Amended in Assembly May 1, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 1837

Introduced by Assembly Member Atkins

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(Coauthors: Assembly Members Fox, Medina, and V. Manuel Pérez)

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February 18, 2014

An act to begin insert amend Section 13997.6 of, and to end insert add begin delete Section 12096.3.7 to end delete begin insert Article 4.5 (commencing with Section 12096.6) to Chapter 1.6 of Part 2 of Division 3 of Title 2 of, end insert the Government Code, relating to state government.

LEGISLATIVE COUNSEL’S DIGEST

AB 1837, as amended, Atkins. Governor’s Office of Business and Economic begin delete Development. end delete begin insert Development: social innovation financing. end insert

The Economic Revitalization Act establishes the Governor’s Office of Business and Economic Development, also known as begin delete “GO-Biz,” to, end delete begin insert “GO-Biz.” GO end insert begin insert -Biz, end insert among other duties, begin delete serve end delete begin insert serves end insert the Governor as the lead entity for economic strategy and the marketing of California on issues relating to business development, private sector investment, and economic growth.

This bill would require GO-Biz to serve as the lead entity for efforts to explore social innovation begin delete financing, defined as an investment arrangement using private funding to finance a social program administered by a nonprofit organization or for-profit service provider on behalf of a government agency pursuant to a performance-based contract. This end delete begin insert financing, as defined. The end insert bill would also require GO-Biz to develop begin delete model provisions for end delete begin insert recommendations for implementing social innovation finance models, including end insert performance-based begin delete contracts that allow private investors to provide upfront financing to service providers to achieve preagreed upon social outcomes and require a contracting government agency to pay the private investor a return on investment if successful programmatic outcomes are achieved by the service provider. end delete begin insert contracts, as defined, for achieving measurable social benefits. The bill would authorize GO-Biz to establish an advisory board to help guide the implementation of the act. end insert

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Other existing law creates the California Economic Development Fund in the State Treasury for the purpose of receiving federal, state, local, and private economic development funds, and receiving repayment of loans or grant proceeds and interest on those loans or grants.

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The bill would establish the Social Innovation Account within the fund for the purpose of receiving federal, state, and local governmental moneys and private moneys to be used to implement social innovation financing methods. The bill would authorize GO-Biz to accept nonstate moneys for the purposes of facilitating, administering, or collaborating on social innovation financing and implementing performance-based contracts. The bill would require GO-Biz to post on its Internet Web site prescribed information on private donations. The bill would authorize GO-Biz to expend moneys in the account, upon appropriation, to make payments to private investors and service providers and to fund other expenditures directly related to performance-based contracts and other social innovation financing methods and models.

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This

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begin insert The end insert bill would also make legislative findings and declarations in this regard.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) It is the intent of the Legislature to establish partnerships
between begin delete government end delete begin insert governmental end insert agencies, private investors,
nonprofit organizations, and for-profit service providers to facilitate
the use of social innovation financing to achieve measurable social
benefits.

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(b) Social innovation financing and the use of
performance-based contracting can serve as an effective tool for
addressing social and community development challenges where
private sector innovations may be useful and multiple approaches
may be appropriate. Research shows that the selection and design
of these types of social interventions should be done with care in
order to ensure successful outcomes. Among other criteria, selected
projects should meet the following requirements:

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(1) Address social needs that are unmet, high priority, and
large-scale.

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(2) Address target populations that are well-defined and can
be measured with scientific rigor.

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(3) Result in outcomes that are credible and readily available
by cost-effective means.

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(4) Propose interventions that are highly likely to achieve
targeted impact goals.

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(5) Be carried out by proven service providers that are prepared
to scale with quality.

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(6) Include safeguards to protect the well-being of the
populations served.

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(7) Be cost-effective programs that can demonstrate financial
savings for government.

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(b)

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begin insert (c) end insert  The focus of initial social innovation financing efforts should
be begin delete towards end delete begin insert toward end insert decreasing recidivism rates in our criminal
justice system, reducing homelessness, and promoting workforce
development.

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SEC. 2.  

Section 12096.3.7 is added to the Government Code,
to read:

12096.3.7.  

(a) The office shall serve as the lead entity for
efforts to explore social innovation financing and provide technical
assistance to local governments that are exploring the creation of
social innovation financing.

(b) The office shall develop model provisions for
performance-based contracts.

(c) For purposes of this section only, the following terms shall
have the following meanings:

(1) “Performance-based contracts” means contractual
agreements between government, private investors, and service
providers where private investors agree to provide upfront
financing to service providers to achieve preagreed upon social
outcomes and the government agency agrees to pay a return on
investment to the investors if successful programmatic outcomes
are achieved by the service provider.

(2) “Social innovation financing” means an investment
arrangement using private funding to finance a social program
administered by a nonprofit organization or for-profit service
provider on behalf of a government agency pursuant to a
performance-based contract.

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begin insert SEC. 2. end insert   

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begin insert Article 4.5 (commencing with Section 12096.6) is added
to Chapter 1.6 of Part 2 of Division 3 of Title 2 of the end insert begin insert Government
Code end insert begin insert , to read: end insert

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Article begin insert 4.5. end insert   Social Innovation Financing

 

begin insert 12096.6. end insert   

(a) The office shall serve as the lead entity for efforts
to explore social innovation financing and provide technical
assistance to local governments that are exploring the creation of
social innovation financing.

(b) The office shall develop recommendations for implementing
social innovation finance models, including performance-based
contracts for achieving measurable social benefits. These
recommendations shall include, but are not limited to, the
following:

(1) Strategies for engaging with private investors, nonprofit
organizations, and for-profit and nonprofit service providers.

(2) Parameters for determining which projects are appropriate
for performance-based contracts.

(3) Parameters for establishing baseline, setting performance
metrics, and measurable outcomes.

(4) A model for a performance-based contract, including
parameters for writing a statement of work and quality standards
that encompasses the requirements of paragraph (3).

(c) The office may establish an advisory board to help guide
the implementation of this chapter.

(d) As used in this section only:

(1) “Performance-based contracts” means contractual
agreements between government, private investors, and service
providers where private investors agree to provide up-front
financing to service providers to achieve social outcomes agreed
upon in advance and the government agency agrees to pay a return
on investment to the investors if successful programmatic outcomes
are achieved by the service provider.

(2) “Social innovation financing” means an investment
arrangement using private funding to finance a social program
administered by a nonprofit organization or for-profit service
provider on behalf of a government agency pursuant to a
performance-based contract.

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begin insert SEC. 3. end insert   

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begin insert Section 13997.6 of the end insert begin insert Government Code end insert begin insert is amended
to read: end insert

13997.6.  

(a) The California Economic Development Fund is
hereby created in the State Treasury for the purpose of receiving
federal, state, local, and private economic development funds, and
receiving repayment of loans or grant proceeds and interest on
those loans or grants.

(b) Upon appropriation by the Legislature, moneys in the begin delete fund end delete
begin insert California Economic Development Fund end insert may be expended by the
Governor’s Office of Business and Economic Development to
provide matching funds for loans or grants to public agencies,
nonprofit organizations, and private entities, and for other economic
development purposes, consistent with the purposes for which the
moneys were received.

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(c) (1) The Social Innovation Account is hereby established
within the California Economic Development Fund for the purpose
of receiving federal, state, and local governmental moneys and
private moneys that will be used to implement social innovation
financing methods including performance-based contracts, as
defined and authorized in Section 12096.6.

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(2) (A) The Governor’s Office of Business and Economic
Development may accept nonstate moneys, including, but not
limited to, private sector funds, for the purposes of facilitating,
administering, or collaborating on social innovation financing
and implementing performance-based contracts.

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(B) The Governor’s Office of Business and Economic
Development, for each private donation that it receives to fund a
social innovation finance activity or performance-based contract,
shall post a report on its Internet Web site within 30 days of
receiving that donation. The report shall contain all of the
following information:

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(i) The name and address of the donor.

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(ii) The amount of the donation.

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(iii) The date the donation was made.

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(iv) The name and address of the entity receiving or using the
donation.

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(v) A brief description of the goods or services provided or
purchased, if any.

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(vi) A description of the specific purpose or event for which the
donation was made, if any.

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(3) Upon appropriation by the Legislature, the Governor’s
Office of Business and Economic Development may expend moneys
in the Social Innovation Account to make payments to private
investors and service providers and to fund other expenditures
directly related to performance-based contracts and other social
innovation financing methods and models.

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