BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1009 (V Perez)
Hearing Date: 8/27/2009 Amended: 8/17/2009
Consultant: Bob Franzoia Policy Vote: B,P&ED 6-3
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BILL SUMMARY: AB 1009 would require the Secretary of Business,
Transportation and Housing to develop and implement, until
January 1, 2105, Direct Loan Program to provide loans to small
businesses meeting certain requirements. This bill would
require the maximum loan limit to be $500,000. This bill would
establish the Direct Loan Account in the California Small
Business Expansion Fund (CSBEF) and would continuously
appropriate all moneys in the account for purposes of
implementing and administering the program. This bill would
authorize a public entity to deposit money in this account in
order to capitalize the program. This bill would require the
Director of the Small Business Financial Development
Corporation, prior to the distribution of funds to determine
that the program is sufficiently capitalized. This bill would
require an annual report.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Limited term small business Unknown, major costs through
January General/
loan program 1, 2015; loan guarantees may not
beSpecial*
available or may be prohibitively
expensive
Loan administration Up to $250 annually;
reimbursed from Special*
loan interest charge
* Direct Loan Account in the California Economic Development
Fund
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
The CSBEF was created for the purpose of receiving state money
to make guarantees with investors to indemnify them against the
risk of loss in investment in a minority small business
investment company, (2) enter into agreements with financial
intuitions to indemnify such institutions' investments in
securities in return for the institutions expanding their small
business loan activity and (3) provide assistance to small
businesses in the acquisition and development of agricultural
lands with respect to financing managerial and technical
assistance. These programs are carried out by agreements with
regional nonprofit job creation corporations that are formed to
promote the economic development of small businesses. The
state's obligations and liabilities are limited to the amount
appropriated from the General Fund to the fund and allocated by
the Small Business Development Board.
For the purposes of what public entities may deposit funds in
the Direct Loan Account, it would be the state, the Regents of
the University of California, a county, city, city and
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AB 1009 (V Perez)
county, district, public authority, public agency, and any other
political subdivision or public corporation in the state or the
United States.
The amount of guarantee liability outstanding at any one time
shall not exceed four times the amount of funds on deposit in
the expansion fund plus any receivables due from funds loaned
from the expansion fund to another fund. After January 1, 2013,
the director may permit a higher leverage ratio for an
individual corporation, as specified.
While the Direct Load Account may receive moneys and be
administered pursuant to an agreement between the Director of
Small Business and the funding public entity, this account has
no dedicated source of revenue.
Chapter 12/2009 (ABx4 12, Evans) added Corporations Code Section
14044, to read:
14044. (a) As of the effective date of the act adding this
section, notwithstanding any other provision of this chapter,
state money in the expansion fund or the trust fund shall not be
available to corporations or to the state to enter into new
loans, loan guarantees, or other investments authorized by this
chapter.
(b) State money in the expansion fund and the trust fund
that is not needed to guarantee existing loans, to administer
existing loans, or for other existing investments authorized
under this chapter, as determined by the Director of Finance,
shall revert to the General Fund.
Associated with this language was the sweeping of $10 million
from the SBEF, leaving the minimum of $26 million necessary to
guarantee outstanding loans. Staff notes that until this
language is repealed, new guarantees from the CSBEF are
suspended.
The proposed amendments would add existing Government Code
13997.6, which reads:
(a) The California Economic Development Fund is hereby
created in the State Treasury for the purpose of receiving
federal, state, local, and private economic development funds,
and receiving repayment of loans or grant proceeds and interest
on those loans or grants.
(b) Upon appropriation by the Legislature, moneys in the fund
may be expended by the Secretary of Business, Transportation and
Housing to provide matching funds for loans or grants to public
agencies, nonprofit organizations, and private entities, and for
other economic development purposes, consistent with the
purposes for which the moneys were received.
The amendments would strike language that deposits funds into
the CSBEF and instead would deposit funds into the California
Economic Development Fund noted above.