BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Isadore Hall, III Chair 2015 - 2016 Regular Bill No: AB 582 Hearing Date: 6/28/2016 ----------------------------------------------------------------- |Author: |Calderon | |-----------+-----------------------------------------------------| |Version: |6/15/2016 Amended | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Felipe Lopez | | | | ----------------------------------------------------------------- SUBJECT: Entrepreneur-in-Residence Act of 2016 DIGEST: This bill enacts the Entrepreneur-in-Residence (EIR) Act of 2016, which would establish the state EIR program within the Government Operations Agency (GOA) for the purpose of utilizing the expertise of private-sector entrepreneurs to help make state governmental activities and practices more streamlined and accessible. ANALYSIS: Existing law: 1)Establishes the GOA, within the Governor's office, which consists of several state agencies, including the Department of General Services and the Department of Technology. 2)Finds and declares that it is in the public interest to aid, counsel, assist, and protect the interest of small business concerns in order to maintain a healthy state economy. This bill: 1)Enacts the EIR Act of 2016, which would establish the state EIR program within the GOA for the purpose of utilizing the expertise of private-sector entrepreneurs to help make state governmental activities and practices more streamlined and accessible. AB 582 (Calderon) Page 2 of ? 2)Specifies that the GOA may appoint one or more EIRs under the program during each year, however, the GOA shall not appoint more than 10 EIRs during any calendar year. 3)Specifies that the GOA, with the approval of the state agency, may appoint an EIR to any state agency. 4)Specifies that any person appointed as an EIR shall meet at least one of the following qualifications: a) The individual shall have demonstrated success in working with California small businesses and entrepreneurs. b) The individual shall have successfully developed, invented, or created a product and brought the product to the marketplace. 5)Prohibits any person appointed as an EIR in having a conflict of interest with the activities of the state agency where he or she is placed, including, but not limited to, having any existing business before the state agency in which he or she is proposed to be placed or is placed. 6)Requires the GOA to accept appointment applications for the position of an EIR and to establish procedures for complying with this bill no later than March 1, 2017. Among other requirements, the procedures shall include the following: a) A process for engaging with and receiving approval from state agencies about prospective appointments. b) A process for screening prospective appointees, including checking background and references. c) A standard memorandum of understanding that stipulates the responsibilities of each party in undertaking an EIR under the program, including, but not limited to, hours, duties, goals, expected outcomes, agency support, and office participation. This standard memorandum of understanding shall be a model that shall be adapted to address each individual placement to create the memorandum of understanding into which the appointee, the agency, and the office enter. As a condition of having a placement of an EIR, the state agency shall agree to the memorandum. 7)Requires every individual selected to participate in the program, before the effective date of an appointment, to enter AB 582 (Calderon) Page 3 of ? into a memorandum of understanding with the secretary of the GOA and the head of the state agency where the entrepreneur will serve. The memorandum of understanding shall be specific to the placement and clearly identify the hours, duties, goals, expected outcomes, agency support, and office participation. The memorandum of understanding shall set the benchmarks and metrics for evaluating the success of the placement. 8)Specifies that in administering the EIR program, the GOA shall appoint EIRs in a variety of interested agencies. However, to the extent practicable, the secretary shall not appoint more than two EIRs to positions in the same agency during the same year. 9)Prohibits an EIR from serving as an EIR for no longer than two years. 10) Requires an EIR to have all of the following duties: a) Providing recommendations to the head of the state agency where the EIR serves on how to streamline, eliminate, or modify potentially inefficient or duplicative activities, processes, and programs, if any, at the state agency. b) Providing recommendations to the head of the state agency where the EIR serves on methods to improve program efficiency at the state agency or new initiatives, if any, that may be instituted at the state agency to address the needs of small businesses and entrepreneurs. c) Assisting the state agency in improving outreach and service to small business concerns and entrepreneurs including, but not limited to, the following: i) Facilitating meetings and forums to educate small businesses and entrepreneurs on programs or initiatives of the state agency the EIR is serving. ii) Facilitating in-service sessions with employees of the office and the state agency the EIR is serving on issues of concern to entrepreneurs and small businesses. iii) Providing technical assistance or mentorship to small businesses and entrepreneurs in accessing programs at the office and the state agency the EIR is serving. AB 582 (Calderon) Page 4 of ? 11) Requires an EIR to serve on a voluntary basis, and shall dedicate at least 16 hours per week to the program, unless a greater number of hours per week is otherwise agreed upon. At the discretion of the head of a participating state agency, the EIR shall have access to an office, computer, and other related support services and equipment from the participating state agency as the state agency determines to be necessary for the EIR to discharge his or her duties. 12) Requires the EIR to report directly to the head of the state agency in which the EIR is serving and shall also keep the secretary of the GOA updated on his or her activities, findings, and recommendations. 13) Requires the GOA to establish an informal working group of EIR to discuss best practices, experiences, obstacles, opportunities, and recommendations. 14) Requires the GOA to annually prepare and submit to the Governor and the Assembly Committee on Jobs, Economic Development, and the Economy a report on the program. The report, at a minimum, shall include the following: a) A progress report on the activities of each EIR during the reporting period, based on the applicable memorandum of understanding. b) A general summary on how the overall program is addressing the goals of the program, which are as follows: i) Making state programs simpler, easier to access, more efficient, and more responsive to the needs and concerns of small businesses and entrepreneurs. ii) Providing for better outreach by the state to the private sector. iii) Strengthening coordination and interaction between the state and the private sector on issues relevant to entrepreneurs and small business concerns. 15) Specifies that the requirement for submitting a report imposed by this bill, shall become inoperative on January 1, 2021. 16) States that it is anticipated that program impacts will not be fully measurable until recommended changes and AB 582 (Calderon) Page 5 of ? activities are fully implemented. 17) Requires the office and the agency where an EIR is placed to continue to measure and report the impact of the activities of the EIR for three years following the placement of an EIR. Background Purpose of the bill. The author argues that, "without practical experience with the limited administrative capacity in which many small businesses operate or a realistic method for small businesses to participate in the regulatory process, it is difficult for state agencies to adopt rules that are considerate of needs of these smaller size businesses while still meeting the intended policy requirements." Quality of the EIR Program. The bill currently specifies that the EIR program is completely voluntary and that an EIR is required to volunteer a minimum of 16 hours per week. Without any compensation, and being required to work a minimum of 16 hours per week, it is hard to imagine that too many successful entrepreneurs would volunteer for such an assignment. In addition, the bill currently prohibits an EIR from being placed in a state agency where the EIR might have a conflict of interest. While understandable, the prohibition does diminish the knowledge that such an EIR would provide for the state. If the EIR is prohibited from volunteering in the state agency where he/she would realistically have more of an expertise, are we not then diminishing the role of an EIR? Similar EIR Programs. EIR Programs are not necessarily a new idea and have been used in the investment and business world for decades. The use of EIR Programs to help government agencies is more recently gaining traction. As an example, in 2012, the Federal Drug Administration (FDA) established an EIR Program to attract seasoned entrepreneurs in the medical industry that had successfully navigated the FDA's regulatory process. The six to seven month program was designed to help the FDA and small businesses work together to introduce new products in the marketplace both quickly and safely. The FDA not only improved processes, FDA staff also gained a better understanding of the challenges small businesses face and how to better network with entrepreneurs in the future. AB 582 (Calderon) Page 6 of ? In another example, U.S. Citizenship and Immigration Services (USCIS) established an EIR initiative with the goal of recruiting a small "tactical team" of business experts to work with USCIS staff to help streamline operations and enhance pathways within existing immigration law to help immigrant entrepreneurs start and grow businesses in the U.S. This was a 90-day project, which also included the other entities within the Department of Homeland Security and was a component of the White House Startup America initiative. Prior/Related Legislation SB 1140 (Moorlach, 2016) would have required the automatic repeal of a statute that expressly or implicitly authorizes an executive agency to promulgate regulations two years after the statute goes into effect, unless the Legislature amends the statute to state its intent that the statute not be repealed, or unless the statute was passed in response to an emergency, as defined. (Failed passage in Senate Governmental Organization Committee) AB 12 (Cooley, 2015) would have required every state agency to review all provisions of the California Code of Regulations it has adopted, and to adopt, amend, or repeal any regulations identified as duplicative, overlapping, or out of date by January 1, 2018. (Held on Senate Appropriations Suspense File) AB 1675 (Calderon, 2014) would have established the EIR program within the Governor's Office of Business and Economic Development to provide private sector expertise and assistance to help make government activities and practices streamlined and accessible to small business. (Held on Senate Appropriations Suspense File) SB 981 (Huff, 2014) would have required each state agency to review each regulation adopted prior to January 1, 2014, and to develop a report to the Legislature containing prescribed information. (Failed passage in Senate Governmental Organization Committee) FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No AB 582 (Calderon) Page 7 of ? SUPPORT: TechNet OPPOSITION: None received ARGUMENTS IN SUPPORT: According to TechNet, "This bill is a great step in the right direction to support and encourage some of the best and brightest minds in the private and small business sectors to help positively influence the operation and business processes and procedures at the governmental agency level. AB 582 is a win-win for all involved and we believe will not only provide the benefit to the public sector, but will move to incent small business, private sector executives to build, maintain and enhance their businesses in the State of California."