BILL ANALYSIS Ó
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|Hearing Date:June 16, 2014 |Bill No:AB |
| |674 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Ted W. Lieu, Chair
Bill No: AB 674Author:Quirk-Silva
As Amended:January 14, 2014 Fiscal: No
SUBJECT: Microenterprise.
SUMMARY: Revises the definition of microenterprise and
microenterprise development organization.
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
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
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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)
This bill:
1) Specifies that a microenterprise has five or fewer employees,
including the owner who may be employed full or part-time.
2) Provides that a "limited liability company" is one of the types of
entities that can be defined as a microenterprise.
3) Removes the specific list of examples of microenterprises.
4) Makes technical and clarifying changes.
FISCAL EFFECT: This bill is keyed non-fiscal by Legislative Counsel.
COMMENTS:
1. Purpose. The Author is the Sponsor of this measure. According to
the Author, "during these tough economic times, we must make a
strong effort to support these small businesses that fuel our
economy."
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
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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. 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,
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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. Prior Related Legislation. AB 285 (Brown) of 2013 was very similar
to this bill and in addition to revising the definition of
microenterprise, would have added, and recast provisions requiring
the California Workforce Investment Board (CWIB) to develop
guidelines for targeting resources to high-wage industry sectors
and implementing entrepreneurial and self-employment training
programs. ( Status: The bill was vetoed by the Governor who wrote
in his veto message that provisions related to CWIB were overly
prescriptive and unduly infringed on the CWIB's authority and
discretion.)
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. ( Status: 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) expanded
the definition of financial institutions to include a small
business financial development corporation or microenterprise
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development organization that meets the standard established by the
California Pollution Control Financing Authority (CPCFA).
SCR 41 (Yee, Resolution Chapter 59, Statutes of 2009) designated
July 2009 and July of every year thereafter as Microenterprise
Development Month.
AB 2998 (Carter) of 2008 and AB 165 (Carter) of 2009 were also very
similar to this bill and AB 285. 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. ( Status: 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
the Business, Transportation and Housing Agency (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. ( Status: 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. ( Status:
The bill was held in the Assembly Committee on Appropriations.)
SB 1540 (Alarcon) of 2005 would have declared Legislative intent to
bridge the digital divide between microenterprises and other
businesses in order to facilitate enhanced communication and
commerce. ( Status: The bill was never heard in a policy
committee.)
ACR 76 (Yee, Chapter 134, Statutes of 2005) recognized the month of
October 2005 as Microenterprise Development Month.
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
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microenterprises.
SB 892 (Chesbro) of 2000 and SB 252 of 2001 would have required the
Technology, Trade and Commerce Agency (TTCA) to make grants,
contingent on a Budget Act appropriation, to provide matching funds
for eligible recipients of federal microenterprise grants received
pursuant to the federal Program for Investment in
Microentrepreneurs Act of 1999 (PRIME). ( Status: SB 892 bill was
held in the Assembly Committee on Appropriations and SB 252 was
held in the Senate Committee on Appropriations.)
AB 1534 (Runner) of 1999 would have authorized TTCA to issue
Microenterprise Technical Assistance Grants to providers who serve
California Work Opportunity and Responsibility to Kids (CalWORKs)
recipients and other low-income individuals. ( Status: The bill
was vetoed by the Governor.)
AB 1542 (Ducheny, Chapter 270, Statutes 1997) provided for
demonstration projects for microenterprise development to be
administered by the DSS under the CalWORKS program.
SUPPORT AND OPPOSITION:
Support: None on file as of June 11, 2014.
Opposition: None on file as of June 11, 2014.
Consultant:Sarah Mason