BILL ANALYSIS                                                                                                                                                                                                    

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          2664 (Irwin)

          As Amended  June 22, 2016

          Majority vote

          |ASSEMBLY:  | 80-0 |(May 31, 2016) |SENATE: |38-0  |(August 18,      |
          |           |      |               |        |      |2016)            |
          |           |      |               |        |      |                 |
          |           |      |               |        |      |                 |

          Original Committee Reference:  HIGHER ED.

          SUMMARY:  Requires the University of California (UC) to make  
          one-time expenditures on activities, using the $22 million  
          General Fund provided in the Budget Act of 2016, to expand or  
          accelerate economic development in the state in ways that  
          support innovation and entrepreneurship.

          The Senate amendments do all of the following:

          1)Identify 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)Require the UC Regents to designate an external advisory body,  
            whose members have demonstrated expertise innovation and  
            entrepreneurship, to encourage the effective use of specified  


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            funds through planning and oversight; and specify that 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)Prohibit 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; and,

               vi)    Equipment

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


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             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; and,

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

          4)Require the 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.

          EXISTING LAW:  

          1)Establishes the Donahoe Higher Education, setting forth the  
            mission of the UC (Education Code (EC) Section 66010, et  

          2)Grants the UC Regents regulatory authority over the UC (EC  
            Section 92440, et seq.).

          FISCAL EFFECT:  According to the Senate Appropriations  

          1)The Budget Act of 2016 provides $22 million one-time General  
            Fund for innovation and entrepreneurship programs.  This bill  
            provides implementation language for those funds.

          2)Potential campus-level cost pressure to the extent the  
            advisory body overseeing the use of funds is unable to certify  
            that a chancellor of a campus has demonstrated that private  
            funds will be used for these activities, with the intent that  
            the amount of private funds will be at least $2.2 million.  It  


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            is unclear whether expenditure of the campus' state allocation  
            is permissible without certification of this level of private  

          COMMENTS:  Background.  As the research arm of the state, the UC  
          has driven innovation and economic growth.  According to the UC,  
          it is now the world's academic leader in the number or research  
          inventions, with 1,700 reported in 2014.  The UC continues to be  
          the launching platform for a numerous startup companies that  
          stimulate the economic and job growth in California.

          The state, in 2000, created the California Institutes for  
          Science and Innovation (Cal-ISIs) through the budget and  
          legislation (AB 2883, (Villaraigosa), Chapter 79, Statutes of  
          2000) to speed up business growth in the state, develop research  
          and innovations to meet California's needs, and train future  

          The state provided start-up funds of $400 million for the  
          Cal-ISIs and the UC provide a 2-to-1 match from a combination of  
          business and federal sources.  The state continues to reap the  
          benefits of its original investment.  

          What is needed for continued growth?  According to the UC,  
          specific investments are needed so that the pace can be  
          maintained to keep up with the demand for innovation and  
          entrepreneurial infrastructure, resources, and support programs.  
           The UC contends that the investments will leverage UC research  
          in two ways:  1) provide researchers with the necessary tools to  
          turn their ideas into job-providing companies; and, 2) organize  
          research systemwide in order to address the various challenges  
          facing California.

          Expanding the infrastructure for UC innovation and  
          entrepreneurship to create innovation and economic development  
          in the surrounding communities of UC campuses and across  
          California will not happen overnight.  The UC has a three-year  


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          investment of $2 million per year for each of the 10 UC campuses  
          and the Lawrence Berkeley National Laboratory.

          This measure calls for the appropriation of $22 million for  
          fiscal years 2017-18, 2018-19 and 2019-20 inclusive, to be used  
          by the UC in order for the UC to expand the infrastructure  
          necessary to increase innovation and entrepreneurship for the   
          purpose of creating economic development for California.

          Purpose of this measure.  According to the author, in 2014,  
          active UC startups based in California employed over 19,000  
          Californians and brought in more than $14 billion in revenue.   
          The author contends that in order to maximize the transformative  
          power of UC's research engine, the UC innovation ecosystem needs  
          to expand throughout the State.  The author states, "The UC's  
          ability to provide entrepreneurial services is at capacity.  The  
          demand for startup seed funding is rising, and workspace demand  
          consistently exceeds capacity.  While UC-fostered  
          entrepreneurship is increasing, entrepreneurship in the state of  
          California is declining.  The number of new adults becoming  
          entrepreneurs per month slipped from a high of 440 out of every  
          100,000 Californian adults in 2012, to 390 in 2015; a troubling  
          trend as young companies are the primary source for all net new  
          jobs created annually."

          This measure seeks to build upon the successful model that the  
          state created in 2000. 

          Analysis Prepared by:                                             
                          Jeanice Warden / HIGHER ED. / (916) 319-3960   
          FN: 0004238


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