BILL ANALYSIS �
AB 780
Page 1
Date of Hearing: May 8, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 780 (Bocanegra) - As Introduced: February 21, 2013
Policy Committee: JEDE Vote:9-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill appropriates $2 million from the General Fund to
provide administrative funding to the state's small business
financial development corporations (FDCs), and specifies each
FDC is eligible to receive $150,000. This bill also states it
is the Legislature's intent the FDCs should be under the
jurisdiction of the Governor's Office of Business and Economic
Development (GO-Biz).
FISCAL EFFECT
Appropriates $2 million (GF).
COMMENTS
1)Purpose : According to the author, FDCs serve small
businesses, the backbone of the California economy.
Established more than 40 years ago, FDCs have a proven track
record of helping businesses create and retain jobs. The
author reports in the last decade FDCs have helped retain
101,248 jobs and created 19,970 more. More specifically, FDCs
have excelled with help from the Small Business Loan Guarantee
Program (SBLGP).
Despite their track record, the author states FDC
administrative budgets have taken unnecessary reductions and
their ability to get loans out the door has dropped
significantly. In 2006, California provided about $4 million
for FDC administrative budgets and almost 1,400 loans were
made. Since 2008, when their budgets were reduced, the number
of loans slipped to dipped to about 350. This slowing pace of
lending raises concerns about whether or not California can
AB 780
Page 2
comply with federal rules by 2017 or face the penalty of
returning funds to the U.S. Treasury. The author contends
without the administrative support historically provided to
FDCs, FDCs stand to lose out on more than $50 million in
federal funding and more than $500 million in leveraging
opportunities.
2)Governor's Office of Business and Economic Development . In
March 2012, the Governor initiated a reorganization process to
realign the state's administrative stricture. Key changes
were proposed and agreed to by the Legislature including the
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.
The Infrastructure and Economic Development Bank
(I-Bank).
In addition, the Governor called for the placement of the
California Small Business Development Center Program (SBDC)
within GO-Biz. Programmatic approval of the reorganization
was granted in July 2012 and becomes effective July 2013.
Legislation is, however, necessary to statutorily reflect the
reorganization changes.
1)FDC Funding . Historically, the state has provided for a
portion of the FDC administrative costs through an annual
payment that has ranged from $120,000 to $418,000. FDCs are
paid an additional fee per loan based on a percentage of the
loan value. In the last few years, both state administrative
costs and program dollars available for FDC guarantees have
shrunk significantly, requiring many of the 11 FDCs to lay-off
employees and/or not replace vacated positions.
2)Related Legislation .
a) AB 1247 (Medina) moves the provisions of the FDC small
business financing programs from BTH to GO-Biz. The bill
is pending in this Committee.
b) AB 201 (Holden) requires the names of the financial
AB 780
Page 3
institutions and financing companies that make direct loans
that include credit enhancements offered by FDCs be posted
on the website of the Business and Consumer Services
Agency. The bill is pending in this Committee.
5)Related Legislation : Chapter 475, Statutes of 2011 AB 29 (J.
P�rez) 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.
6)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081