BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1233
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          Date of Hearing:   January 10, 2012

          ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
                               V. Manuel Pérez, Chair
               AB 1233 (V. Manuel Perez) - As Amended:  January 4, 2012
           
          SUBJECT  :   California Economic Workforce Development Strategy

           SUMMARY  :   Requires the Director of the Governor's Office of 
          Business and Economic Development (GO-BIZ) to prepare a 
          five-year economic and workforce development strategy.  
          Specifically,  this bill  :

          1)Requires GO-BIZ, in consultation with the Secretary of the 
            Labor and Workforce Development Agency (LWD), to prepare, and 
            update every five years, the California Economic and Workforce 
            Development Strategy (Strategy).

          2)Requires the California Workforce Investment Board (CWIB) to 
            assist LWD in preparing the Strategy and provides that the 
            Strategy may serve to meet existing requirements to have a 
            state workforce strategy, one of the pre-conditions for 
            drawing down federal Workforce Investment Act moneys.

          3)Requires the Strategy to include goals, objectives and 
            recommendations for legislation, as well as regulatory and 
            administrative actions.  The recommendations will, among other 
            things, identify funding options, stakeholder partnerships 
            necessary for implementation and methods for measuring 
            success.  The Strategy is also required to provide a context 
            for these recommendations by providing a prioritized list of 
            significant issues affecting the economy, an evaluation of the 
            state's existing economic development programs and an 
            assessment of the adequacy of state and local physical, 
            electronic and human infrastructure.

          4)The Strategy is required to be based on existing and current 
            assessments that have been completed by relevant state, 
            federal, local and regional public and private organizations.  
            The bill includes a list of economic and workforce development 
            related state entities and reports that need to be consulted 
            with and/or reviewed by CAL-BIZ and LWD to ensure a 
            comprehensive, yet cost effective, policy review.

          5)Requires that a preliminary Strategy be developed and that the 








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            relevant policy and fiscal committees of the Legislature hold 
            one or more public hearings on the document.  Following the 
            conclusion of those hearings, the Strategy may be finalized by 
            CAL-BIZ.

          6)Provides for the posting of the preliminary and final strategy 
            on relevant state entity websites and requires notice of these 
            actions to the public and Legislature.

          7)Prohibits state funds from being used to finance the 
            development of the preliminary Strategy.

          8)Contains an urgency clause.








































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           EXISTING LAW  :  

          1)Establishes GO-BIZ within the Governor's Office for the 
            purpose of serving as the lead state entity for economic 
            strategy and marketing of California on issues relating to 
            business development, private sector investment and economic 
            growth.   

          2)Establishes the LWD in state government, and provides that the 
            Secretary is responsible for overseeing seven major areas 
            including, but not limited to, enforcement of California labor 
            laws; workforce development activities, including grant making 
            for job training and coordination with other workforce 
            development partners; tax collection; and economic development 
            activities that lead to job creation and improved economic 
            competitiveness.

          3)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 with 
            particular attention to statewide land use policy.  

           FISCAL EFFECT  :   Unknown

           COMMENTS  :   

          1)Purpose:  According to the author, "Implementation of AB 1233 
            will help the state set a strategic path forward through 
            prioritizing and coordinating state activities, supporting 
            local and regional economic development activities and better 
            leveraging of private sector and other public sector 
            resources."  

            The author states that "without a blueprint to guide the 
            expenditure of state resources the state risks losing its 
            comparative advantages that have, up until now, allowed 
            workers and businesses to remain competitive within the global 
            economy.  There is much work to be done," the author states, 
            "to support small businesses, improve infrastructure and 
            provide the education and workforce training necessary to be 
            competitive in a marketplace that has few geographic 
            boundaries."

          2)What the strategy would accomplish:  There are six key drivers 
            of the California economy:  Capital, infrastructure, labor, 








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            business, consumers and government actions.  Each of these 
            drivers has both is own unique characteristics and also 
            qualities that are shared in common.  In addition, each of the 
            drivers is inextricably linked within the overall economy.  
            Weaknesses within any one of the drivers affects the others.  

            As an example, California's aging infrastructure limits the 
            state's ability to attract new capital - especially in rural 
            and historically underserved areas, such as those in the 
            Coachella and Imperial Valleys.  The condition of 
            infrastructure in turn limits new job opportunities, resulting 
            in less consumer spending and ultimately less tax revenues.

            There is, however, no single document or planning process 
            where these programs, services, and activities come together 
            into a single comprehensive strategy.  Up until August 2011, 
            existing law required the state to have a two-year state 
            Economic Development Strategic Plan, which would set state 
            economic goals and recommendations necessary to improve the 
            business climate and economy of the state.  The Plan was to 
            also evaluate the adequacy of state and local infrastructure, 
            the effectiveness of the state's economic development programs 
            and identify strategies to foster job growth and economic 
            development covering all state agencies, offices, boards, and 
            commissions that have economic development responsibilities.  
            The timely and regular update of the state Economic 
            Development Strategic Plan was also designed to allow the 
            Administration and Legislature to monitor the effectiveness of 
            state economic development programs and services on an ongoing 
            basis.

            The state Economic Development Strategic Plan was last 
            prepared in 2002 and its statutory mandate was eliminated as 
            part of the 2011-12 budget actions.  The state still has a 
            requirement to develop a state workforce development strategy, 
            which is used to draw down federal WIA funding.  The workforce 
            strategy does not, however, meaningfully address economic and 
            business development issues.  AB 1233 would establish a 
            requirement for the state to have a comprehensive strategy to 
            support job creation, business development and attraction of 
            private sector investment.  

          3)Governor's Office of Business and Economic Development:  In 
            February 2010, the Little Hoover Commission (LHC) undertook a 
            review of the state's economic and workforce development 








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            programs.  In its final report,  Making up for Lost Ground: 
            Creating a Governor's Office of Economic Development  , it 
            analyzed the status and effectiveness of current programs 
            since the 2003 demise the Technology, Trade and Commerce 
            Agency and recommended the creation of a new governmental 
            entity to fill the void left by the dismantled agency.

            The report called for a single entity that would promote 
            greater economic development, foster job creation, serve as a 
            policy advisor and deliver specific services (i.e., 
            permitting, tax, regulatory, and other information) directly 
            to the California business community.  In April 2010, Governor 
            Schwarzenegger issued Executive Order S-05-10 (EO) as a means 
            to operationalize the report recommendations including the 
            creation of the Governor's Office of Economic Development 
            (GOED).
                 
            Since its inception, GOED 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, the Office of the 
            Small Business Advocate, and innovation.  There are 23 
            positions assigned to GOED in 2011-12 Budget, which are funded 
            through existing state resources and staffed by personnel 
            loaned from state agencies and departments.   In October 2011, 
            the Governor signed AB 29 (cited and described below), which 
            effectively codified GOED and changed its name to GO-BIZ, 
            effective January 1, 2012.

            Among other programs, GO-BIZ administers the Innovation Hub 
            (iHUB) program in partnership with the statewide network of 
            Small Business Development Centers.  There are currently 12 
            regional iHUBs located throughout the state.  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.








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            Another key initiative of GO-BIZ 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 to locate and/or expand in California.

            GO-BIZ 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 Web site (24x7) and apply for and pay all necessary 
            city, county and state permits.   

          4)Challenges to California's Competitiveness:  Innovation has 
            long been the cornerstone of California's competitive edge.  
            Innovation, by its very nature, however, requires constant 
            reassessment and, very often, reinvestment of public resources 
            to maintain and enhance a creative environment where 
            businesses and financial partnerships can constantly evolve.


            On an ongoing basis, JEDE tracts a variety of surveys that 
            rate and rank California's business climate.  Overall, JEDE 
            has found that the state's businesses experience higher costs 
            than in many other areas of the nation, consistently ranking 
            California in the top 10 highest cost states.  However, 
            surveys also find that even with those costs certain regions 
            of the state remain highly competitive within the national and 
            global marketplace.   Below is a sampling of the findings from 
            key economic surveys including those related to innovation, 
            venture capital and research and development.   


            The 2010 innovation index developed by Milken Institute and 
            Greenstreet Partners ranked only one California location in 
            the top 25 communities in the nation, that being 
            Hanford-Corcoran (24th).  This finding is down from that of 
            the 2007 index which ranked four California metro areas within 
            the top 25 areas that are best to create and sustain 
            innovation-based jobs:  Riverside-San Bernardino (3rd), 
            Bakersfield (17th), Vallejo-Fairfield (22nd), and 
            Sacramento-Arden-Arcade-Roseville (25th).  









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            California has also consistently been a leader in attracting 
            venture capital, although research shows that other states and 
            regions in the world are beginning to close the gap.  A 2010 
            report, Venture Impact:  The Economic Importance of Venture 
            Capital Backed Companies in the U.S. Economy, showed that 
            although California remains a leader in both venture-backed 
            employment and revenues, its position is being seriously 
            challenged.   Among other key challenges is the continued 
            impact of the 2008 recession.  

            According to the report, California was the only state, within 
            the top 5 states, to see a decline in venture capital 
            investment; the state went from receiving $997 billion in 2008 
            to $845 billion in 2010.  The State of Washington saw the 
            largest increase in venture capital investment, having 
            received $79 billion in 2008 to $256 billion in 2010.  In 
            addition, the report offered the following findings related to 
            venture-backed companies and employment:

                 Nationally, venture-backed companies contributed to 11.9 
               million jobs and $3.1 trillion in revenues in 2010.  
               California was the leader in revenues tied to 
               venture-backed companies with $846 billion, followed by 
               Washington ($256 billion), Texas ($243 billion), 
               Pennsylvania ($238 billion) and Massachusetts ($90 
               billion). 



                 The states with the highest employment attributable to 
               venture-backed companies were California (3.9 million 
               jobs), Texas (1.1 million jobs), Pennsylvania (783,527 
               jobs), Washington (778,579) and Massachusetts (775,151 
               jobs) in 2010.


            Another historic California strength has been its 
            academic-based research capacity.  In a 2006 survey, the 
            University of California ranked second with Caltech third and 
            Stanford fourth among all universities for biotechnology 
            transfer.  MIT was ranked first and the University of Florida 
            ranked fifth.  

            California also ranks first among 50 states for patents issued 
            in 2010, when 30,089 total patents were granted.  Other top 








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            performing states include New York (8,095 patents), Texas 
            (8,027 patents), Washington (5,810 patents), and Massachusetts 
            (5,261 patents).  California's research and development 
            expenditures as a percentage of GDP were just above 3.5% in 
            2009, ranking the state first among many global competitors 
            including Japan, Korea, Germany, France, Singapore, Canada, 
            U.K., China and India.  While the state's world class research 
            universities remain an advantage, recurring cuts to the 
            University of California system and the proliferation of new 
            global centers of innovation will likely require new 
            collaborations and investments.

            Other indices reviewed identified additional areas that 
            threaten California's long-term economic strength.  In 
            particular, JEDE surveys found that the state will need to 
            make long-term investments in infrastructure, K-12 education, 
            and workforce development.  As an example, California ranks 
            only 5th among U.S. states in science and technology according 
            to the Milken Institutes 2010 Science and Technology Index.  
            If the state does not regain competitiveness in these areas, 
            California's advantages in entrepreneurship, finance, and 
            technology will further erode.
            
          1)Related legislation:  The following is a list of bills related 
            to a state economic development strategy.
           
              a)   AB 29 (John A. Pérez) - Codification of GO-BIZ:  This 
               bill establishes the Office of Business and Economic 
               Development 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:  Signed by the Governor, Chapter 475, Statutes of 
               2011.

             b)   AB 699 (Portantino and V. Manuel Pérez) - 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 to the 
               Legislature by May 1, 2010.  Status:  Held in Assembly 
               Appropriations Committee in 2009.
           
              c)   AB 1606 (Arambula and Lieu) -Update Economic Strategy 1: 
               This bill would have updated the requirements of the ESP 








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               and required the development of a targeted set of actions 
               to increase private investment in California's historically 
               underserved communities, also known as emerging domestic 
               markets.  Status:  Vetoed by the Governor in 2007.  

             d)   AB 1916 (Portantino, Arambula, Price, Salas, and 
               Caballero) - 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.   

             e)   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.

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Assembly Committee on Jobs, Economic Development and the Economy 
          (sponsor)

           Opposition 
           
          None received

           
          Analysis Prepared by  :    Toni Symonds / J., E.D. & E. / (916) 
          319-2090