BILL ANALYSIS �
AB 780
Page 1
ASSEMBLY THIRD READING
AB 780 (Bocanegra)
As Introduced February 21, 2013
2/3 vote
ECONOMIC DEVELOPMENT 9-0 APPROPRIATIONS 16-0
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|Ayes:|Medina, Mansoor, Daly, |Ayes:|Gatto, Harkey, Bigelow, |
| |Fong, Fox, Linder, | |Bocanegra, Bradford, Ian |
| |Melendez, V. Manuel | |Calderon, Campos, |
| |P�rez, Weber | |Donnelly, Eggman, Gomez, |
| | | |Hall, Ammiano, Linder, |
| | | |Pan, Quirk, Wagner, Weber |
| | | | |
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SUMMARY : Appropriates $2 million from the General Fund for the
purpose of providing administrative funding to the state's small
business financial development corporations (FDCs). Each FDC is
eligible to receive $150,000. This bill also states that it is
the Legislature's intent that the FDCs are to be under the
jurisdiction of the Governor's Office of Business and Economic
Development (GO-Biz).
EXISTING LAW :
1)Authorizes the approval of 11 FDCs by BTH for the purpose of
administering a number of small business finance programs
including the Small Business Loan Guarantee Program (SBLGP),
direct loans, disaster assistance loans and surety bond
guarantees.
2)Establishes the SBLGP for the purpose of assisting small
businesses in obtaining long-term loans or lines of credit
from conventional financial institutions, which small
businesses would not otherwise qualify for without the
guarantee. Under this program, FDCs act as financial
intermediaries between the state, the small business, and the
financial institution.
FISCAL EFFECT : This bill appropriates $2 million from the
General Fund to GO-Biz.
COMMENTS : The measure proposes the appropriation of $2 million
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for the purpose of supplementing FDC administrative funds, which
will allow them to assist small business access up to $84
million in loan guarantees.
Paying administrative costs for delivering federal block grants
is an issue that the state has long struggled. From the federal
government's perspective, it does not seem unreasonable to
expect states to cover state-side administrative costs when they
are sending $168 million to implement the capital access program
of the state's choice.
In the past, California's failure to provide administrative
funds has resulted in the loss of federal dollars to other
states, as in the case of the Small Business Development Center
Program; penalties in future program years, as is the case of
the Small Cities Community Block Grant Program; and an inability
to obtain the maximum leverage of federal dollars, as in the
case of the disabled veteran opportunity. The Assembly Jobs,
Economic Development, and the Economy policy committee analysis
includes additional details on California's small business
economy, the SBLG Program, the federal Small Business Jobs Act,
and related legislation.
Small Business Loan Guarantee Program: The SBLGP enables a
small business to obtain a term loan or line of credit when it
cannot otherwise qualify for a loan on its own. The state,
working through 11 regionally networked FDCs, provides direct
technical and financial assistance to small businesses seeking
capital from private financial institutions.
In 2011-12, approximately $5.7 million was made available for
loan guarantees under the state SBLGP, which leveraged $9.9
million in small business loans from financial institutions.
During this period 178 guarantees were provided, creating and/or
retaining over 1,200 jobs. There are currently 1,046 loans
being guaranteed under the state program.
In October 2010, Congress passed and the President signed the
Small Business Jobs Act (Act). Among other things, the Act
created the State Small Business Credit Initiative (SSBIC),
which is authorized to expend up to $1.5 billion for state
sponsored small business finance programs. Over the life of the
program, every federal dollar must be matched by $10 private
sector dollars. September 2017 is the deadline for using the
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funds. Funding for the administration, outreach, and oversight
of the program is primarily the responsibility of the state.
Under the funding formula, California is eligible to receive up
to $168 million, which is the largest amount of any state.
California uses its moneys to capitalize the SBLGP administered
through BTH and a loss reserve program and collateral support
program administered through the California Pollution Control
Financing Authority at the state Treasurer's Office.
California has encumbered $16.6 million, with approximately
$13.4 million set aside to cover loan guarantees under the
federal portion of the SBLG Program. Over 18, 600 jobs have
been created or retained by the close of 2012.
According to the FDCs, one impediment to getting the SBLGP
portion out is the lack of state administrative support.
Repeated budget actions have severally limited ongoing
management funds and crippled the state portion of the program,
which allowed greater programmatic flexibility in serving the
needs of small businesses. AB 780 provides additional funding
to help get these federal moneys encumbered.
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
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