BILL ANALYSIS Ó
AB 29
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Date of Hearing: May 3, 2011
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel Pérez, Chair
AB 29 (John A. Perez) - As Introduced: December 6, 2010
SUBJECT : Governor's Office of Economic Development
SUMMARY : Establishes the Office of Economic Development within
the Governor's Office (GOED) for the purpose of serving as the
lead entity for economic strategy and marketing of California on
issues relating to business development, private sector
investment and economic growth. Specifically, this bill :
1)Codifies the existing CalBIS within GOED as a program to serve
employers, corporate executives, business owners, and site
location consultants who are considering California for
business expansion and investment. In implementing the
program, GOED is required to establish a process for convening
strike teams on key business development situations including,
but not limited to, attracting new businesses, relocating
large manufacturers and closure of large businesses.
2)Transfers the existing Office of the Small Business Advocate
(OSBA) to GOED.
3)Requires that the Director of GOED be appointed by the
Governor, subject to confirmation by the Senate Rules
Committee.
4)Specifies that, among other duties, GOED:
a) Make recommendations to the Governor and Legislature on
new state policies, programs and actions, as well as
amendments to existing programs, for the purpose of
advancing statewide economic goals, respond to emerging
economic issues, and ensure that all state policies and
programs conform to the adopted state economic and business
development goals;
b) Coordinate the development of policies and critera to
ensure that federal grants administered or directly
expended by the state advance statewide economic goals and
objectives;
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c) Market the business and investment opportunities
available in California by working in partnership with
local, regional, federal, and other state public and
private institutions to encourage business development and
investment;
d) Provide information on, among other things, the state's
economic, workforce, infrastructure and demographic
conditions, as well as financial information to help link
businesses with state and local public and private
programs;
e) Provide information on permitting, siting and other
regulatory information, as well as other regulatory
information pertinent to business operations in the state.
GOED is also required to provide assistance in obtaining
state and local permits;
f) Encourage collaboration among research institutions,
start-up companies, local governments, venture capitalists
and economic development organizations; and
g) Establish a well-advertised telephone number, an
interactive Internet website and an administrative
structure that effectively supports the facilitation of
business development and investment.
5)Expands the agenda of issues to be addressed during the
biennial convening of the Economic Strategy Panel (ESP) to
include existing industries, as well as the currently required
emerging and declining industries.
6)Requires a copy of a previously mandated ESP report on
economic development program accountability be provided to
GOED following the conclusion of the next biennial convening
of the ESP. The bill also expands the accountability system
to include an assessment of business retention.
7)Provides that funding for GOED in the 2011-12 fiscal year
shall be from existing resources and staffed by personnel
loaned from other state agencies and departments including,
but not limited to, Labor and Workforce Development Agency
(LWD); Business, Transportation and Housing Agency (BTH);
California Environmental Protection Agency (CalEPA); the State
and Consumer Services Agency; Governor's Office of Planning
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and Research (OPR); and the Resources Agency. Each member of
Cabinet is required to identify a senior manager within his or
her agency who is to be responsible for coordinating business
support activities with GOED. Funding in subsequent years
will be through the regular budgeting process, including the
permanent transfer of associated positions.
EXISTING LAW :
1)Requires the Governor to prepare the Environmental Goals and
Policy Report every four years for the purpose of defining the
state's 20 year growth and economic development strategy.
2)Establishes the ESP, chaired by the Secretary of LWD, for the
purpose of developing an overall state economic vision and
strategy that can guide public policy, including an
examination of the state's economic regions, industry
clusters, and cross-regional economic issues.
3)Establishes the OSBA within OPR for the purpose of supporting
small business development in the state.
4)Establishes various state programs and services related to
economic development and growth at differing agencies,
departments, boards, and state entities including, but not
limited to, LWD; BTH; OPR; Department of Housing and Community
Development; and CalEPA.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose : According to the author, "In February 2010, the
Little Hoover Commission released a report entitled Making up
for Lost Ground: Creating a Governor's Office of Economic
Development . The report analyzed the status and effectiveness
of the various pieces of the defunct Technology, Trade and
Commerce Agency (TTCA) that had been reorganized into other
state entities. The report recommended the creation of a new
governmental entity to fill the void left by the dismantled
agency. One agency that would promote greater economic
development, foster job creation, and deliver specific
services (i.e. permitting, tax, regulatory, and other
information) directly to the California business community.
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AB 29 creates the Office of Economic Development within the
Governor's Office, and establishes specific tasks and duties
for the office, including reorganizing such entities as the
Small Business Advocate and CalBIS into this new office.
Ultimately, this new office will establish long-term economic
goals and strategies as well as specific and effective
services to California's businesses both large and small."
2)Governor's Office of Economic Development : GOED was created
in April 2010 through Executive Order (S-05-10). Since its
inception, it has served over 3,000 businesses, 95% of which
are small. The most frequent types of assistance include help
with permit streamlining, starting a businesses, relocation
and expansion of businesses, and regulatory challenges.
Under the auspices of GOED, a number of state programs and
services are administered, including programs related to
international trade, permit assistance, CalBIS, the OSBA, and
innovation. There are 23 positions assigned to GOED, which is
funded through existing state resources and staffed by
personnel loaned from state agencies and departments. AB 29
states that this shall remain the funding and staffing
structure for GOED during the 2011-12 fiscal year and
thereafter be subject to the regular state budgeting process.
Among other programs, GOED administers the Innovation Hub
(iHUB) program in partnership with the statewide network of
Small Business Development Centers. There are currently 12
regional iHUBs including iHUBs located in the following
regions: Sacramento, San Jose, the Coachella Valley, and San
Diego and Imperial Counties. The iHUB program is designed to
improve the state's national and global competitiveness by
stimulating partnerships, economic development, and job
creation around specific research clusters. Key assets and
partners of the initiative include technology incubators,
research parks, universities, federal laboratories, economic
development organizations, business groups, and venture
capitalists.
Another key initiative of GOED are the "strike teams" which
can be mobilized to help attract and/or retain specific
businesses. Strike teams are especially well suited to engage
with major employers and have been successfully activated to
assist Bayer Healthcare, Jazz Semiconductor, and Baxter
Pharmaceutical locate and/or expand in California.
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GOED is also sponsoring a permit streamlining pilot project,
which will offer a One-Stop-Shop for state and local permits.
The pilot, launched in partnership with the City and County of
San Francisco, will allow a business owner to login to a
single website (day or night) and apply for and pay all
necessary city, county and state permits. AB 29 substantially
implements the current activities of GOED as outlined in the
2010 EO.
3)Supporting local economic recovery : One of the primary ways
by which states compete for attracting, retaining and
expanding businesses and industry sectors is through their
fiscal policies, including income tax- and sales and use
tax-based incentives. California's economic
development-related incentives include tax benefit programs
that address the purchase and depreciation of equipment, the
undertaking of research and development of new products and
technologies, targeting of private investments to underserved
areas, and special treatment for small businesses under the
state's tax laws.
In addition to tax incentives, the state funds and/or
administers a limited number of programs and services to
assist business and workforce development, including, but not
limited to, the OSBA; the California Small Business Loan
Guarantee Program; international trade and foreign investment
activities; the federal Small Cities Community Development
Block Grant Program; the Enterprise Zone Program; the
Employment Training Panel; the California Workforce Investment
Board; the ESP; and the small business and disabled
veteran-owned business enterprise procurement preference
programs.
There is, however, no single location where information on
and/or technical assistance for accessing these programs,
services, and activities can be found. Further, recent budget
actions have reduced incentives and eliminated key programs
and services. Economic developers believe that California's
budget problems will not be resolved until the state more
concretely addresses the economic recovery needs of workers,
businesses, and investors.
4)Differing models for the state's economic development
activities : While AB 29 substantially codifies the current
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activities of GOED, at least one of the state economic
development stakeholders would prefer a different model. A
letter by the California Manufacturing and Technology
Association (CMTA) states that GOED's current structure has
resulted in an office of state employees that, while highly
qualified, lack sufficient direct authority to "work at the
same level of a CalEPA or BT&H Secretary."
More specifically, the CMTA, recommends reorganizing the LWDA
into two separate departments: a Department of Industrial
Relations that focuses on the enforcement and compliance with
the Labor Code and a Department of Workforce and Economic
Development. The second Department would house many of the
divisions currently under the Employment Development
Department and would align all workforce policy decisions
within an economic development plan.
There has been extensive dialogue about the structure and
location of a renewed economic development entity. Comments
later in the analysis provide a fairly comprehensive
historical prospective. Most recently, even the Governor has
indicated to a number of stakeholder groups that he is
interested in a broad reorganization discussion of many of the
state's current programs and services (including the economic
development programs) for the purpose of creating leaner, less
duplicative, and improved program outcomes.
5)Historical perspective on the state's economic development
activities : The challenges of bringing together a coherent,
outcome-oriented economic and workforce development program
have been discussed by Assembly and Senate policy committees
since the demise of the TTCA in 2003.
With the elimination of the TTCA, many have opinioned that the
state lost focus and, potentially, its ability to adequately
support business development and job creation. Further
compounding the state's ability to decisively act on economic
development recommendations is the ESP's failure to meet its
statutory obligation to update the state Economic Development
Strategic Plan every two years. Since 2002, no economic
development plan has been prepared.
Beginning in 2005, JEDE held hearings and sponsored
legislation to, at a minimum, bring greater coordination of
existing state programs and services and call for an updated
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economic development strategy.
JEDE sponsored legislation in 2007 (AB 1721 ÝArambula],
Chapter 631), designating BTH as having primary responsibility
for the facilitation of economic development activities. The
following year, the Budget Act deleted this designation, once
again leaving the state with no lead agency for state economic
development activities.
Also in 2007, JEDE sponsored legislation (AB 1606 ÝArambula
and Lieu]), to require the state to centralize its existing
economic development programs within the ESP, however, that
bill was vetoed by the Governor. The Governor's veto message
stated that he would be coming forward with his own
restructuring program in the following year. In 2008 and
2009, JEDE sponsored three additional bills to try to improve
coordination of programs and to better leverage private sector
dollars. Each of these bills were either vetoed or held in
the Assembly or Senate Appropriations Committees. Full
descriptions under the final comment in the analysis.
In August 2009, JEDE sponsored a seventh bill relating to
realigning the state's economic and workforce development
resources, AB 1558 (V. Manuel Perez), which was held in Senate
Appropriations Committee in 2010. This session, JEDE
sponsored AB 1233 (V. Manuel Pérez), which authorizes the
creation of a joint economic and workforce development
strategic plan and extends the term of the strategic plan from
two to five years, as well as making other updates to its
content. In deference to AB 29, the Chair of JEDE has made AB
1233 a two-year bill.
6)The Little Hoover Commission and renewed legislative
responses : In February 2010, the Little Hoover Commission
(LHC) completed an extended review of the state's economic and
workforce development programs and services and released its
report, Making up for Lost Ground: Creating a Governor's
Office of Economic Development .
While the LHC heard substantial criticism about the state's
business climate during its review, this report focused on how
the state could better organize and utilize its existing
business focused and broader economic and workforce
development programs and services. The report noted that the
state's current economic development activities are spread out
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over numerous agencies, boards, commissions and financing
authorities. "More than 10 advisory panels, boards and
commissions, with more than 150 combined members from the
public and private sectors, provide guidance on how the state
should spend millions of dollars on economic and workforce
development programs. This fragmentation helps explain why
state government lacks a vision or voice for California
economic development," states the report.
Further, the LHC report states that this lack of a cohesive
vision has resulted in a leadership void that has diminished
the state's ability to coordinate state resources and evaluate
the overall effectiveness of the state's economic development
efforts. Based on its hearings and research, the LHC report
made four core recommendations:
a) The state must create a high-profile office for economic
development (OED) within the Governor's Office, to bring
together critical functions of existing state economic
development entities. The office should serve as the
visible point of contact for existing and prospective
businesses and economic development leaders at the local,
state and federal levels. Key information should be
compiled and made available through a well-publicized
website.
b) A series of Action Teams must be created within the OED.
CalBIS should be moved from LWD to the OED and serve as
the foundation for this more robust outreach unit.
c) A policy unit must be created within the OED to develop
a statewide vision for economic growth. Guided through
bottom-up input from public and private entities, the OED
should take over the statutory responsibilities of the ESP
and develop the state economic development strategy.
d) The OED must serve as an advocate for big-picture
prosperity and economic growth including serving as a
representative on the California Strategic Growth Council
and TeamCalifornia and partnering with public and private
entities, such as legislative policy committees.
Two Assembly measures were introduced to help implement the
LHC recommendations - AB 2734 (John A. Pérez) and AB 2287
(Bass) in 2010. A Senate measure was also introduced that
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year to help move the LHC recommendations forward, SB 1259
(DeSaulnier). SB 1259, however, proposed a slightly different
structure than the Assembly measures by establishing a new
state agency rather than an office within the Governor's
Office. Governor Schwarzenegger also chose to move forward on
the LHC report recommendations and issued Executive Order
S-05-10, which created the currently operating GOED. Together
with AB 1558 from the prior year, there were four measures
pending in the Legislature in May 2010, which underlines the
importance of codifying the realignment the state's economic
development programs.
Ultimately, the Legislature sent AB 2734 to the Governor which
would have codified the Executive Order. AB 2734 was vetoed
by the Governor, based, according to his veto message, on the
provision that the director of GOED was subject to Senate
confirmation, which he stated inappropriately infringed on the
rights and powers of the Governor. AB 29 also includes the
Senate confirmation provision.
7)The California economy : California is the one of the largest
and has one of the most diversified economies in the world
with a state gross domestic product (GDP) of over $1.9
trillion in 2009. If California were an independent nation,
it would rank as the eighth largest economy in the world.
Historically, the state's significance in the global
marketplace has resulted from a variety of factors, including:
its strategic west coast location that provides direct access
to the growing markets in Asia; its economically diverse
regional economies; its large, ethnically diverse population,
representing both a ready workforce and significant consumer
base; its access to a wide variety of venture and other
private capital; its broad base of small- and medium-sized
businesses; and its culture of innovation and
entrepreneurship, particularly in the area of high technology.
Economic growth in California has also historically outpaced
the growth rate of the nation as a whole.
The chart to the left illustrates Ýremoved due to the
graphic's incompatibility with hosting system] the industry
make-up of California's economy based on employment. Among
other economic distinctions, the state has historically led
the nation in export-related jobs, small business development,
and business start-ups.
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California's economy and business profile, however, have been
shifting. As the chart below illustratesÝremoved due to the
graphic's incompatibility with hosting system] , between 2001
and 2009, there has been a significant shift from high wage
jobs with benefits to lower wage jobs, which often pay no
benefits. This shift is particularly acute in the
manufacturing sector, where it is estimated that over 473,000
jobs were lost during that time period.
In this recession, significant drops in consumer spending have
led to workforce reductions and business bankruptcies across
the state. For much of 2009, the number of unemployed workers
rose 40 to 60,000 per month, and 2010 ended with a seasonally
adjusted unemployment rate of 12.5%, representing 2.25 million
people officially identified as unemployed (excludes those
that have stopped looking for work, among others). The number
of persons unemployed 27 weeks or more increased by 230,000
since February of 2010 - representing a 28.6% increase and
over 1 million workers.
Most economic forecasters believe that unemployment will
remain above 10% throughout 2011 and 2012. Jobs are forecast
to recover to their pre-recession peak by the first half of
2013, however, unemployment rates are likely to remain above
8% through much of 2014. Forecasters at the University of the
Pacific Business Forecasting Center state that California GDP
will average a modest 2.8% in 2011 and approximately 255,000
jobs will be added.
8)Forecast of the next economy : As California moves slowly out
of the recession, growth will need to take place within a
post-recession economy that will likely be more resource and
capital constrained. In addition, some analysts believe the
global economy will transition through a great "rebalancing of
economic power," whereby the U.S.' dominant economic position
will be challenged by other large economies like those in
Japan, China and the European Union.
In fact, the U.S. has slipped to third place among G-20
nations in terms of clean energy sector investments according
to the Clean Edge News. Until 2008, the U.S. had been the
world leader, which is now held by China. Globally, 2010
clean-energy finance and investments grew by 30% to a record
$243 billion. The U.S. received $34 billion in equity last
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year, a 51% increase from 2009. However, the gap with China,
which attracted a record $54.4 billion, continues to widen.
Germany also attracted more money than the U.S. with $41.2
billion, claiming the number two spot, up from third the
previous year.
The Brookings Metropolitan Policy Program has published its
own assessment of how this rebalancing will be experienced in
the U.S. and has noted four key trends to watch in the
post-recession economy. The first trend is that the economy
will be more export oriented and second, it will be fueled by
new, lower-carbon energy sources. The third trend identified
is that the next economy will be based on a higher level of
global innovation, which will require "a relentless pace of
innovation, adaptation, and embracement of new markets and
processes." The fourth key trend is that next economy will be
led by major metropolitan areas - not nations and not states.
While California's historical dominance in innovation-based
industries, networked global supply chains and strong regional
economies should give instate businesses certain advantages in
the post-recession economy, other components of the California
economy, including the quality of the state's infrastructure
and the preparedness of its workforce for the 21st Century
economy, are not as strong and could limit the state's overall
economic growth.
9)Related legislation : Below is a list of related legislation.
a) Current legislative session:
i) AB 1233 (V. Manuel Pérez) : This bill calls for an
integrated economic and workforce development plan.
Status: This measure is pending in the Assembly
Committee on Jobs, Economic Development and the Economy.
The author has made it a two-year bill.
b) Previous legislative sessions:
i) AB 699 (Portantino and V. Manuel Pérez) - Demand and
Update State Economic Strategy 3 : This bill would have
updated the requirements for the development of a State
Economic Development Strategy, especially in the areas of
technology and innovation, and requires it be submitted
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to the Legislature by May 1, 2010. Status: Held in
Assembly Appropriations Committee in 2009.
ii) AB 1558 (V. Manuel Pérez) - EDD Reorganization
Model : This bill would have realigned the state's
economic and workforce development programs within the
Employment Development Department, to be renamed the
Economic and Employment Development Department. Status:
Held in the Senate Appropriations Committee in 2010.
iii) AB 1606 (Arambula and Lieu) - ESP Reorganization
Model : This bill would have required the development of a
strategy to increase private investment in California's
historically underserved communities, also known as
emerging domestic markets. The bill also centralizes the
state's existing economic development programs with the
Economic Strategy Panel, in order to improve their
coordination and impact on California communities.
Status: Vetoed by the Governor in 2007.
iv) AB 1721 (Arambula) - Designates BTH as Lead on
Economic Development : This bill designated the Business,
Transportation, and Housing Agency as the state's primary
agency responsible for the facilitation of economic
development activities. The bill also established a fund
for receiving federal, state, local, and private economic
development moneys that can be used to further state
economic development activities. No moneys may be used
from this fund without a specific appropriation by the
Legislature. The bill also added economic
development-related definitions and authorizes the
Business, Transportation, and Housing Agency to
administer specified federal Economic Development
Administration disaster recovery moneys. Status: Signed
by the Governor, Chapter 631, Statutes of 2007.
v) AB 1916 (Portantino, Arambula, Price, Salas, and
Caballero) - Demand and Update Economic Strategy 2: This
bill would have updated the membership and requirements
of the ESP, especially in the areas of technology and
innovation, and required that the next State Economic
Development Strategy be submitted to the Legislature by
January 1, 2010. Status: Vetoed by the Governor in
2008.
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vi) AB 2287 (Bass) - Office of Economic Development and
CalBIS : This bill would have established the Office of
Economic Development, which includes the California
Business Investment Services Program, within the
Governor's ED Office. Status: Held under submission in
JEDE in 2010.
vii) AB 2711 (Portantino, Arambula, Price and Salas) -
State Technology and Innovation Strategy: This bill would
have required the Secretary of the Business,
Transportation and Housing Agency to develop a
comprehensive state technology and innovation strategy to
guide future state expenditures and activities. Status:
Held under submission in the Assembly Committee on
Appropriations in 2008.
viii) AB 2734 (John A. Pérez) - Governor's Office of
Economic Development : This bill would have established
the Office of Economic Development (ED Office) within the
Governor's Office for the purpose of serving as the lead
entity for economic strategy and marketing of California
on issues relating to business development, private
sector investment and economic growth. Status: Vetoed
by the Governor in 2010.
ix) SB 1259 (DeSaulnier) - Economic Development and Job
Creation Agency: This bill would have created the
Economic Development and Job Creation Agency and required
the new agency to perform duties relating to economic
development and job creation. It would have required the
secretary to develop a reorganization plan and propose a
structure for the agency. Status: Held in Senate
Appropriations Committee on 2010.
REGISTERED SUPPORT / OPPOSITION :
Support
Bay Area Council
Business Council, Inc.
California Center for Rural Policy, Humboldt State University
California Faculty Association
City of San Bernardino
Contra Council
Economic Vitality Corp.
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Fresno Business Council
Greater Antelope Valley Economic Alliance
Greater Corona Valley Chamber of Commerce
Hollywood Chamber of Commerce
Joint Venture Silicon Valley Network
Little Hoover Commission
Los Angeles Area Chamber of Commerce
Los Angeles County Business Federation
Los Angeles County Economic Development Corporation
North Bay Leadership Council
Oakland Metropolitan Chamber of Commerce
Orange County Business Council
Rafter Group, Inc.
Sacramento Metro Chamber
San Diego Chamber of Commerce
San Diego Regional, EDC
San Francisco Chamber of Commerce
San Gabriel Valley Economic Partnership
San Jose Silicon Valley Chamber of Commerce
Sierra Business Council
Silicon Valley Leadership Group
Small Business California
Sonoma County Economic Development Board
South Bay Association of Chambers of Commerce
Southern California Leadership Council
Team California
The Greater Corona Valley Chamber of Commerce
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090