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."