BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 780 (Bocanegra) - Small Business Financial Development
Corporations
Amended: August 12, 2013 Policy Vote: BP&ED 10-0
Urgency: No Mandate: No
Hearing Date: August 19, 2013
Consultant: Robert Ingenito
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 780 would provide for a one-time General Fund
appropriation of $2 million to the Governor's Office of Business
and Economic Development (GO-Biz), to provide administrative
funding for financial development corporations (FDCs).
Fiscal Impact: This bill would result in a one-time $2 million
General Fund appropriation in 2013-14.
Background: In 2010, the Governor's Office of Economic
Development was created through executive order to serve the
needs of businesses and promoters of economic development. The
office was subsequently codified and renamed GO-Biz.
Current law authorizes the approval of eleven FDCs (located
throughout the State) to administer a number of finance programs
to small business (500 or fewer employees), including the Small
Business Loan Guarantee Program (SBLGP). The SBLGP was
established over 40 years ago to assist small businesses in
obtaining long-term loans or lines of credit from conventional
financial institutions. This program promotes local economic
development by providing partial guarantees for loans issued to
small businesses. Thus, the SBLGP enables small businesses to
not only obtain a loan it could not otherwise achieve, but to
establish a favorable credit history with a lender. With that,
the business may obtain further loans on its own, without the
assistance of the program. The FDC's administrative costs are
supported primarily by the General Fund, a portion of federal
funds and fees resulting from program activity.
The FDCs originally received $3.9 million General Fund annually
to support the administrative costs and issued loan guarantees
AB 780 (Bocanegra)
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to over 1,000 entities. Annual General Fund support for FDC
administration has since decreased to $861,000; consequently,
loan guarantees dropped to about 350 during 2011-12. The slower
pace of lending potentially challenges the State's ability to
comply with federal rules, and could result in federal funds
reverting to the U.S. Treasury in 2017.
Proposed Law: This bill would appropriate $2 million from the
General Fund to the Director of GO-Biz, for the purpose of
providing administrative funding to FDCs. The bill provides
$181,818 to each of the 11 FDCs to support administrative
functions.
Staff Comments: In 2011, the federal government created the
Small Business Credit Initiative Program. The State received a
grant of roughly $168 million from this program, divided equally
between the SBLGP and the Capital Access Program (CAP). Each of
the two programs would receive its share in three installments,
with administrative caps of five percent on the first draw and
three percent on the second and third draws. The first draw took
place in 2010-11, and when 80 percent of the first draw has been
obligated, the State will receive the second draw. According to
GO-Biz, the administration take from the first draw has taken
place. Current estimates are that the second draw could be
expected by September 2014, at which time three percent of the
funds would be available for administration.
Staff notes that this proposal was considered by ultimately
rejected during the 2013-14 budget deliberations. Specifically,
the $2 million dollar augmentation was included in the
Assembly's version of the budget, but not in the Senate's
version. The enacted budget did not include the $2 million
augmentation.