BILL ANALYSIS Ó
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CONCURRENCE IN SENATE AMENDMENTS
AB 1247 (Medina and Bocanegra)
As Amended September 6, 2013
2/3 vote. Urgency
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|ASSEMBLY: |70-0 |(May 16, 2013) |SENATE: |39-0 |(September 11, |
| | | | | |2013) |
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Original Committee Reference: J., E.D. & E.
SUMMARY : Transfers the administration of the small business
financial development corporation (FDC) managed programs from
the Business, Transportation and Housing Agency (BTH) to the
California Infrastructure and Economic Development Bank (I-Bank)
within the Governor's Office of Business and Economic
Development (GO-Biz). Specifically, this bill :
1)Repeals and recasts the statues related to the establishment,
operations and oversight of the FDC managed programs from BTH
to the I-Bank, which is relocated to GO-Biz.
2)Transfers and modifies the membership of the California Small
Business Board from a free-standing board at BTH to a
subcommittee of the I-Bank board of directors.
3)Expands the list of eligible financial institutions and
entities, that an FDC may offer a loan guarantee to include
credit unions, community development financial institutions
and microlenders.
4)Includes an urgency clause allowing the bill to take effect
immediately upon enactment.
The Senate amendments :
1)Modify and expand the membership of the California Small
Business Board by adding two FDCs and two small business
representatives.
2)Shift finance programs from regulations to directives and
requirements adopted by the I-Bank Board at a public meeting.
This is consistent with other I-Bank activities.
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3)Specify that any prior regulations adopted by BTH will remain
in effect until the I-Bank Board adopts directives and
requirements. In no case, however, can this extension go
beyond June 1, 2015.
4)Clarify that a corporation that has been suspended from the
state's access to capital programs remains a nonprofit benefit
corporation.
5)Exempt the annual contract between the state and the FDCs from
the state's general procurement process. Under the statute,
the FDCs serve as a pre-selected pool of local nonprofits to
administer the finance programs;
6)Authorize the I-Bank to make investment decisions about
Expansion Fund moneys, which is consistent with existing
I-Bank policy. Currently, the program manager has to get the
Department of Finance approval.
7)Authorize the I-Bank to adopt other financial products related
to debt instruments and credit enhancements. This is
consistent with existing I-Bank operational practice.
8)Place similar program conditions for direct loans and disaster
guarantees as with loan guarantees. Existing law is silent.
9)Remove 25% limitation on the total amount of funds that can be
sued by a FDC to make loans and the $50,000 individual loan
limit, and instead, requires that limitations be set by the
I-Bank Board through adopted directives and requirements.
10)Provide program flexibility to the allocation or transfer of
moneys between FDC trust fund accounts.
11)Allow an exception to the preclusion against mixing separate
FDC trust fund accounts when a program manager has designated
a shared trust fund account which multiple FDCs.
12)Add an uncodified section that clarifies that nothing in the
bill alters or impairs any control or oversight of GO-Biz
relating to federal funds received by the state under the
State Small Business Credit Act of 2010.
13)Authorize the establishment of a holding account within the
expansion fund or trust fund for moneys that the program
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manager has withdrawn from a corporation for cause.
14)Make other conforming and technical changes in the
definitions and administrative functions of the finance
programs within the I-Bank.
15)Add an urgency clause allowing the bill to take effect
immediately upon enactment.
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 : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : This measure transfers the authority for the FDC
programs to the I-Bank, which is then moving under the
auspicious of GO-Biz. These transfers further consolidate the
state's economic development programs into a single location and
strengthen the I-Bank's business development tool kit.
The bill also separates the FDC-managed programs from the
FDC-incorporation provisions to more effectively leverage the
programs within the state's existing network of programs. The
analysis includes information on California's small business
economy, the SBLGP, the federal Small Business Jobs Act, and
related legislation.
California Small Business: 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.
Businesses with less than 100 employees comprise nearly 98% of
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all businesses, and are responsible for employing more than 37%
of all workers in the state.
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 FDCs, offers direct loans or loan guarantees
that a qualifying small business borrower could not otherwise
obtain.
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
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.
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
FN: 0002727
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