BILL ANALYSIS �
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|Hearing Date:June 3, 2013 |Bill No:AB |
| |285 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: AB 285Author:Brown
As Introduced: February 11, 2013 Fiscal:Yes
SUBJECT: Microenterprises: economic development.
SUMMARY: Revises the definition of microenterprise. Adds to, and
recasts provisions requiring the California Workforce Investment Board
to develop guidelines for targeting resources to high-wage industry
sectors and implementing entrepreneurial and self-employment training
programs.
Existing law:
1) Defines "microenterprise" as a sole proprietorship, partnership, or
corporation that has fewer than five employees, including the
owner, is part time or full time, and generally lacks access to
conventional loans, equity, or other banking services. (Business
and Professions Code (BPC) � 18000)
2) States that microenterprises are distinct from small businesses or
microbusinesses and include, but are not limited to, businesses
that provide child development services, businesses that provide
landscaping services, businesses that provide building maintenance,
businesses that provide personal and business services, businesses
that provide specialty food products, and home-based businesses.
Provides that "microenterprise development provider" means a
nonprofit or public agency that provides self-employment training,
technical assistance, and access to microloans to individuals
seeking to become self-employed or to expand their current
business. (Id.)
3) Provides that every city, county, and city and county is encouraged
to access microenterprise development in order to create new jobs
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and income opportunities for individuals of low and moderate
income. Provides that every city, county, and city and county is
encouraged to include microenterprise development as a part of
their economic development strategy. Provides that California
communities and the public agencies that serve them, such as
workforce investment boards, community colleges, and local economic
development agencies, are encouraged to promote local partnerships
that invest in microenterprise development. (BPC � 18001)
4) States findings and declarations about the importance of a highly
skilled workforce in necessary for California to remain prosperous
and globally competitive. (Unemployment Insurance Code (UIC) �
14000)
5) Establishes the California Workforce Investment Board (CWIB) as the
body responsible for assisting the Governor in the development,
oversight, and continuous improvement of California's workforce
investment system. (UIC � 14010)
6) Provides that the CWIB shall assist the Governor in the following:
(UIC � 14013)
a) Promoting the development of a well-educated and highly
skilled workforce.
b) Developing the State Workforce Investment Plan.
c) Developing guidelines for the continuous improvement and
operation of the workforce investment system, including
developing policies to guide the one-stop system, providing
technical assistance for the continuous improvement of the
one-stop system, recommending state investments in the
one-stop system, targeting resources to high-wage industry
sectors that are either high-growth sectors or critical to
California's economy, or both.
d) Developing and continuously improving the statewide
workforce investment system as delivered via the one-stop
delivery system, including developing linkages in order to
assure coordination and nonduplication among workforce
programs and activities, reviewing local workforce investment
plans and providing guidance to ensure services reflect the
needs of high-wage industry sectors.
e) Commenting, at least once annually, on the measures
taken pursuant to the Carl D. Perkins Vocational and Applied
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Technology Education Act Amendments of 1990 (Public Law
101-392; 20 U.S.C. Sec. 2301 et seq.).
f) Designating local workforce investment areas within the
state based on information derived from consultations with the
Governor, consultations with the chief local elected
officials, consideration of comments received through the
public comment process, as described in Section 112(b)(9) of
the federal Workforce Investment Act of 1998.
g) Developing and modifying allocation formulas, as
necessary, for the distribution of funds for adult employment
and training activities, for youth activities to local
workforce investment areas, and dislocated worker employment
and training activities, as permitted by federal law.
h) Coordinating the development and continuous improvement
of comprehensive state performance measures, including state
adjusted levels of performance, to assess the effectiveness of
the workforce investment activities in the state.
i) Preparing the annual report to the United States
Secretary of Labor.
j) Recommending policy for the development of the statewide
employment statistics system, including workforce and economic
data, as described in Section 15 of Title 29 of the United
States Code, and using, to the fullest extent possible, the
Employment Development Department's existing labor market
information systems.
aa) Recommending strategies to the Governor for strategic
training investments of the Governor's 15-percent
discretionary funds.
bb) Developing and recommending waivers, in conjunction with
local workforce investment boards, to the Governor as provided
for in the federal Workforce Investment Act of 1998.
cc) Recommending policy to the Governor for the use of the
25-percent rapid response funds, as authorized under the
federal Workforce Investment Act of 1998.
dd) Developing an application to the United States
Department of Labor for an incentive grant under Section 9273
of Title 20 of the United States Code.
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1) Provides that the CWIB, in collaboration with state and local
partners, including the Chancellor of the California Community
Colleges, the State Department of Education, other appropriate
state agencies, and local workforce investment boards, shall
develop a strategic workforce plan to serve as a framework for the
development of public policy, fiscal investment, and operation of
all state labor exchange, workforce education, and training
programs to address the state's economic, demographic, and
workforce needs. States that the strategic workforce plan shall
also serve as the framework for the single state plan required by
the federal Workforce Investment Act of 1998, and be updated at
least every five years. (UIC � 14020)
This bill:
1) Provides that a "limited liability company" is one of the types of
entities that can be defined as a microenterprise.
2) Specifies that a microenterprise has five or fewer employees,
including the owner who may be employed.
3) Makes technical and clarifying changes.
4) States findings and declarations that:
a) Nearly one-third of California's workforce is comprised
of independent and self-employed workers, including
entrepreneurs, contractors, independent consultants, and
home-based businesses.
b) The self-employed workforce in California has grown by
over 100 percent in the last
15 years.
c) The federal Workforce Investment Act of 1998 (29 U.S.C.
Sec. 2801 et seq.) provides that states should offer training
and workforce development services through state and local
workforce investment boards. In fulfilling these duties, it is
important that all Californians have the opportunity to
receive entrepreneurial and self-employment training, as well
as other training that can help them successfully work for
others.
d) It is the policy of the State of California, to the
extent feasible, to provide individuals with the opportunity
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to learn skills needed to pursue self-employment opportunities
in order to provide a stable income for them and their
families.
1) Provides that the CWIB shall provide guidance to endure services
reflect the needs of high-wage industry sectors in developing
guidelines for the continuous improvement of the one-stop system.
Provides that the CWIB shall make recommendations on how to target
resources to high-wage industry sectors that are either high-growth
sectors or critical to California's economy or both in developing
and continuously improving the one-stop system.
2) Requires the CWIB to assist the Governor in recommending policy and
providing technical assistance on entrepreneurial training
opportunities that could be made available through programs of
local WIBs.
FISCAL EFFECT: This measure is keyed fiscal. According to the
Assembly Appropriations Committee analysis dated April 17, 2013, this
bill results in minor absorbable costs for the CWIB.
COMMENTS:
1. Purpose. This bill is sponsored by the California Association for
Microenterprise Opportunity (CAMEO). According to the Author,
there are currently many job training programs, but limited
entrepreneurial training for established businesses. The Author
states that by requiring the CWIB to develop guidelines to ensure
that entrepreneurial training and technical assistance are
available through local workforce investment boards, a currently
underserved group of prospective entrepreneurs, as well as
unemployed individuals, will have better access to quality training
and the opportunity to learn skills needed to pursue
self-employment. The Author states that changing the definition of
a microenterprise will help these firms gain access to conventional
loans, equity, or other banking services. The Author states that
there are over three million microenterprises in California that
employ over four million people and that continuing the growth of
California's smallest businesses is essential to solving the
state's unemployment problem.
According to information provided by the Sponsors,
microentrepreneurs who have gone through training programs and
receive business technical assistance and entrepreneurial training
have an 80 percent success rate and create an average of two jobs,
in addition to their own, over three to five years.
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2. Microenterprises. The term "microenterprise" has come into common
usage in the economic development community over the past decade to
describe the type of self-employment that can become a principle
way to help people exit poverty and accrue wealth. The federal
Small Business Administration's (SBA) definition generally refers
to a business that will have fewer than 5 employees, requires less
than $35,000 in startup capital and which does not have access to
the traditional commercial banking sector. California law goes a
step further and distinguishes microenterprises from small
businesses in that they include, but are not limited to, businesses
that provide child development services, landscaping services,
building maintenance, personal and business services, specialty
food products, and home-based businesses.
Microenterprise development is the process of providing training,
technical assistance and microloans to the smallest business
owners. Microenterprise development programs are generally
operated by nonprofit organizations that target individuals who
experience obstacles to successful business growth such as a
limited access to credit, lack of business management experience
and language barriers. Financial support for microenterprise
development organizations is a complex mix of funding from federal,
state and local government, plus private dollars from foundations,
corporations, and faith-based organizations.
Many of the non-profit organizations around the state that serve
microbusinesses have a critical need to build their capacity to
serve potential entrepreneurs, particularly in rural areas.
Capacity building generally includes projects such as: acquisition
of computer hardware, software and technology skills to better
assess and track microentrepreneurial activities, and evaluate and
report microenterprise progress and program outcomes; professional
development of trainers and business consultants; development of
outreach materials to communicate with special populations;
development of websites to facilitate microentrepreneur access to
regional business services; computer upgrades and software to
ensure effective micro loan tracking; and, staff expansions for
program delivery/evaluation, information management and fund
development.
In July 2006, the Assembly Committee on Jobs, Economic Development,
and the Economy (JEDE) held an informational hearing on
microenterprise development: Microenterprise: The Engine of
California Regional Economies. This bill seeks to implement one of
the primary recommendations from that hearing.
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According to JEDE, small businesses form the core of California's
$1.7 trillion economy, comprising more than 98% of all businesses,
and are responsible for employing more than 50% of all workers in
the state. Microenterprises, meaning businesses with less than
five employees, represent approximately 93% of all businesses in
the state, or approximately 3.2 million of all businesses.
Microenterprises create jobs, generate taxes, and revitalize
communities. In 2003, these businesses employed over 19% of all
workers in California and generated $238 billion in taxable
revenues. During the nation's economic downturn from 1999 to 2003,
microenterprises created 318,183 new jobs, or 77% of all employment
growth, while larger businesses with more than 50 employees lost
over 444,000 jobs. From 2000 to 2001, microenterprises created
62,731 jobs in the state, accounting for nearly 64% of all new
employment growth. In this most recent recession the trend
continued, with the number of non-employer firms increasing from
2.6 million firms reporting $137 billion in revenues for 2008, to
2.8 million firms reporting $138 billion in revenues for 2010,
based on federal tax returns. In the post-recession economy, these
businesses are expected to become increasingly important due to
their ability to be more flexible and better suited to meet niche
market needs.
Common types of microenterprises include engineering, computer
system design, housekeeping, construction, landscaping and
personnel services. Many microenterprises start as part-time or
home-based businesses. Due to their small size and limited
business experience, many owners of microenterprises have
difficulty meeting the traditional credit and collateral
requirements of mainstream financial institutions. A typical
microenterprise start-up will be financed through the
entrepreneur's personal assets, including savings accounts, home
equity loans and credit cards.
Microenterprise development is a model for providing services,
technical assistance and financing to new, prospective and existing
owners of microenterprises.
3. Structure and Background of Workforce Investment Boards and Local
Workforce Investment Areas. The Workforce Investment Act (WIA) is
administered by 49 Workforce Investment Boards (WIBs) in
California. WIBs are administered by a variety of agencies,
including county and city governments, non-profits and joint power
authorities. Within county and city government, WIBs are placed in
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a variety of organizational structures. Some WIBs are housed in
welfare agencies, economic development departments and still others
are their own agencies or separate non-profit organizations.
The California Workforce Investment Board (CWIB) provides guidance
to local WIBs and development of a unified, strategic plan to
coordinate various education, training, and employment programs
that result in an integrated workforce development system that
supports economic development. This plan is required to be updated
at least every 5 years in order to address the state's changing
economic, demographic, and workplace needs.
The designated grant recipient and administrator for WIA funding is
decided by a local partnership between the chief local elected
official (CLEO) and the WIB, whose members the CLEO appoints. They
then select One Stop Career Center operators and training providers
to serve the local community. WIB membership is comprised of
private sector representatives from key local industries, organized
labor, education, economic development, community based
organizations and other community stakeholders. The majority of
members are from the private sector and the chair is always a
business representative. WIA emphasizes that the local WIB and
chief local elected official have discretion over the strategy and
decision making for their WIA funding so they can best respond to
the needs of business and residents of their community.
WIBs have oversight of local workforce investment areas. The local
workforce areas roughly correspond to labor market areas, but also
operate from historical precedent. The majority of workforce
investment areas are single counties. The rest are composed of
large cities, multiple counties that form a consortium under a
joint powers agreement or consortia of multiple cities. There are
seven WIBs in the County of Los Angeles, including LA County, LA
City and five consortia of cities. In Northern California, there
are two WIBs that have jurisdiction over 15 counties. In all parts
of the State, WIBs work together as formal or informal regional
collaboratives ensuring that they are addressing regional workforce
issues that may cross geo-political boundaries.
As innovation is key to California's economy, the state engages in
workforce development activities to ensure there are workers who
have the skills to innovate, change and avail themselves of ongoing
training opportunities. No one institution alone is tasked with
this responsibility. In fact, the job of providing education,
training, skills upgrades and support for California's workers is
spread over a vast array of agencies, organizations and
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institutions, both public and private. Many California WIBs have
become a significant catalyst for community conversations and
dialogue among these players, adding value in aligning resources
and policy to better respond to changing workforce needs, and to
the skills crisis that exists in almost every community.
Every (WIB) has its own charter, organization and unique context,
but they all share a set of central roles. Each WIB provides
oversight for the WIA program and acts as a catalyst to provide
seamless services among various workforce programs and provides
community leadership around workforce issues.
4. Related Legislation. SB 118 (Lieu) requires the CWIB to
incorporate specific principles into the state's strategic plan
that align the education and workforce investment systems of the
state to the needs of the 21st century economy and promotes a
well-educated and highly skilled workforce to meet California's
future workforce needs. The measure is pending on the Senate
Floor.
AB 674 (Quirk-Silva) would expand the definition of microenterprise
to include those entities that have fewer than 10 employees,
including the owner, as prescribed. The measure is pending in the
Assembly Committee on Jobs, Economic Development and the Economy.
SB 734 (Price) of 2011 encouraged participation of small businesses
in the High Speed Rail project by establishing goals, preferences,
outreach and information to small businesses about contracting
opportunities. The bill would have granted an additional 2.5%
preference to state certified microbusinesses. The bill was
amended to become a DeSaulnier bill (Chapter 498, Statutes of 2011)
which required the CWIB to incorporate specific principles into the
state's strategic plan that align the education and workforce
investment systems of the state to the needs of the 21st century
economy and promote a well-educated and highly skilled workforce to
meet the state's future workforce needs.
AB 901 (V. Manuel Perez, Chapter 483, Statutes of 2011) expands the
definition of financial institutions to include a small business
financial development corporation or microenterprise development
organization that meets the standard established by the California
Pollution Control Financing Authority (CPCFA).
SCR 149 (Yee, Resolution Chapter 59, Statutes of 2009) designates
July 2009 and July of every year thereafter as Microenterprise
Development Month.
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AB 2998 (Carter) of 2008 and AB 165 (Carter) of 2009 were very
similar to this bill. Those measures would have made technical
modifications to the definition of microenterprise, added
legislative intent on the importance of Californians having access
to training related to self-employment entrepreneurship and
required the CWIB to develop guidelines for entrepreneurial
training by January 1, 2010. AB 2998 was held in the Senate
Committee on Appropriations and AB 165 was held in the Assembly
Committee on Appropriations.
SB 446 (Yee) of 2007 and AB 1209 (Yee) of 2006 would have required
BT&H to administer a program providing grants on a competitive
basis to qualifying microenterprise development providers for
capacity building projects, and to the extent funds are
appropriated for that purpose by the Legislature. SB 446 was
amended but never taken up for a vote on the Senate Floor and AB
1209 was held in the Senate Committee on Appropriations.
AB 816 (Carter) of 2007 would have established a new $5 million
program, administered by BT&H, for the purpose of making capacity
building grants to microenterprise development providers. The bill
was held in the Assembly Committee on Appropriations.
SB 1156 (Alarcon, Chapter 87, Statues 2004) defined the terms
"microenterprise" and "microenterprise development provider." It
also stated the State's intent to encourage every city and county
to access microenterprise development in order to create new jobs,
to include microenterprise development as a part of their economic
development strategy, and to promote local investments in
microenterprises.
AB 1542 (Ducheny, Chapter 270, Statutes 1997) provided for
demonstration projects for microenterprise development to be
administered by the DSS under the CalWORKS program.
5. Arguments in Support. The California Association of Micro
Enterprise Opportunity (CAMEO) and Central Valley Business
Incubation write in support of this bill, noting that the U.S.
Department of Labor released directives encouraging WIBs to
integrate entrepreneurial training as a vital workforce development
strategy, but that this training has not been incorporated into the
workforce system in any significant way. Supporters believe that
this bill furthers the goal of small business, particularly
microbusinesses, by being an integral part of economic and
workforce strategies.
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NOTE : Double-referral to Labor and Industrial Relations Committee.
SUPPORT AND OPPOSITION:
Support:
California Association of Micro Enterprise Opportunity (CAMEO),
Sponsor
3CORE
AnewAmerica Community Corporation
Central Valley Business Incubation
Coalition of California Welfare Rights Organizations, Inc.
Community Action Partnership of Sonoma County
Renaissance Entrepreneurship Center
Opposition: None on file as of May 28, 2013
Consultant:Sarah Mason