BILL ANALYSIS Ó ----------------------------------------------------------------------- |Hearing Date:June 16, 2014 |Bill No:AB | | |2749 | ----------------------------------------------------------------------- SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Ted W. Lieu, Chair Bill No: AB 2749 Author:Assembly Committee on Jobs, Economic Development and the Economy As Amended:April 10, 2014 Fiscal: Yes SUBJECT: Economic development. SUMMARY: Makes technical changes to the Government Code relating to the transfer of economic development related programs from the Business, Transportation and Housing Agency (BTH) to the Governor's Office of Business and Economic Development (GO-Biz). Existing law: 1)Places the definitions for specified terms relating to economic development within part 4.7 of division 3 of title 2 of the California Government Code, concerning Business and Tourism (Government Code (GC) § 13997.2). This is reflective of the Business, Transportation and Housing Agency (BTH)'s previous role as administrator of economic development programs within the executive branch of the California government. 2)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. (GC §§ 12096 - 12098.5) 3)Designates the Director of GO-Biz as the official state administrator of the Economic Adjustment Assistance Grant and the Small Business Expansion Fund. (GC §13997.7) AB 2749 Page 2 4)Establishes the California Small Business Finance Center within the California Infrastructure and Investment Bank (I-Bank) for the purpose of overseeing programs locally delivered through a network of small business financial development corporations (FDCs). (GC § 63088 et. seq.) This bill: 1)Makes technical corrections to the transfer of the administration of the Economic Adjustment Assistance Grant and the Sudden and Severe Economic Dislocation Grant Program from the BTH to GO-Biz. 2)Renumbers within statute the following definitions (no changes have been made to the definitions): ------------------------------------------------------------------- | a) Local Economic | b) Financial Intermediary | | Development Organization | | |------------------------------+------------------------------------| | c) Regional Economic | d) Regional Economic Development | | Development Organization | Corporation | |------------------------------+------------------------------------| | e) Regional Economic | f) Small Businesses | | Development Organization | | |------------------------------+------------------------------------| | g) Economic Development | h) Community Development | | Corporation | | |------------------------------+------------------------------------| | i) Triple Bottom Line | j) Financial Institution Capital | |------------------------------+------------------------------------| | aa) Economic Development| bb) Community Development | | | Intermediary | |------------------------------+------------------------------------| | cc) Local Economic | dd) Microbusiness Lender | | Development | | |------------------------------+------------------------------------| | ee) Emerging Domestic | ff) California Council on Science | | Market |and Technology | | | | ------------------------------------------------------------------- 3)Modifies the annual reporting requirements of the I-Bank including: consolidating requirements; making submittal of the report to the Legislature rather than the Joint Legislative Audit Committee; AB 2749 Page 3 requiring that aggregate-level reporting be provided on revolving loan fund activities rather than the current requirement to report, in detail, on every application received during the reporting period; and requiring the annual report be posted on its website. 4)Removes the requirement for the Small Business Advocate to consult with the Department of Transportation on the Small and Emerging Manager Contractor Technical Assistance Program, a program that sunsetted on January 1, 2013. 5)Makes other technical and conforming changes to the Government Code. FISCAL EFFECT: This bill is keyed "fiscal" by Legislative Counsel. According to the Assembly Committee on Appropriations analysis dated May 7, 2014, this bill will result in minor and absorbable costs to GO-Biz. COMMENTS: 1. Purpose. The Author is the Sponsor of this measure. According to the Author, this measure makes a number of technical changes to conform existing law with the previously enacted legislation. 2. Background. a) Governor's Office of Business and Economic Development (GO-Biz). In February 2010, the Little Hoover Commission undertook a review of the state's economic and workforce development programs. In its final report, Making up for Lost Ground: Creating a Governor's Office of Economic Development, it analyzed the status and effectiveness of current programs since the 2003 demise of the Technology, Trade and Commerce Agency (TTCA) and recommended the creation of a new governmental entity to fill the void left by the dismantled agency. The report called for a single entity that would promote greater economic development, foster job creation, serve as a policy advisor and deliver specific services (i.e., permitting, tax, regulatory, and other information) directly to the California business community. In April 2010, Governor Schwarzenegger AB 2749 Page 4 issued Executive Order S-05-10 as a means to operationalize the report recommendations including the creation of the Governor's Office of Economic Development (GOED). In October 2011, the Governor signed AB 29 (cited and described below), which effectively codified GOED and changed its name to GO-Biz, effective January 1, 2012. Since its inception, the office has served over 3,000 businesses, 95% of which are small. The most frequent types of assistance include help with permit streamlining, starting a businesses, relocation and expansion of businesses, and regulatory challenges. According to GO-Biz, the Office of Small Business Advocate (OSBA) advocates the causes of small business and provides small business owners with the information needed to succeed in the California marketplace. OSBA staff provides assistance to the state's small business community on issues ranging from regulations to procurement. Depending on the issue, staff can refer small businesses to appropriate contacts in State government, business, and service organizations. OSBA staff also serves on various State interagency working groups and task forces to represent small business interests in state legislation, policy, and procedures. In March 2012, the Governor initiated a reorganization process to 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 California Travel and Tourism Commission, Small Business Loan Guarantee Program, the California Film Commission, the Film California First Program and the Infrastructure and Economic Development Bank (I-Bank). b) Economic Adjustment Assistance Grant. The federal Economic Adjustment Assistance Grant program was initially designated to be administered through the Technology, Trade, and Commerce Agency, which was eliminated in 2003. Although the State Controller retained the federal money, no state entity had the legal authority to actually use the money. In 2008, BTH was designated as the state administrator of the funds and the moneys were transferred to the California Expansion Fund where they could be used under contract through the state's network of FDCs. Code clean-up to the Governor's GRP 2 transferred the authority to use the federal funds and the AB 2749 Page 5 responsibility to oversee the FDC contracts from BTH to GO-Biz. However, legislation enacted in 2013 ( AB 1247 (Medina), Chapter 537, Statutes of 2013), transferred the FDC programs to the I-Bank, a unit within GO-Biz. This bill would give the executive director of the I-Bank the authority to administer the federal funds through the FDCs. c) I-Bank. The I-Bank was established in 1994 to promote economic revitalization, enable future development, and encourage a healthy climate for jobs in California. Housed within GO-Biz, it is governed by a five-member board of directors comprised of the Director of GO-biz (Chair), State Treasurer, Director Department of Finance, Transportation Agency, and a Governor's appointee. The day-to-day operations of the I-Bank are directed by the Executive Director who is an appointee of the Governor and is subject to confirmation by the California State Senate. Currently, the I-Bank has authority for 25 staff members. The I-Bank does not receive any ongoing General Fund support, rather it is financed through fees, interest income, and other revenues derived from its public and private sector financing activities. According to its Comprehensive Annual Financial Report for the fiscal year ended June 2013, its programs continued to provide revenues sufficient to cover operating expenses. The I-Bank administers three programs: (1) the Infrastructure State Revolving Fund which provides direct low-cost financing to public agencies for a variety of public infrastructure projects; (2) the Conduit Bond Program which provides financing for manufacturing companies, public benefit nonprofit organizations, public agencies and other eligible entities; and (3) the Small Business Finance Center which helps small businesses access private financing through loan guarantees, direct loans, and performance bond guarantees. There is no commitment of I-Bank or state funds for any of the conduit revenue bonds. Even in the case of default, the state is not liable. Since its creation in 1994, the I-Bank has loaned, financed, or participated in over $344 billion in infrastructure and economic expansion projects. This includes over $400 million to local and state agencies; developing a high-level of expertise in the financing of public infrastructure. The I-Bank also serves as the state's only general purpose financing authority with broad AB 2749 Page 6 statutory powers to issue revenue bonds, make loans, and provide guarantees. Over $33 billion in conduit revenue bonds have been issued by the I-Bank since 2000. 3. Prior Related Legislation. SB 820 (Committee on Governmental Organization, Chapter 353, Statutes of 2013) enacted the statutory changes to reflect the assignment and reorganization of the functions of state government as outlined in the Governor's Reorganization Plan No. 2 of 2012 (GRP 2), effective on July 3, 2012, and operative on July 1, 2013. AB 1247 (Medina, Chapter 537, Statutes of 2013) established the California Small Business Finance Center at the I-Bank, within GO-Biz, and transferred the authority to administer the small business loan guarantee program and other related programs to the I-Bank. AB 1317 (Frazer, Chapter 352, Statutes of 2013) also enacted statutory changes to reflect the assignment and reorganization of the functions of state government as outlined in the Governor's Reorganization Plan No. 2 of 2012 (GRP 2), effective on July 3, 2012, and operative on July 1, 2013. AB 29 (John A. Pérez, Chapter 475, Statutes of 2011) 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. AB 192 (Assembly Budget Committee, Chapter 312, Statutes of 2007) made the necessary statutory changes to allow the transfer of $4.3 million in federal funds held by the State Controller's Office to the Business Transportation and Housing Agency in order to reactivate the Sudden and Severe Economic Dislocation Grant Program as was approved in the budget. SUPPORT AND OPPOSITION: Support: None on file as of June 11, 2014. Opposition: None on file as of June 11, 2014. Consultant:Sarah Mason AB 2749 Page 7