BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON EDUCATION
                              Senator Carol Liu, Chair
                                2015 - 2016  Regular 

          Bill No:             AB 2664            
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          |Author:    |Irwin                                                |
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          |Version:   |June 22, 2016                            Hearing     |
          |           |Date:   June 29, 2016                                |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Olgalilia Ramirez                                    |
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          Subject:  University of California:  innovation and  
          entrepreneurship expansion


            SUMMARY
          
          This bill requires the University of California (UC) to make  
          one-time expenditures, with funds appropriated in Budget Act of  
          2016, for activities to expand or accelerate economic  
          development in the state in ways that are aligned with efforts  
          to support innovation and entrepreneurship.

            BACKGROUND
          
          The California Constitution establishes the UC, a public trust  
          to be administered by the Regents of the UC and grants the  
          Regents full powers of organization and government, subject only  
          to such legislative control as may be necessary to insure  
          security of its funds, compliance with the terms of its  
          endowments, statutory requirements around competitive bidding  
          and contracts, sales of property and the purchase of materials,  
          goods and services.  (Article IX, Section (9)(a) of the  
          California Constitution)

          Existing law establishes the Donahoe Higher Education, setting  
          forth the mission and function of the University of California  
          designates, among other things, UC as the primary  
          state-supported academic agency for research.  (EC § 66010.4) 

            ANALYSIS







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          This bill requires the UC to make one-time expenditures, with  
          funds appropriated in the  Budget Act of 2016, for activities to  
          expand or accelerate economic development in the state in ways  
          that are aligned with efforts to support innovation and  
          entrepreneurship. Specifically it:

          1)   Identifies a specific funding source in the Budget Act of  
               2016 and allocates $2 million from that source to each of  
               the 10 campuses of the UC.

          2)   Requires the Regents of the UC to designate an external  
               advisory body, whose members have demonstrated expertise  
               innovation and entrepreneurship, to encourage the effective  
               use of specified funds through planning and oversight. The  
               external advisory body must notify the Director of Finance  
               and the Legislature of its intent to certify, no fewer than  
               10 days before providing certification.


          3)   Prohibits a campus from expending funds until the external  
               advisory body has certified that the chancellor of the  
               campus has demonstrated all of the following:

               a)        That the funds will be used only for the costs of  
               activities that support the 
                    expansion or acceleration of economic development in  
               the state 
                    benefitting entrepreneurs, such as any of the  
               following:

                    i)             Business training. 

                    ii)            Mentorship.

                    iii)           Proof-of-concept grants.

                    iv)            Work space. 

                    v)             Laboratory space.

                    vi)            Equipment.

               b)        That funds will be spent only after the uses and  








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               beneficiaries have been 
                    determined through a transparent, inclusive and fair  
               process. 

               c)        That private funds will also be used for the  
               specified activities, with the 
                    intent that the amount of private funds will be at  
                    least equal to the amount of state funds.

               d)        That any financial benefit that results from the  
               use of these funds be 
                    accounted for and also used on the specified  
               activities, as described. 

               e)        That a credible plan has been developed to  
               support any ongoing activities 
                    beyond the one-time expenditures of these funds.

          4)   Requires the University of California (UC) to report to the  
               Department of Finance and the Legislature on or before  
               November 30, 2017, on the specific activities at each  
               campus as specified. 

          5)   Makes various findings and declarations relative to the  
               UC's position in addressing challenges faced by  
               entrepreneurs that are particularly acute for  
               underrepresented groups and the state's ability to harness  
               the power of the UC's expertise in this field to spur  
               economic development.

          6)   States that it is the intent of the Legislature to:

               a)        Provide one-time funds for new infrastructure at  
               each campus.

                    b)             Enhance the state's network of programs  
                    and services that support innovators, entrepreneurs,  
                    startups, investors, and industry and community  
                    partners that are locally based and committed to  
                    serving in communities across California.

               c)        Generate commitments of private funds for these  
               activities in the amount 
                    at least equal to the amount of state funds. 








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          STAFF COMMENTS
          
          1)   Need for the bill. The Budget bill, SB 826 (Leno, Budget  
               Act of 2016), provides $22 million for innovation and  
               entrepreneurship efforts at University of California (UC).  
               This bill provides implementation language for that  
               purpose. According to the author, "the goal of the funding  
               is to aid researchers who have innovations that can be  
               taken to market by providing the institutional resources  
               and expertise needed to get it to the next level." The  
               author contends that entrepreneurship in California is  
               declining and investments are needed in order to keep pace  
               with the demand for innovation and entrepreneurial  
               infrastructure, resources and support programs. This bill  
               seeks to leverage UC research to spur economic development  
               in the state by laying a foundation for innovation and  
               entrepreneurship at each UC campus. 

          2)   Related activities at University of California. 

               The UC system, as the research arm of the state, has  
               historically played a significant and foundational role  
               within California's innovation-based industries.   In 2000,  
               the state through AB 2883 (Villaraigosa, Chapter 79,  
               Statutes of 2000)  established the California Institutes  
               for Science and Innovation (Cal-ISIs) at the UC for the  
               purpose of accelerating  business growth in the state,  
               developing research and innovations to meet California's  
               needs and training future scientist. At that time, the  
               state provided start-up funds of $400 million for the  
               Cal-ISIs with the UC providing a 2-to-1 match from a  
               combination of business and federal sources.  Four centers  
               were established as a result of this investment, which  
               include the following:

                  a)        Center for Information Technology Research in  
                    the Interests of Society (CITRIS) which is  
                    headquartered at UC, Berkeley with partnerships and  
                    collaborations to researchers at UC, Santa Cruz, UC,  
                    Davis, UC Merced and over 60 corporations. It creates  
                    information technology solutions for pressing social,  
                    environmental and healthcare problems. Research at  
                    CITRIS focuses on four core initiatives: Energy,  








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                    Health Care, Intelligent Infrastructure, and Data and  
                    Democracy. 

                  b)        California Nanosystems Institute at UC, Los  
                    Angeles and UC, Berkeley seeks technological  
                    breakthroughs by understanding of how to manipulate,  
                    control and manufacture at the nanometer scale.  
                    Control of material at this scale allows for compact,  
                    complex and multifunctional systems at the macro-scale  
                    that can dramatically improve present-day  
                    communications, computation, medical therapies and  
                    environmental remediation. 

                  c)        California Institute for Telecom and  
                    Information Technology at UC, San Diego and UC, Irvine  
                    focuses its research on Enabling Technologies  
                    (Wireless, Photonics, Cyber infrastructure,  
                    Nanotechnology/MEMS) to realize the goals of its  
                    socially relevant Application Thrusts (Culture,  
                    Energy, Environment, Health). 

                  d)        California Institute for Quantitative  
                    Biosciences (QB3) at UC, Berkeley, UC, San Francisco,  
                    UC, Santa Cruz and UC, Davis covers the "quantitative  
                    biosciences," meeting challenges in molecular biology  
                    using the techniques of physics, chemistry, and  
                    computer sciences. This enables UC to convert life  
                    science research into solutions for better health, a  
                    sustainable environment, and a dynamic economy. QB3  
                    has built a matrix of support for entrepreneurs that  
                    include a renowned incubator network and a venture  
                    capital fund.

               The state continues to reap the benefits of this original  
               investment. For example the QB3 program has helped to  
               incorporated over 250 companies, provided work space for  
               over 100 companies and raised $36 million in seed venture  
               funds. In 2014, active UC startups based in California  
               employed over 19,000 Californians and brought in more than  
               $14 million in revenue. 

               In addition to using state funds for similar activities,  
               this bill requires UC to generate commitments of private  
               monies and encourages that the amount of private funds  








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               match the amount of state funds. 

          1)   Related budget activity. The Budget Act of 2016 includes  
               $22 million on a one-time basis for innovation and  
               entrepreneurship. As noted, this bill provides  
               implementation language for those funds. 
               
          2)   Prior and related legislation. 
          
               SB 826 (Leno, Budget Act of 2016) provides $22 million in a  
               one-time basis for innovation and entrepreneurship programs  
               pursuant to legislation enacted in the 2015-16 legislative  
               session.

               AB 2883 (Villaraigosa, Chapter 79, Statutes of 2000)  
               authorized the University of California and established  
               three, competitively bid, California Institutes for Science  
               and Innovation, which would be devoted to basic and applied  
               cross-disciplinary research, focusing on problems of  
               significant scale and on scientific advances that may  
               provide the underpinnings of future economic activity in  
               California.  


            SUPPORT
          
          California Chamber of Commerce
          California Manufacturer and Technology Association 
          Computing Technology Industry Association (CompTIA)
          Late Tahoe South Shore Chamber of Commerce TechNet
          University of California




            OPPOSITION
           
           None received. 

                                      -- END --
          











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