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