BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
358 (Ducheny)
Hearing Date: 5/28/2009 Amended: 4/13/2009
Consultant: Bob Franzoia Policy Vote: B,P&ED 8-1
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BILL SUMMARY: SB 358 would require the Secretary of Business,
Transportation and Housing to establish the Native American
Business Revolving Loan and Guarantee Program for the purpose of
providing nongaming business and loan guarantees to qualified
Indian tribes. This bill would create the Native American
Business Revolving Loan and Guarantee Program Account solely for
the purpose of receiving state, federal, or local government
moneys, other public or private moneys, and tribal government
contributions. This bill would continuously appropriate the
moneys in the account to the
director of the program, appointed by the secretary, for the
purpose of implementing and administering the program. This
bill would specify the maximum amount of a loan or loan
guarantee and would require a tribe to provide matching funds.
A nine member Native American Business Finance Council would
provide policy and program guidance regarding the development
and operation of the program. The program would be subject to
annual reporting requirements and independent audits.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Loan and guarantee program Unknown, major costs ongoing*
Special/
Other**
Program administration $125 $250 $250 Special/
Other**
* The program would not become operative until it is determined
sufficient funds to create a loan pool and pay program
administrative costs have been received.
** Special funds, federal funds, local government funds, other
public and private moneys, tribal contributions.
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STAFF COMMENTS: SUSPENSE FILE.
This analysis estimates the program would need a minimum of two
staff to review applications, serve as a liaison, and work with
the council. Loans and loan guarantees provided by the program
would be for nongaming business and shall be used to start or
expand a business or to supply working capital to a business.
Federally recognized tribes located in the state that receive
payments from the Indian Gaming Revenue Sharing Trust Fund
(RSTF) would be eligible for the program. This fund was created
by Chapter 874/1999 (AB 1385, Battin) to assist non gaming
tribes. Gaming license fees are deposited in the fund and
payments to non compact tribes (tribes with fewer than 350 slot
machines) are required to be $1.1 million annually.
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SB 358 (Ducheny)
Since its inception, however, the RSTF has lacked sufficient
funds to cover the costs of these payments. In prior years, the
Legislature has appropriated funds from the Indian Gaming
Special Distribution Fund (SDF), another account that receives
payments from the 1999 compact tribes, to cure the shortfall.
Chapter 858/2003 (SB 621, Battin), specifies that funding the
RSTF shortfall is the first priority use of SDF funds, followed
in descending order by other allowed uses of SDF funds: problem
gambling prevention programs, casino regulatory costs of the
California Gambling Control Commission and the Department of
Justice, and grants to local governments affected by tribal
casinos.
While the required $77 million was paid to 71 non-compact tribes
in 2007-08, due to amendments to three recent compact, the
General Fund has an obligation to cover the RSTF annual
shortfall if the SDF cannot. The LAO notes the SDF is projected
to run a $57 million deficit in 2008-09.
The State Business Expansion Fund 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.
Under the proposed program, the maximum loan limit would be
$500,000 and the maximum loan guarantee would be 90 percent of
the loan amount, not to exceed $500,000. A qualified tribe
would provide matching funds equal to one half the amount of the
loan requested and may include in-kind contributions though
in-kind contributions would be limited to one quarter the value
of the requested loan. Staff notes it is unclear whether the
director or the council has the final authority to approve an
application for a loan.
A 4/13/2009 amendment appears to limit the use of General Funds.
However, the bill permits the use of public moneys which can be
General Funds. Staff recommends the bill be amended to state
that no General Funds may be used to make loans or loan
guarantees. It appears the only special fund moneys that could
be used for this program would be the RSTF or the SDF.
SB 1200 (Ducheny) 2008 proposed a business grant and loan
program for persons who were members of a nongaming Indian
tribe. That bill was held in Assembly Appropriations.