BILL ANALYSIS �
AB 837
Page 1
Date of Hearing: April 23, 2013
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AB 837 (Campos) - As Introduced: February 21, 2013
SUBJECT : Economic development programs: reporting
SUMMARY : Requires annual reporting to the Governor's Office of
Business and Economic Development (GO-Biz) on Small Business
Development Center (SBDC) activities in any year that the state
contributes funds. Specifically, this bill :
1)Declares, among other things, that:
a) The California Small Business Development Center Program
(California Program) is part of the federal Small Business
Development Center Program and plays a primary role in providing
technical assistance with verified outcomes to the state's small
businesses.
b) The California Program is administered through six
administrative lead centers (Lead Centers) which are designated
by the federal Small Business Administration (SBA) and affiliated
with one of California's three systems of higher education.
c) The Lead Center supports a network for over 30 small business
development centers, which provide assistance to existing
businesses in the areas of financing, government contracting,
business planning and management, marketing, international trade,
energy efficiency and sustainability, and disaster preparedness.
In providing assistance, the SBDCs work in collaboration with
public and private partners including local workforce development
boards and community colleges.
d) Lead Centers are responsible for securing required one-to-one
matching funds to draw down federal appropriations and are
required to submit regular performance reports to SBA that
document measurable and verifiable outcomes.
e) The California SBDC Leadership Council is comprised of the
directors of the six Lead Centers and is tasked with negotiating
partnerships on behalf of the California Program, leveraging
operational and technical assistance for best practices across
the six regions, and working with the state government to
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maximize the economic impact of the federal program within the
state.
2)Requires each Lead Center to report to GO-Biz on the activities and
performance goals of the California Program within their region by
August 30 of the following fiscal year in which state funding is
provided. This reporting requirement is a condition of the funding.
3)Specifies that the report shall, at a minimum, include the number
of: businesses assisted, people employed at those businesses,
businesses served by industry sector; jobs created; jobs retained,
tax dollars generated by assisted businesses, and the total amount
of federal funds allocated in the region.
4)Requires GO-Biz to post each Lead Center's report on its website no
later than 30 days following the transmittal of the report to the
Governor and Legislature.
EXISTING LAW:
1)Establishes GO-Biz within the Governor's Office for the purpose of
serving as the lead state entity for economic strategy and marketing
of California on issues relating to business development, private
sector investment and economic growth. GO-Biz also serves as the
administrative oversight for the California Business Investment
Service and the Office of the Small Business Advocate (OSBA).
2)Establishes the OSBA for the purpose of advocating on the behalf of
small businesses. Among other duties, the Office responds to
complaints from small businesses concerning the actions of state
agencies and the operative effects of state laws and regulations
adversely affecting those businesses.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Purpose : According to the author, "The California Small
Business Development Center program (California Program) is the only
comprehensive statewide small business assistance infrastructure and
delivery system with centers in nearly every region of California
and, providing services to more than 50,000 small businesses
annually. The California Program is part of the national SBDC
program operated by the US Small Business Administration. The SBDC
in each state is required to match its federal funding allocation.
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In nearly all states, the state government provides the required
matching funds or part of the required match. California currently
does not provide matching funds to this program.
This bill would formally codify the California Program, providing a
state point of contact and a conduit for compiling data on the
impacts of statewide SBDC activity. This bill introduces
accountability standards and reporting requirements if and when
state appropriations are made to support the California Program.
The California Program brings $12 million in federal funding to
California. This bill establishes a structure whereby California
can provide matching funds and ensure that the maximum amount of
federal dollars come to California in support of our 3.5 million
small businesses. This bill would require the SBDC State Chair, in
any year that state appropriations are made to support the program,
to submit a report to the director of GO-Biz, and to the
Legislature, with detailed information on the program's activities
and performance. There would be no cost to the state."
2)Framing the Policy Issue : This measure establishes an
accountability and reporting mechanism for instances when the state
provides matching funds to draw down federal dollars. Each year
California leaves federal moneys on the table, which could be
funding locally-based small business technical assistance centers.
In making the case for this measure, the author cites the importance
of small businesses to the California economy and key reporting
standards set in this measure to track the use and results of state
funds. The analysis includes information on California small
businesses, the SBDC program, review key transparency and
accountability standards, and related legislation. Comment 7
includes amendment recommendations.
3)The Role of Small Business within the California Economy :
California's dominance in many economic areas is based, in part, on
the significant role small businesses play in the state's $1.9
trillion economy. Among other advantages, small businesses are
crucial to the state's international competitiveness and are an
important means for dispersing the positive economic impacts of
trade within the California economy. California small businesses
comprised 96% of the state's 60,000 exporters in 2009, which
accounted for over 44% of total exports in the state. Nationally,
small businesses represented only 31.9% of total exports. These
numbers include the export of only goods and not services.
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Business owners, with no employees make up the single largest
component of businesses in California, 2.8 million out of an
estimated 3.5 million firms in 2010. As these businesses grow, they
continue to serve as an important component of California's dynamic
$1.9 trillion economy. 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. Businesses with 99 or less employees comprise nearly
98% of all businesses and employee approximately 38% of all workers.
These non-employer and small employer firms create jobs, generate
taxes, and revitalize communities.
In hard economic times, smaller size businesses often function as
economic engines. In this most recent recession the trend
continued, with the number of nonemployer firms increasing from 2.6
million firms ($137 billion in revenues) for 2008 to 2.8 million
firms ($138 billion in revenues) for 2010. In the post-recession
economy, small businesses are expected to become increasingly
important due to their ability to be more flexible and better suited
to meet niche market needs.
Their small size, however, also results in certain challenges in
meeting regulatory requirements, accessing capital, and marketing
their goods and services. California's network of SBDCs provide
small size businesses, including business start-ups, with access to
quality education, one-on-one counseling, and other business
development resources.
4)Small Business Development Center Program : The SBDC program is
sponsored by the federal SBA and functions as a cooperative effort
of the private sector, the educational community, and federal,
state, and local governments. In California, SBDCs are administered
through a partnership between the California State Universities at
Chico, Humboldt, and Fullerton; the University of California at
Merced; Long Beach City College; and Southwestern Community College.
Formal management of the partnership is provided through a Lead
Center that is designated by, and responsible to, the SBA. Each
Lead Center serves a specific geographic area compromised of several
SBDCs. Networked, the six centers oversee the 30+ individual SBDCs
in the state.
The SBDCs facilitate the creation, expansion, and retention of
businesses. Each SBDC provides one-on-one counseling, workshops,
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advice, and referrals to prospective and existing business owners.
The SBDCs assist with financing, government contracting, business
planning and management, marketing, international trade, energy
efficiency and sustainability, disaster preparedness and other
business issues. Each Lead Center has its own resources, as well as
maintaining links with other public and private small business
service providers, such as financial institutions, local workforce
investment boards, economic development corporations, and federal,
state and local government entities.
There are also SBDCs which specialize in assisting technology based
companies with advice and training on angel and venture capital
presentation preparation, funding strategies, product positioning,
market launch strategies, applications for federal grants,
technology transfers with research universities, intellectual
property issues, and strategic partnerships.
Funding for the program is provided through a federal SBA
population-based grant. In order to draw down these funds, each
Lead Center must provide a dollar-for-dollar match. Since the
demise of the Technology, Trade, and Commerce Agency in 2003,
California has only received the full amount of eligible federal
funds once. In 2010, the Speaker John A. P�rez negotiated $6
million for the SBDCs as part of the final budget negotiations with
the Governor.
5)Accountability and Transparency : Public accountability of state
expenditures is very important, as is having clear strategic
objectives and measurable outcomes. In 2001, the Joint Legislative
Audit Committee requested the California Bureau of State Audits to
conduct a performance review of the now defunct Technology, Trade
and Commerce Agency (TTCA). At the time, the state served as the
Lead Center for the SBDC program under a cooperative agreement with
the SBA.
The state audit reported that many of the TTCA programs, including
the SBDC program, lacked key components of sound strategic planning.
Recommended improvements included setting more significant
performance goals that would challenge programs and selecting goals
that emphasized real outcomes rather than process inputs. Unlike
the issues raised with TTCA's performance, the reporting
requirements in AB 837 represent best practices and ensure GO-Biz
will receive key information on the impact of state funding
including data on the number of businesses assisted, jobs
created/retained, and state tax dollars generated from assisted
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businesses.
California's prior administration of the SBDC program was also the
subject of a 2001 audit by the federal SBA. This audit found that
the state did not have adequate service center monitoring procedures
and was out of compliance with a range of federal fiscal
requirements. The state failed to respond to the SBA regarding the
audit findings and was eventually required to return $800,000 to the
SBA, according to research by committee staff. When TTCA was
dissolved, the SBA regionalized the administration of the SBDC
program in California and entered into cooperative agreements with
six Lead Centers - one for each of the SBA regions in California.
While top level oversight remains in Washington D.C., the six SBA
district directors actively participate with the Lead Centers on
both program and administrative issues. The SBDCs are also
independently reviewed to ensure management and accounting methods
are accurate.
Funding provided by AB 837 does not trigger any administrative
oversight responsibilities on the part of the state. Funding
provided will be conditioned on receiving clear and accurate
reporting on program outcomes. The committee may want to also
consider giving GO-Biz access to a non-confidential version of the
SBDC database in order to give GO-Biz the option of monitoring the
operations during the funding year.
6)Governor's Office of Business and Economic Development : In April
2010, the Governor's Office of Economic Development was established
to provide a one-stop-shop for serving the needs of businesses and
economic developers. While initially established through Executive
Order S-01-10, the office was later codified and renamed as GO-Biz,
in AB 29 (John A. P�rez), Chapter 475, Statues of 2010. In 2012,
GO-Biz directly assisted 5,308 companies, resulting in the creation
and/or retention of 9,050 jobs and $1.45 billion in investments.
Among other programs, GO-Biz provides permit and other business
assistance for new and expanding businesses, as well as
administering the California Innovation Hub Program under an initial
partnership with the statewide network of SBDCs. GO-Biz also
oversees the Office of the Small Business Advocate, who advocates
for and provides key information to small businesses. Up until
January 1, 2013, the California SBDC Program was co-located at
GO-Biz.
In March 2012, the Governor initiated a reorganization process to
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realign the state's administrative structure. Key changes include
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; and
The Infrastructure and Economic Development Bank (I-Bank).
In addition, the Governor called for the placement of the California
SBDC Program within GO-Biz. Programmatic approval of the
reorganization was granted in July 2012 and will become effective
July 2013. Legislation is, however, also necessary to statutorily
reflect the reorganization changes. AB 837 would implement one of
these changes.
1)Technical Amendments : The Committee may wish to consider the
following technical amendments:
a) What Performance Goals ? The bill contains a requirement to
report on performance goals, but does not specify how those goals
are to be set or by what government entity.
b) Clarify Deadlines : The bill requires each Lead Center report
to be posted on the GO-Biz website no later than 30 days of
report being transmitted to the Governor and the Legislature.
The Governor, however, is never required to receive a copy of the
report and it is unclear how GO-Biz would know if the Lead Center
transmitted a copy to the Legislature. Perhaps it would be
helpful to have the Lead Center just report to GO-Biz and have
GO-Biz transmit the report to the Legislature. Posting of the
report could then be 30 days following report submittal to
GO-Biz.
c) Deeper Data : The bill requires specific reporting of
aggregate level outcomes. As SBDCs already maintain extensive
individual business tracking, it may be appropriate to provide
GO-Biz with review authority in any year that the state provides
funding.
d) Trigger Report to Receiving Money : The bill requires
reporting if the state appropriates money to the California SBDC
Program, but does not necessarily require that the Lead Centers
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receive funds. It is not inconceivable that the state would
appropriate money so GO-Biz could be a better partner on SBDC
activities, such as supporting technical assistance to innovation
based businesses or hosting a small business summit. Perhaps,
the Lead Center reporting trigger should be limited to those
times when the Lead Center specifically receives money.
e) Consolidate Reporting : The bill has each Lead Center
reporting separately to GO-Biz. As a statewide network, it may
be more appropriate for the Lead Centers to consolidate their
information into a single report.
2)Related Legislation : Below is a list of related legislation.
a) AB 29 (John A. P�rez) Codification of GO-Biz : This bill
established 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. Status: Signed by the
Governor, Chapter 475, Statutes of 2011.
b) AB 2206 (Price) Small Business Development Centers : This bill
would have re-established the California Small Business
Development Center Program through the auspices of the Business,
Transportation, and Housing Agency. Status: Held in Assembly
Committee on Appropriations in 2008.
c) SB 1436 (Figueroa) Small Business Liaisons : This bill
enhanced the state's technical assistance to small businesses by
improving the state's Internet information for small businesses
and requiring the designation of agency-level small business
liaisons. Status: Signed by the Governor, Chapter 234, Statutes
of 2006.
REGISTERED SUPPORT / OPPOSITION :
Support
101MFG-California's Next Great Manufacturing Center
Advanced Beauty College
Alameda County Small Business Development Center (Oakland Metropolitan
Chamber of Commerce)
Alameda County Small Business Development Center, Bay Area Development
Company
Alameda County Small Development Center
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Alliance Small Business Development Center
Ambryx Biotechnology
Associated Builders and Contractors of California
Bixel Exchange Small Business Development Center
Blueray Concepts
Bouchard Business Services
Brand Source Pacific Rim
California Asian Pacific Chamber of Commerce
California Association of Competitive Telecommunications Companies
California Association of Microenterprise Opportunity
California Chapter of American Fence Association
California Employers Association
California Hispanic Chamber of Commerce
California Metals Association Coalition
California State University Monterey Bay Small Business Development
Center
California State University, Fullerton's Mihaylo College of Business
and Economics (Orange County/Inland Empire Small Business Development
Center)
Central Coast Small Business Development Center
Central Coast Small Business Development Center at Cabrillo College
Central Valley Business Incubator Small Business Development Center
Tulare Kings
Coalition of Small and Disabled Veteran Businesses
Contra Costa Small Business Development Center
Economic Development Collabroative-Ventura County
El Camino College Small Business Development Center, El Camino
Engineering Contractors' Association
Flasher Barricade Association
Fresno Regional Workforce Investment Board
Fresno State Office of Community and Economic Development
Golden Gate Restaurant Association
Greater Sacramento/Sierra Small Business Development Center at Los
Rios Community College District
Henry Buder's Landscape Restoration
Inland Empire Small Business Development Center
Inland Valley Business Alliance-Rancho Cucamonga
J Style at Home Inc.
Jamber
Jim Hilliard State Farm Insurance
King Knish Inc.
LaunchPad Small Business Development Center, OCTANE
Law Office of Blanca E. Zaraz�a
Los Angles Regional Small Business Development Center Network
Los Angles Regional Small Business Development Center Network, Long
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Beach Community College District
Main Street Chamber-Rancho Cucamonga
Main Street Chamber-Upland
Marin Builders Association
Marysville Van & Storage Co.
Masako's Music Studio
Mendocino Small Business Development Center
Mendocino Small Business Development Center, West Company
MiraCosta College-North San Diego Small Business Development Center
Monterey County Business Council
National Association of Women Business Owners
National Federation of Independent Business
Newport Home Care Inc.
Northern California Independent Booksellers Association
North Coast SBDC
North Coast Small Business Development Center
North Coast Small Business Development Center, Arcata Economic
Development Corporation
North Coast Small Business Development Center, The County of Humboldt
Headwaters Fund
North Coast Small Business Development Corporation
North San Diego Small Business Development Center
Northeastern California Small Business Development Center, San Joaquin
Delta College
Northern CA Small Business Development Center San Joaquin Delta
College
Northern California Small Business Development Center
Oakland Metropolitan Chamber of Commerce
Optimum Zendejas Home Loans
Orange County Small Business Development Center
Pacific Coast Regional Small Business Development Center
Plumbing-Heating-Cooling Contractors Association of California
Real Property Management
Redwood Region Economic Development Commission
Saafara West African Herbal Teas
San Francisco Chamber of Commerce
San Francisco Council of District Merchants Associations
San Francisco Locally Owned Merchants Alliance
San Francisco Small Business Development Center
San Francisco Small Business Development Center
San Francisco Small Business Development Center, City College of San
Francisco
Santa Monica College Small Business Development Center
Small Business California
Small Business Development Center
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Small Business Majority
Small Manufactures Association of California
SOBERLINK
Solano College Small Business Development Center
Sonoma and Napa Small Business Development Centers
Stanislaus Economic Development and Workforce Alliance-Alliance Small
Business Development Center
The California State University, Los Angeles Small Business
Development Center
The CPR Lady
The Dutch Gardener
The East Bay Green Corridor
Tim Wright Transportation Inc.
Times-Delta Media Group
TMC Development Working Solution
TriTech Small Business Development
UC Merced Small Business Development Center Regional Network
Ventura and Santa Barbara Counties Small Business Development Center
Vivas Banners & Signs
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090