BILL ANALYSIS Ó
AB 1196
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Date of Hearing: January 13, 2016
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY
Eduardo Garcia, Chair
AB 1196
(Eduardo Garcia) - As Amended January 4, 2016
SUBJECT: Commission for Economic Development
SUMMARY: Updates the role and authorities of the California
Commission on Economic Development (CED) by expanding its membership
and duties. More specifically, the bill:
1)Modifies the purpose of CED to reflect the integrated roles of the
public and private sectors in creating an economic environment that
supports job creation and business growth.
2)Authorizes specific new CED activities, including:
a) Collaborating with statewide and regional organizations on
implementing key initiatives; and
b) Identifying and supporting California's access to federal
programs, services, and initiatives.
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3)Authorizes the addition of up to three Members of the California U.S
Congressional Delegation, who have applied to, and have been
appointed by the Governor. The bill further provides that these
Members may participate in the activities of the CED only to the
extent that such participation is not incompatible with their
respective positions as Members of the U.S. Congress.
4)Modifies the illustrative list of economic development backgrounds
which Members of the CED are required to possess.
5)Requires that all studies and reports of the CED be public documents
and posted on the Internet website of the Lieutenant Governor for no
less than 24 months.
6)Limits reimbursement of CED members to the actual travel expenses
rather than all costs incurred in the performance of their duties.
7)Authorizes meetings to be conducted via teleconference and other
electronic means.
8)Excludes the taking of testimony and the discussion of issues from
the requirement that a quorum of CED members be present. This does
not remove the requirement that the taking of testimony and the
discussion of issues be undertaken in a public meeting and all
related actions taken by the CED continue to require that a quorum
to be present.
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9)Authorizes rather than mandates that advisory committees be formed.
10)Reduces the number of mandatory CED meetings from four to three per
year.
11)Authorizes rather than mandates that the CED study laws and
programs of other states.
12)Authorizes rather than mandates that the CED make recommendations
regarding legislation.
13)Adds federal, foreign, and local government entities to those
groups that the CED is specifically authorized to work with in
achieving its objectives.
14)Removes sexist language from the code by replacing chairman with
chairperson.
15)Makes related technical and conforming changes.
EXISTING LAW:
1)Establishes the CED for the purpose of providing bipartisan
legislative, executive branch, and private sector support and
guidance for the best possible overall economic development of the
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state.
2)Mandates that the CED be comprised of the following 17 Members:
a) The Lieutenant Governor, who is mandated to serve as the
chair;
b) Ten members appointed by the Governor after consulting with
business, industry, and labor organizations on potential
candidates. No more than six may be from the same political
party;
c) Three members of the Senate appointed by the Senate Rules
Committee of which no more than two can be from the same
political party; and
d) Three members of the Assembly appointed by the Speaker of the
Assembly of which no more than two can be from the same political
party.
Members of the Legislature constitute a joint investigating
committee on economic development and have the powers and duties
imposed upon such committees by the Joint Rules of the Senate and
Assembly.
3)Specifies that each of the Governor's appointments serve for a term
of four years, as specified.
4)Requires the CED to appoint advisory committees from outside its
membership to represent the aerospace, manufacturing, maritime,
tourism, and world trade segments of the state's economy. Other
advisory committees may be established as deemed necessary to carry
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out the purpose of the CED.
5)Specifies that members of the CED serve without compensation, but
shall be reimbursed for actual necessary expenses incurred in the
performance of their duties.
FISCAL EFFECT: Unknown
POLICY ISSUE FRAME: California's $1.3 trillion economy is comprised
of nearly a dozen regional economies, each with their own dominant and
emerging industry sectors. Over the past decade, the state's economic
growth has been increasingly tied to the state's participation and
competitiveness within the global economy. In 2014, $274 billion in
goods were shipped to over 220 markets around the world.
While post-recession California has experienced record setting growth
among many industry sectors and certain areas of the state, other
geographic regions and certain population groups have not received
similar economic benefits. Research shows that these types of
regional and demographic disparities often serve as a drag on
long-term economic growth. Compounding these impacts are the changing
regulatory environment and the increasing competition California
businesses and workers face from developed and emerging markets. As
noted in the Governor's 2016-17 proposed budget, the state's
infrastructure is in immediate need of rehabilitation and
modernization, while business and industry consistently express their
concerns about accessing a middle-skilled workforce able to meet their
needs.
These and other issues require new and more collaborative economic
development methods. Given the size and complexity of the issues
facing California, it is highly unusual that the state has no
operating board/commission/advisory body that can serve as a convener
of the public and private sectors and catalyst for the state's
evolving economic agenda.
AB 1196 proposes to remove barriers to the potential re-establishment
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of the CED and to foster a new stakeholder dialogue on the key
economic issues facing the state. This analysis includes background
on the CED, related legislation, and the current challenges facing the
California economy.
COMMENTS:
1)The California Commission for Economic Development: The CED was
established in 1971, as the statewide, bipartisan advisory body
responsible for providing guidance to the legislative and executive
branches on economic development issues affecting the California
economy.
The commission is chaired by the Lieutenant Governor and consists of
17 members appointed by the Governor and Legislature. The
commission is charged with the task of assessing specific local and
regional economic development problems, providing a forum for
economic development-related conversations between the state and
private sectors, and furnishing studies and recommendations to
resolve important economic development issues.
Under Lieutenant Governor Garamendi, in 2011, the CED moved key
initiatives on sustainable economic growth, career technical
education, and workforce development. While the actions of the CED
have no direct legislative or administrative power, the CED does
provide a valuable policy view on important and current economic
development issues.
2)Last CED Meeting: The last meeting of the CED was in 2013 at which
time the Commission discussed the updating of the Lt. Governor's
2011 report "An Economic Growth and Competitiveness Agenda for
California."
Guiding principles of the 2011 report include: Governing for Growth
and Opportunity; Practice Partnerships; Engage Globally; Build on
Industry Strengths; Remove Barriers; Act Regionally; Invest in
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Performance; Skill Up for Opportunity; Act with Urgency; and Sustain
Commitment. Key recommendations from the report focus on preparing
for the next economy including taking advantage of the expanding
export markets for California goods and services, adopting
innovative models from other states and nations; reinvesting in the
state's manufacturing base, and accelerating the state's clean
technology opportunities.
No future meetings can be held due to a lack of CED member
appointments. Without new appointments, the CED is unable to reach
quorum and conduct its business. The author has proposed AB 1196 to
update and add flexibility to the existing CED structure as a means
to kick-start the re-establishment of this important economic
stakeholder advisory board.
3)The California Economy: California is one of the largest and most
diversified economies in the world, which had a gross domestic
product (GDP) of over $2.3 trillion in 2014. If California were a
country, its 2014 GDP would place it 8th among nations, ranking as
follows: United States ($17.41 trillion), China ($10.38 trillion),
Japan ($4.61 trillion), Germany ($3.86 trillion), France ($2.84
trillion), Brazil ($2.35 trillion), California ($2.31 trillion);
Italy ($2.14 trillion), India ($2.05 trillion), and Russia ($1.85
trillion).
Historically, the state's significance in the global marketplace
resulted from a variety of factors, including its strategic west
coast location, its economically diverse regional economies, its
skilled workforce, and its culture of innovation and
entrepreneurship, particularly in the area of technology.
California's 29 million working age individuals comprise the single
largest workforce in the nation, are comparatively younger, and have
an educational achievement level above the national average. As an
example, over 30% of the working age population in California holds
at least a bachelor's degree.
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California's well diversified small business base also provides an
economic advantage by meeting the niche needs of the state's
dominant and emerging innovation-based industry sectors. Chart 1
displays information on California's private industry sectors.
In 2014, the finance and insurance sector provided the largest
economic contribution to the state's overall GDP, $484 billion of
the $2.3 trillion. Firms in this industry sector include entities
that raise funds, pool risk, and facilitate financial transactions
including real estate.
Chart 2, developed using data provided by the California Employment
Development Department, shows California's largest industry sectors
based on employment. Based on total employment, the trade,
transportation, and utilities sector is largest, employing 2.8
million (18.4% of California jobs). Jobs in this sector also
support employment in other industry sectors including Manufacturing
(8.1%), Professional Services (15.6%), and Financial Activities
(5.0%).
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Many of the jobs associated with these major industry sectors are
also associated with high wages. Manufacturing is considered the
"gold standard" for jobs because of its high wages, inclusion of
small businesses within its global supply chains, and having a high
multiplier effect on related jobs. The Milken Institute estimates
that for every job created in manufacturing, 2.5 jobs are created in
other sectors. In some industry sectors, such as electronic
computer manufacturing, the multiplier effect is 16 to one.
For the past serval years, California's overall economic growth and
increase in jobs has outpaced the U.S. in general, often ranking the
state within the top five states in terms of its economic condition.
This success, however, has not been consistent throughout the state
with many regions and certain population groups still experiencing
recession-related poor economic conditions. According to the U.S.
Census Bureau, California has the highest poverty rate in the U.S
with nearly a quarter of the children (22.7%) in the state living in
households with annual incomes below the federal poverty line.
Contributing factors to these poverty rates are stagnate wage rates,
an increasing concentration of annual income among the highest
income individuals, and differing job opportunities in the
post-recession economy.
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A review of the most recent unemployment numbers in Chart 3 is
illustrative of the expanding patterns of economic disparity between
regions and population groups in California.
-------------------------------------------------------------
| Chart 3 - Unemployment November 2015 (not seasonally |
| adjusted) |
| |
| |
-------------------------------------------------------------
|---------------+---------------+-+------------+---------------|
| | Unemployment | | | Unemployment |
| | Rate | | | Rate |
| | | | | |
| | | | | |
|---------------+---------------+-+------------+---------------|
|California | 5.7% | |California | 5.7% |
| | | | | |
| | | | | |
|---------------+---------------+-+------------+---------------|
|Imperial | 20.4% | |Blacks | 11.0% |
|County | | | | |
| | | | | |
| | | | | |
|---------------+---------------+-+------------+---------------|
|Los Angeles | 5.7% | |Hispanics | 7.7% |
|County | | | | |
| | | | | |
| | | | | |
|---------------+---------------+-+------------+---------------|
|Orange County | 4.2% | |Whites | 6.1% |
| | | | | |
| | | | | |
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|---------------+---------------+-+------------+---------------|
|Riverside | 6.2% | |16 to 19 | 21.2% |
|County | | |year olds | |
| | | | | |
| | | | | |
|---------------+---------------+-+------------+---------------|
|San Bernardino | 5.9% | |20 to 24 | 11.2% |
|County | | |year olds | |
| | | | | |
| | | | | |
|---------------+---------------+-+------------+---------------|
|San Mateo | 3.9% | |25 to 34 | 6.2% |
|County | | |year olds | |
| | | | | |
| | | | | |
--------------------------------------------------------------
--------------------------------------------------------------
|Tulare County | 11.1% | |Source: California |
| | | |Employment Development |
| | | |Department |
| | | | |
| | | | |
|---------------+---------------+-+----------------------------|
|Ventura County | 5.4% | | |
| | | | |
| | | | |
--------------------------------------------------------------
While the state's unemployment rate for November 2015 (not
seasonally adjusted) was 5.7%, some areas of the state had lower
rates, while others were considerably higher. San Mateo County
recorded the lowest at 3.9% and Imperial County experienced the
highest unemployment rate at 21.2%. Inland areas generally reported
unemployment rates above the statewide average. As the chart above
shows, Tulare County's unemployment rate was 11.2% and Riverside
County was recorded as 6.2%. Coastal areas overall had lower rates
than the state's, with Orange County at 4.2%, and Ventura County at
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5.4%. Even densely populated and economically diverse areas like
Los Angeles County reported a November 2015 unemployment rate of
5.7% (equal to the state's rate).
Looking more specifically at different population groups, the data
also shows the great discrepancies between the statewide rate and
key subgroups, including unemployment among Blacks and Hispanics
being 11.0% and 7.7% respectively. For the youngest members of the
workforce obtaining quality jobs remains a significant issue with
unemployment among 16 to 34 years being well above the state
average, ranging from 6.2% to 21.2%.
Just as the unemployment data shows the growing economic disparities
by geography, race/ethnicity, and age, research also confirms that a
greater percentage of total aggregate earnings is going to a smaller
group of individuals. According to the World Top Income Database,
pretax income among those with the highest 1% of income in
California comprised 9.82% of total income in 1980 and 25.31% in
2013. These findings could signal a larger issue in that a growing
body of economic studies show that large-scale income disparities
correlate to shorter periods of economic growth, whereby societies
with lower levels of income disparity have larger and longer-term
periods of growth.
Achieving job growth within globally competitive industries and
addressing the state's growing income disparities requires new
community and economic development methods, as well as more
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coordinated efforts by industry, labor, nonprofits, and governments
on a range of issues, including education, workforce training,
infrastructure repair and expansion, entrepreneurship, finance,
among others. Entities like the CED could provide a forum for
these stakeholders to address California's economic challenges.
Geographic Differences in Economic Growth: In September 2015, the
California Employment Development Department released a special
labor trends report which highlighted job growth in Coastal and
Inland county economies. Among other findings, the report noted
that total job growth between 2010 through 2014 was 9.4%, in
contrast to the inland counties at only 8.7%. Reflective of the
disparity in job growth were the differences in overall business
development. Coastal counties added 56,000 new establishments (4.9%
increase), while the inland areas had a net loss of 75 businesses
during the same term. Of the 1.3 million business establishments in
California in 2014, 89.4% were located in the coastal counties with
the remaining (roughly) 11% headquartered in an inland county.
Further compounding the impacts of these trends was the significant
concentration of inland California growth in five counties,
including: Fresno, Kern, Stanislaus, Placer, and Tulare. These
five counties out of the 29 classified as inland counties accounted
for nearly two out of three of the new inland county jobs (64.6% of
124,000 additional jobs). Job growth in the coastal areas was also
concentrated, but not as significantly, with Los Angeles, Santa
Clara, and San Diego experiencing 44.8% of the 1.2 million new jobs
created in coastal areas.
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In 2014, 90.1% of nonfarm payroll was related to jobs in coastal
counties and 9.9% in inland counties, 13.9 million and 1.5 million
jobs respectively. While this split is partially due to the higher
percentage of the population being located in those counties
classified as coastal, these number also suggest other demographic
and economic shifts.
Among other issues, the special labor trends report highlighted two
key factors as contributing to the jobs imbalance including a lack
of trade-related infrastructure within the inland counties and
different business development patterns. California's coastal areas
have three of the nation's busiest sea ports, including Los Angeles,
Long Beach, and Oakland. San Diego and Port Hueneme are also
important to cars and agriculture respectively. The inland counties
have tried for years to develop inland ports and multimodal
transportation facilities. Bringing these inland resources to scale
will take significant funding and focused public policy attention on
upgrading inland California's logistical network. As an example,
Ontario Airport has been designated as the Los Angeles World
Airport's cargo hub. Yet, Los Angeles International Airport remains
better developed and thus significantly busier.
Addressing the challenges raised in the labor trends study and
bridging the geographic disparities between California's inland and
coastal areas will require a focused effort to remove impediments
and leverage resources. California currently has no government
sponsored stakeholder engagement that facilitates these types of
discussions. In instances where these discussions are being led by
private organizations, the state has made no specific commitment to
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meaningfully participate on a long-term and ongoing basis. AB 1196
proposes that the CED serve as that link and help to ensure that
state is formerly part of these private sector-driven dialogues.
1)Related Legislation: Below is a list of legislation related to AB
1196.
a) AB 680 (Atkins) California Business Marketing Plan: This bill
would have required the Governor's Office of Business and
Economic Development to develop a plan to market the business and
investment opportunities available in California. Status: Held
on Suspense in the Assembly Committee on Appropriations, 2015.
b) SB 412 (De León) Biotech and the Commission for Economic
Development: This bill adds the biotechnology industry to the
list of segments of the state's economy from which the Commission
for Economic Development is required to appoint an advisory
committee. Status: Pending in the Assembly Committee on Jobs,
Economic Development, and the Economy, two-year bill.
REGISTERED SUPPORT / OPPOSITION:
Support
None Received
Opposition
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None Received
Analysis Prepared by:Toni Symonds / J., E.D., & E. / (916) 319-2090