BILL ANALYSIS Ó ----------------------------------------------------------------------- |Hearing Date:July 1, 2013 |Bill No:AB | | |53 | ----------------------------------------------------------------------- SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Ted W. Lieu, Chair Bill No: AB 53 Author:John A. Pérez As Amended:June 25, 2013 Fiscal: Yes SUBJECT: Governor's Office of Business and Economic Development: biennial California Economic Development Strategic Plan. SUMMARY: Requires GO-Biz to lead the preparation of a California Economic Development Strategic Plan. 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)Authorizes GO-Biz as the lead entity for economic strategy and the marketing of California on issues relating to business development, private sector investment and economic growth. Authorizes GO-Biz, in this capacity, to coordinate the development of policies and criteria to ensure that federal grants administered or directly expended by state government advance statewide economic goals and objectives. Authorizes GO-Biz to 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 in the state. (GC § 12096.3) 3)Makes the following definitions: (Labor Code (LC) § 1400) AB 53 Page 2 a) "Covered establishment" means any industrial or commercial facility or part thereof that employs, or has employed within the preceding 12 months, 75 or more persons. b) "Employer" means any person, as defined, who directly or indirectly owns and operates a covered establishment. A parent corporation is an employer as to any covered establishment directly owned and operated by its corporate subsidiary. c) "Layoff" means a separation from a position for lack of funds or lack of work. d) "Mass layoff" means a layoff during any 30-day period of 50 or more employees at a covered establishment. e) "Relocation" means the removal of all or substantially all of the industrial or commercial operations in a covered establishment to a different location 100 miles or more away. f) "Termination" means the cessation or substantial cessation of industrial or commercial operations in a covered establishment. g) "Employee" as a person employed by an employer for at least 6 months of the 12 months preceding the date on which notice is required. 2)Provides that an employer may not order a mass layoff, relocation, or termination at a covered establishment unless, 60 days before the order takes effect, the employer gives written notice of the order to the employees of the covered establishment affected by the order, the Employment Development Department (EDD), the local workforce investment board (WIB), and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs. (LC § 1401) 3)Provides that an employer required to give notice of any mass layoff, relocation, or termination under this chapter shall include in its notice the elements required by the federal Worker Adjustment and Retraining Notification (WARN) Act (29 U.S.C. Sec. 2101 et seq.). (Id.) 4)States that notwithstanding the above requirements, an employer is not required to provide notice if a mass layoff, relocation, or termination is necessitated by a physical calamity or act of war. (Id.) AB 53 Page 3 This bill: 1) Requires GO-Biz to lead the preparation of a California Economic Development Strategic Plan. Provides that in fulfilling this duty, GO-Biz shall commission a study that includes, but is not limited to: a) Recommendations regarding an economic development strategic plan for the state, covering a two-year period for the first report and then a three-year time period for subsequent reports and containing a statement of economic goals for the state. b) Governmental and nongovernmental impediments to economic development and a list of legislative, regulatory, and administrative reforms necessary to ease those impediments and improvements to the business climate and economy of the state. c) An evaluation of the effectiveness of the state's economic development programs. d) A list of key industries in which the state shall focus its economic development efforts as well as providing strategies to foster job growth and economic development, covering all state agencies, offices, boards, and commissions that have economic development responsibilities. e) An evaluation of policies and goals developed at the regional level. f) Strengths and weaknesses of California's economy and the state's prospects for future economic prosperity. g) Existing, emerging and declining industries in California and elsewhere. h) Effectiveness of California's economic development programs in creating and retaining jobs and attracting industries. i) Adequacy of state and local physical and economic infrastructure. j) Governmental and nongovernmental impediments to economic development. aa) Opportunities to leverage federal resources for state priorities. AB 53 Page 4 bb) Tactics for attracting private capital to the state and investment in state priority areas. 2)Provides that upon completion of the study, GO-Biz shall convene a stakeholder advisory group consisting of representatives from businesses, labor unions, organizations representing the interests of diverse ethnic and gender groups, local government leaders, academic economists and business professors, chambers of commerce and other business organizations, economic development organizations, government agencies and key industries to assist with evaluating and preparing the California Economic Development Strategy. 3)Requires GO-Biz to submit a report of its findings and recommendations to the Governor and Legislature no later than October 1, 2016 and every three years thereafter. Requires GO-Biz to electronically deliver copies of the Plan to every constitutional officer, legislator, member of the Governor's cabinet, and every state agency, office, board and commission having economic development responsibilities. 4)Adds GO-Biz to the list of entities that an employer must provide notice of any mass layoff, relocation, or termination. FISCAL EFFECT: According to the Assembly Committee on Appropriations analysis dated May 15, 2013, this bill will result in significant costs to GO-Biz in the hundreds of thousands of dollars for the development of a statewide economic strategic plan and minor and absorbable costs to EDD. COMMENTS: 1. Purpose. The Author is the Sponsor of this measure. The Author notes that the statewide economic strategic plan in this bill will provide an economic development roadmap to guide public policy decisions and actions to foster and promote California's economic growth and competitiveness. According to the Author, recognizing the need to better assist businesses in California and to attract new and emerging companies to California, the strategic plan requirement in this bill seeks to develop recommended actions that will assist in this effort and it will draw input from labor unions, local government leaders, academics, Chambers of Commerce, and other business organizations and government agencies. The Author states that as part of the GO-Biz mission, it has the AB 53 Page 5 ability to convene strike forces or teams to address key business development situations, including, but not limited to, attracting new businesses, the relocation of large manufacturers, or the closure of a large business employer. The Author states that as a result of this bill, GO-Biz will be provided mandatory reporting status, pursuant to the WARN Act, so that it can effectively respond to companies that may be contemplating relocating, closing, or significantly scaling back on their business operations within California. 2. Economic Development Strategy. Typically a comprehensive economic development strategy and coordinating strategic plan allows for the identification of important issues and engaging appropriate stakeholders for the purpose of prioritizing key state actions. The last plan was prepared in 2002. Until very recently, current law established the Economic Strategy Panel (ESP) which was tasked with preparing a California Economic Development Strategic Plan (Plan). The ESP was supported by the EDD and Department of Industrial Relations under the Labor and Workforce Development Agency (LWDA) budget. As part of a larger Administration proposal to reduce state government and achieve savings, the ESP was eliminated in the 2011-12 Budget (AB 119, Committee on Budget, Chapter 31, Statutes of 2011). This bill tasks GO-Biz with similar requirements of the former ESP. 3. Governor's Office of Business and Economic Development (GO-Biz). In February 2010, the Little Hoover Commission 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). In October 2011, the Governor signed AB 29 (cited and described below), which effectively codified GOED and changed its name to AB 53 Page 6 GO-Biz, effective January 1, 2012. Since its inception, the office 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. In March 2012, the Governor initiated a reorganization process to realign the state's administrative structure. Key changes include dismantling of the Business, Transportation and Housing Agency (BTH) and the shifting of a number of key programs and services to GO-Biz including the Small Business Loan Guarantee Program, the California Travel and Tourism Commission, the California Film Commission, the Film California First Program and the Infrastructure and Economic Development Bank (I-Bank). In addition, the Governor called for the placement of the California SBDC Program within GO-Biz. 4. Related Legislation This Session. SB 592 (Price) is an urgency measure that requires GO-Biz to provide a port trade promotion strategy to the Legislature on or before April 1, 2014. The bill also requires GO-Biz to convene a statewide business partnership for port trade promotion and makes various findings and declarations about the economic impact of California's ports and possible threats to ports from the expansion of the Panama Canal. ( Status: The bill is currently pending in the Assembly Committee on Jobs, Economic Development and the Economy.) 5.Prior Related Legislation. AB 29 (John A. Pérez, Chapter 475, Statutes of 2011) established 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 1233 (V. Manuel Perez, 2011) aimed to modernize California's economic development activities and promote the state's competitiveness by requiring an integrated economic and workforce development strategy consistent with the needs of all Californians. ( Status: The bill was held in the Assembly Committee on Appropriations.) AB 1409 (Assembly Committee on Jobs, Economic Development and the Economy, 2011) would have required that the next update of the international trade and investment strategy by BTH include policy goals, objectives and recommendations from the state Goods Movement Action Plan (GMAP), as well as related measurable outcomes and timelines. ( Status: The bill was amended to deal with the AB 53 Page 7 regulatory process and held in the Senate Committee on Rules.) SB 1259 (DeSaulnier, 2010) would have created the Economic Development and Job Creation Agency and require the appointed Secretary of the Agency to develop a reorganization plan, propose a structure for the agency, and perform specified duties relating to economic development and job creation. ( Status: The bill was held in the Senate Committee on Appropriations.) AB 2287 (Bass, 2010) would have established the Office of Economic Development, which includes the California Business Investment Services Program, within the then-GOED. ( Status: The bill was held in the Assembly Committee on Jobs, Economic Development and the Economy.) AB 2734 (John A. Pérez, 2010) would have established the Office of 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: The bill was vetoed by the Governor who stated that he "purposefully placed this entity within the Governor's office to underscore the importance of this mission to the state. Therefore, I am disappointed at the insistence of the State Senate to make the director of this office subject to confirmation, which inappropriately infringes on the rights and powers of my office.") AB 699 (Portantino and V. Manuel Pérez, 2009) would have updated the requirements for the development of a State Economic Development Strategy, especially in the areas of technology and innovation, and required it be submitted to the Legislature by May 1, 2010. ( Status: The bill was held in the Assembly Committee on Appropriations.) AB 1558 (V. Manuel Perez, 2009) would have reorganized the state's economic development efforts by eliminating the duties of the Secretary of BTH and transferring modified duties to a Director and Executive Director of a renamed Economic and Employment Development Department, which would succeed to some of the duties of the existing EDD. ( Status: The bill was held by the Senate Committee on Appropriations.) SB 732 (Steinberg, Chapter 729, Statutes of 2008) creates the Strategic Growth Council and requires the Council to take certain actions with regard to coordinating specified programs of member state agencies, and requires the Council to manage and award grants AB 53 Page 8 and loans to support the planning and development of sustainable communities. AB 1722 (Assembly Committee on Jobs, 2008) would have required BTH to provide the Legislature with a copy of the international trade and investment policy it developed pursuant to existing law. ( Status: The bill was vetoed by the Governor as part of the larger swath of Legislative efforts vetoed that year due to "the historic delay in passing the 2008-2009 State Budget" which "forced" the Governor to "prioritize the bills sent to my desk at the end of the year's legislative session. Given the delay, I am only signing bills that are the highest priority for California. This bill does not meet that standard and I cannot sign it at this time.") AB 1916 (Portantino, 2008) would have changed the membership of the California Economic Strategy Panel and the requirements of the California Economic Development Strategic Plan to include a global competitiveness focus. ( Status: The bill was vetoed by the Governor for the same reason as AB 1722 above.) AB 1606 (Arambula, 2007) attempted to require the development of a state private investment strategy and updated the state's economic development statutory framework for the purpose of streamlining and improving coordination of existing policies and programs. ( Status: The bill was vetoed by the Governor who stated that California needs a new overall strategy for its role in promoting economic development, not a piecemeal approach.) AB 1721 (Arambula, Chapter 631, Statutes of 2007) designates BTH as the state's primary agency responsible for the facilitation of economic development activities. The bill also establishes a fund for receiving federal, state, local, and private economic development moneys that can be used to further state economic development activities. AB 2711 (Portantino, 2007) would have required the Secretary of Business, Transportation and Housing Agency (BT&H) to develop a comprehensive state technology and innovation plan. ( Status: The bill was held in the Assembly Committee on Appropriations.) AB 1516 (Arambula, 2006) would have required at least two appointees to the ESP to be local economic development practitioners. ( Status: The bill was vetoed by the Governor who stated that the bill unnecessarily limited the diversity of the ESP by requiring appointments from a specific organization whose purpose is not necessarily reflective of the ESP's broader goals.) AB 53 Page 9 AB 2570 (Arambula, 2006) would have required BTH to develop a strategy to attract new private investment to the state and require public pension funds with assets over $4 billion to report annually on the value of their investments in California and historically underserved areas of the state. ( Status: The bill was vetoed by the Governor who stated that it would impose new administrative costs on city and county pension systems at a time when those systems are fighting to contain administrative costs and obtain a reasonable rate of return for their pensioners.) 1. Arguments in Support. The California Forward Action Fund (CFAF) writes in support of this bill, stating that the group is passionate about the economic development of our state and believes that a strategy has the potential to ensure the state's continued competitiveness and will contribute to the prosperity of all Californians. CFAF also notes that California needs an economic development strategy that works for everyone and this bill will provide the blueprint for continued economic vitality. According to the California Retailers Association (CRA) and The California Business Roundtable , in today's fast paced global economy, an economic development strategy is critically important to guide state and local public policy decisions and actions that strengthen not only California's economic growth but also our competitiveness against other states who continuously seek to raid California's businesses, future investment and jobs. CRA notes that approval of this bill will not only allow for a comprehensive strategic strategy to modernize our economic development efforts, but it will also help to ensure that our state remains a leader in the global economy. 2. Possible Technical, Clarifying Amendments. a) This bill adds a paragraph to the permissive authority of GO-Biz by stating that GO-Biz "may lead the preparation of a California Economic Development Strategic Plan". Subsequently, the bill requires GO-Biz to lead the preparation of a California Economic Development Strategic Plan under the new section 12096.35. If the Author's goal is for GO-Biz to lead preparation of the Plan, the Author may wish to consider amending the bill to clarify permissive authority, while still ensuring that GO-Biz actually does prepare the plan. On page 3, line 21, strike "lead" and replace with "coordinate" AB 53 Page 10 b) This bill refers to a California Economic Development Strategic Plan and a California Economic Development Strategy. The Author may wish to clarify these references on page 3, where reference is made twice to a "California Economic Development Strategic Plan" and page 5, where reference is made to a "California Economic Development Strategy" and again on page 5, where reference is made to a "California economic development strategic plan". SUPPORT AND OPPOSITION: Support: California Forward Action Fund California Retailers Association Opposition: None on file as of June 25, 2013. Consultant:Sarah Mason