BILL ANALYSIS Ó ----------------------------------------------------------------------- |Hearing Date:July 2, 2012 |Bill No:AB | | |2012 | ----------------------------------------------------------------------- SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Curren D. Price, Jr., Chair Bill No: AB 2012Author:J. Perez As Amended:June 25, 2012 Fiscal: Yes SUBJECT: Economic development. SUMMARY: Transfers the authority for undertaking international trade and foreign investment activities from the Business, Transportation and Housing Agency (BTH) to the Governor's Office of Business and Economic Development (GO-Biz), including establishing any international trade and investment office. In addition, the bill transfers the responsibility for establishing an Internet-based permit assistance center from the Secretary of the California Environmental Protection Agency (CalEPA) to GO-Biz. 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. GO-Biz also serves as the administrative oversight for the California Business Investment Service and the Office of the Small Business Advocate. (Government Code (GC) §§ 12096 - 12098.5) 2)Provides that the Governor shall appoint the Director of the GO-Biz who shall perform all duties, exercise all powers, assume and discharge all responsibilities, and carry out and effect all purposes vested by law in the office, including contracting for professional or consultant services in connection with the work of the office. (GC § 12096.2) 3)Establishes BTH for the purpose, among other things, of overseeing and coordinating the activities of various departments, offices, and AB 2012 Page 2 economic development programs, with responsibility for maintaining the strength and efficiency of California's infrastructure and financial markets. These programs provide financial and programmatic regulation important to the economic marketplace, community development, the safe and efficient flow of commerce, and activities related to international trade and investment. 4)Provides that BTH shall be the primary state agency responsible for trade and foreign investment activities and directs BTH, among other things, to engage in the following as it relates to trade and foreign investment: (GC §§ 13996.45) a) Attract employment-producing foreign investment to the state. b) Cooperate in international public infrastructure projects. c) Provide support for California business in accessing international markets, including but not limited to, export assistance. d) Engage in other trade or foreign investment related activities specifically assigned by the Governor. e) As a condition of that authority, directs the development and implementation of a comprehensive international trade and investment policy and strategies and plans to provide guidance to other agencies and departments related to workforce and infrastructure development. All international trade and foreign investment activities and funding are required to be consistent with this strategy. 5)Requires the Secretary of BTH, no later than February 1, 2008, to provide to the Legislature a strategy for international trade and investment that takes into consideration, at a minimum, on, policy, goals and objectives to implement a comprehensive international trade and investment program in California, measurable outcomes and timelines, identification of key stakeholders, and other information as specified. Requires the relevant policy and fiscal committees to review and hold a hearing on the strategy presented by the Secretary. (GC § 13996.55) 6)Requires the Secretary of BTH to convene a statewide business partnership for international trade and investment no later than March 1, 2007, as specified. (GC § 13996.6) 7)Prohibits the Secretary of BTH from establishing any international AB 2012 Page 3 trade and investment office (ITI Office) unless specified conditions are met including that it is consistent with the policies and the recommendations and priorities established in the international trade and investment strategy and that the strategy conform to requirements, as specified. (GC § 13996.65) 8)Prohibits the Secretary of BTH from establishing any ITI Office unless the Secretary submits a business plan, as specified, to the Legislature and meets other requirements, as specified. (GC § 13996.7) 9)Provides that the Controller shall not allocate any state funds to the BTH for international trade and investment activities unless the strategy for international trade and investment has be submitted to the Legislature by May 1, 2008, and a report as required submitted to fiscal committees of the Legislature. (GC § 13996.75) 10)Authorizes the Secretary of BTH to accept private sector moneys in an amount not in excess of ten thousand dollars ($10,000) per donation made to the state for the purpose of promoting international trade and investment, subject to the Political Reform Act requirements, and not in excess of a total of ten thousand dollars ($10,000) per quarter per donor, and specifies the purposes for which moneys may be used. (GC § 13997) 11)Creates the California Economic Development Fund (Fund) 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 and grants, and provides that upon appropriation by the Legislature, moneys in the Fund may be expended by the Secretary of BTH 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 moneys were received. (GC § 13997.6) 12)Specifies that the Governor is the primary state officer representing California's interest in international affairs and that the Lieutenant Governor is the Chair of the California Commission for Economic Development to improve trade opportunities for California, and that the BTH is the primary state agency responsible for international trade and investment activities in areas other than those covered by the Department of Food and Agriculture, and specifies other authorities of State Office holders and agencies as it relates to international affairs. (GC 99500) 13)Requires the Secretary for the California Environmental Protection AB 2012 Page 4 Agency (CalEPA) to establish an electronic online permit assistance center, called the "California Government-On Line to Desktops" (CALGOLD), through the Internet, and that the CALGOLD shall be available for use by any business or other entity subject to a law or regulation implemented by a board, department, or office within the CalEPA, and shall provide a business or other entity with assistance in complying with those laws and regulations, and to the extent feasible, incorporate permit assistance activities of local and federal entities and of other entities of the state into its operations. (Public Resources Code § 71040) This bill: 1)Transfers all authority for undertaking international trade and foreign investment activities from the BTH to the GO-Biz. 2)Repeals the provisions in Item # 3) above, and instead recasts some of these provisions and requirements for GO-Biz, and also provides that the Director of GO-Biz may establish ITI Offices outside of the Unites States if certain requirements and conditions are met, as specified. 3)Requires the GO-Biz, no later than February 1, 2014, to provide to the Legislature a strategy for international trade and investment that takes into consideration, at a minimum, on, policy, goals and objectives to implement a comprehensive international trade and investment program in California, measurable outcomes and timelines, identification of key stakeholders, and other information as specified. However, removes the requirement that the relevant policy and fiscal committees review and hold a hearing on the strategy presented. 4)Repeals the obsolete provision in Item # 6) above that required the Secretary of BTH to convene a statewide business partnership for international trade and investment no later than March 1, 2007, as specified. 5)Repeals the provisions in Item # 7) above which prohibited the Secretary of BTH from establishing any international trade and investment office (ITI Office) unless specified conditions are met including that it is consistent with the policies and the recommendations and priorities established in the international trade and investment strategy and that the strategy conform to requirements, as specified. ( Note : To keep this provision would be inconsistent with the new authority granted to the Director of GO-Biz to establish ITI Offices outside of the Unites States if AB 2012 Page 5 certain requirements and conditions are met, as specified.) 6)Repeals the provisions in Item # 8) above which prohibited the Secretary of BTH from establishing any international trade and investment office (ITI Office) unless the Secretary submits a business plan, as specified, to the Legislature and meets other requirements, as specified. ( Note : This provision would also be inconsistent with the new authority granted to the Director of GO-Biz to establish ITI Offices outside of the Unites States if certain requirements and conditions are met, as specified.) 7)Requires the Director of GO-Biz to prepare the following: a) A budget for the International Trade and Investment Program (Program) and a separately stated budget for each ITI Office and specifies what information each of the budgets prepared shall include. b) A strategy and business plan for the Program, developed with input from California businesses that shall include, but not be limited to, measurable goals, objectives, and outcomes and timelines necessary to attract employment-producing direct foreign investment to the state and increase California exports. Specifies what the strategy and business plan shall include. c) A written review of the implementation of the prior year's strategy and business plan for the Program that addresses the performance of the program and each ITI Office. d) Submit all of the above to the Legislature and policy committees, as specified. 8)Provides that the Controller shall not allocate any state funds to the GO-Biz for international trade and investment activities unless the strategy for international trade and investment has been submitted to the Legislature by May 1, 2014. 9)Authorizes GO-Biz to accept private sector moneys in an amount not in excess of ten thousand dollars ($10,000) per donation made to the state for the purpose of promoting international trade and investment, subject to the Political Reform Act requirements, and not in excess of a total of ten thousand dollars ($10,000) per quarter per donor, and specifies the purposes for which moneys may be used. 10)Creates the California Economic Development Fund (Fund) in the AB 2012 Page 6 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 and grants, and provides that upon appropriation by the Legislature, moneys in the Fund may be expended by the GO-Biz 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 moneys were received. 11)Specifies that GO-Biz is the primary state agency responsible for international trade and investment activities in areas other than those covered by the Department of Food and Agriculture. 12)Requires the GO-Biz to establish an electronic online permit assistance center, called the "California Government-On Line to Desktops" (CALGOLD), through the Internet, and that the CALGOLD shall be available for use by any business or other entity subject to a law or regulation implemented by an agency, authority, bureau, board, commission, conservancy, council, department, state district or office, and shall provide a business or other entity with assistance in complying with those laws and regulations, and to the extent feasible, incorporate permit assistance activities of local and federal entities and of other entities of the state into its operations. FISCAL EFFECT: According to the Assembly Committee on Appropriations analysis dated April 25, 2012, negligible fiscal impact. COMMENTS: 1. Purpose. The Author is the sponsor of this measure. According to the Author, "AB 2012 is a continuation of work started since 2010, to create a single point of contact for business in California. While the foundation for both the inclusion of foreign trade and permitting was included in prior legislation that was signed into law, the details had not been worked out." "There is currently an agreement between GO-Biz and CalEPA to allow GO-Biz to be able to maintain the CALGOLD website. This bill codifies that agreement." "Additionally, prior legislation defined the powers and duties assigned to GO-Biz as the following : "In cooperation with the federal government, foster relationships with overseas entities to AB 2012 Page 7 improve the state's image as a destination for business investment and expansion. This bill formally transfers the responsibility for foreign trade to GO-Biz." 2.Background. a) Governor's Office of Business and Economic Development (GO-Biz). In February 2010, the Little Hoover Commission (LHC) undertook a review of the state's economic and workforce development 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 of 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 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 AB 2012 Page 8 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. Another key initiative of GO-Biz is 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. b) Expansion of GO-Biz and Reorganization. In signing AB 29, Governor Brown also issued a letter outlining his continued interest in expanding the role of GO-Biz for the purpose of better focusing the state's multiple economic development activities. The Governor reiterated this policy when he released his proposed 2012-13 budget. On March 30, 2012, the Governor submitted a reorganization plan to the Little Hoover Commission, which operationalized his earlier statements. Key GO-Biz related elements within the reorganization plan include: Dismantling BTH and transferring the following programs to GO-Biz: o The Small Business Loan Guarantee Program; o The California Travel and Tourism Commission; o The California Film Commission; o The Film California First Program; and o The Infrastructure and Economic Development Bank (I-Bank). Locating a Small Business Center program with GO-Biz, which is most likely, refers to the Small Business Development Centers Program (SBDC). The SBDC is currently AB 2012 Page 9 co-located at GO-Biz. Replacing the Secretary of BTH with the Director of GO-Biz as Chair of the California Travel and Tourism Commission and the I-Bank. A newly established Secretary of Transportation replaces the Secretary of State and Consumer Services on the I-Bank board. The Little Hoover Commission had 30 days to analyze the Plan and submit its recommendations to the Governor and Legislature. The Legislature has until July 3, 2012 (60 days) to consider the Plan. The Plan will go into effect on July 3rd unless the Legislature takes an action pursuant to a resolution to disapprove the Plan with a majority of the Members in each house voting. On April 23 to April 25, 2012, the Commission held a series of public hearings and received written testimony, interviewed experts and reviewed analyses of the departments involved, including its own previous work when relevant. On April 25, May 11 and May 22, 2012, the Commission also held three public hearings to develop and discuss its report and recommendation to the Legislature. In regards to the changes as mentioned, the Commission stated, "These moves are consistent with the Commission's previous recommendations, and the Commission endorses them as they should bolster the state's economic development efforts." As further stated by the Commission: "The functions of the entities that would become part of GO-Biz are a natural fit for economic and business development. They are not physically relocating but are virtually becoming a part of GO-Biz, similar to what the Commission envisioned." 1.Transfer of the State's Trade Program within BTH. Between 1986 and 2004, the Technology, Trade and Commerce Agency (TTCA) was the responsible government entity for promoting economic development, international trade, and foreign investment in California. When the agency was eliminated due to its poor administrative performance, the authority for all state trade activity was also struck from statute. Beginning in the 2005-06 session, several legislative measures were introduced to reinstate the state's trade authority. No measures were successful until a compromise was negotiated with SB 1513 (Romero, Chapter 663, Statutes of 2006). During deliberations on the re-establishment of the state's trade authority, concerns were repeatedly raised that the state lacked a comprehensive, or even AB 2012 Page 10 generally understandable, statutory scheme related to trade and foreign relations. SB 1513 addressed these concerns by first requiring the Business, Transportation and Housing Agency (BTH) to undertake a trade study to determine what role, if any, the state should play in international trade and foreign investment activities. Second, the bill required BTH to establish a business advisory committee to provide California businesses with direct access to the policy making process. Third, the bill required the development of a trade strategy that is consistent with the trade study and acts as the vehicle for implementing the state's trade policy. The first five-year strategy was published in February 2008. The next update is required in February 1, 2013. 2.Transfer of CalGOLD Program. Existing law requires businesses to obtain various environmental permits prior to undertaking any project with potential environmental impacts. In 1997, the state established a "smart" permit system to aid businesses in complying with these laws and regulations. The system, also known as the CalGOLD, provides "hyperlinks: and other online resources that business can use to identify permit requirements. While statutorily CalGOLD is directed to be operated through the Secretary of the Environmental Protection Agency, the site and its related permit assistance activities are being undertaken by GO-Biz through a memorandum of understanding. 5. Related Legislation. AB 29 (John A. Pérez, Chapter 475, Statutes of 2011) establishes GO-Biz 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. AB 1137 (V. Manuel Pérez) of 2011, would have facilitated local economic development and job creation by assisting small business to access new export markets for their goods and services, updating the law relating to free trade zones, and authorizing the use of new federal funds under the Small Business Jobs Act of 2010. This measure was held in the Senate Committee on Appropriations. SB 1513 (Romero, Chapter 663, Statutes of 2006) provides new authority for the BTH to undertake international trade and investment activities, and as a condition of that new authority, directs the development of a comprehensive international trade and investment policy for California. This bill reflects extended bi-partisan discussions between the Senate and the Assembly. AB 2012 Page 11 AB 2582 (Mullin, Chapter 283, Statutes of 2006) requires the CALGOLD website to be updated periodically to include permitting and regulatory compliance information relevant to emerging and evolving industries. The author was particularly interested in adding online resources for the life sciences industry. 6. Arguments in Support. The California Workforce Association writes that it strongly supports efforts to facilitate bringing businesses to California in order to generate much needed jobs in the state and establishing a central location for business information and permitting is an important step in helping California as it continues to climb out of the Great Recession. 7. Technical Amendment. With changes to Section 13996.65, a reference to a subdivision which is no longer part of that Section was left in and referred inadvertently in Section 13996.75. Suggest the following technical amendment: On page 17, line 8, strike after 2014, "or the strategy update required by subdivision" and strike lines 9 through 11, inclusive. SUPPORT AND OPPOSITION: Support: California Workforce Association California Council for Environmental and Economic Balance Opposition: None on file as of June 27, 2012. Consultant:Bill Gage