Senate Bill No. 936

Introduced by Senator Hertzberg

(Coauthors: Senators Anderson and Wieckowski)

(Coauthors: Assembly Members Dodd and Hadley)

February 2, 2016

An act to amend and repeal Sections 63089.61 and 63089.62 of the Government Code, relating to business.

LEGISLATIVE COUNSEL’S DIGEST

SB 936, as introduced, Hertzberg. California Small Business Expansion Fund: corporate guarantees.

Existing law, the Small Business Financial Assistance Act of 2013, establishes the California Small Business Expansion Fund, a continuously appropriated fund that includes General Fund moneys. The act requires guarantees made by small business financial development corporations to be backed by funds on deposit in the corporation’s trust fund account or by receivables due from funds loaned from the corporation’s trust fund account to another fund in state government, as specified, and requires these loan guarantees to be secured by a reserve of at least 20%, until January 1, 2018, and 25% thereafter, as specified.

This bill would reduce the required reserve to 10% indefinitely and would make conforming changes with respect to related statements of legislative intent.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 63089.61 of the Government Code, as
added by Section 4 of Chapter 537 of the Statutes of 2013, is
amended to read:

63089.61.  

(a) The corporate guarantee shall be backed by
funds on deposit in the corporation’s trust fund account, or by
receivables due from funds loaned from the corporation’s trust
fund account to another fund in state government, as directed by
the Department of Finance pursuant to a statute enacted by the
Legislature.

(b) Loan guarantees shall be secured by a reserve of at least begin delete 20 end delete
begin insert 10 end insert percent to be determined by the program manager unless a
higher leverage ratio for an individual corporation has been
approved pursuant to subdivision (b) of Section 63089.56.

(c) The expansion fund and trust fund accounts shall be used to
guarantee obligations and other financial product obligations, to
pay the administrative costs of the corporations, and for other uses
pursuant to this chapter and Section 8684.2.

begin delete

(d) This section shall remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

end delete

SEC. 2.  

Section 63089.61 of the Government Code, as added
by Section 4 of Chapter 537 of the Statutes of 2013, is repealed.

begin delete

63089.61.  

(a) The corporate guarantee shall be backed by
funds on deposit in the corporation’s trust fund account, or by
receivables due from funds loaned from the corporation’s trust
fund account to another fund in state government, as directed by
the Department of Finance pursuant to a statute enacted by the
Legislature.

(b) Loan guarantees shall be secured by a reserve of at least 25
percent to be determined by the program manager, unless a higher
leverage ratio has been approved for an individual corporation
pursuant to subdivision (b) of Section 63089.56.

(c) The expansion fund and trust fund accounts shall be used to
guarantee obligations and other financial product obligations, to
pay the administrative costs of the corporations, and for other uses
pursuant to this chapter and Section 8684.2.

(d) This section shall become operative on January 1, 2018.

end delete

SEC. 3.  

Section 63089.62 of the Government Code, as added
by Section 4 of Chapter 537 of the Statutes of 2013, is amended
to read:

63089.62.  

(a) It is the intent of the Legislature that the
corporations make maximum use of their statutory authority to
guarantee loans and surety bonds, and administer other financial
products, including the authority to secure loans with a minimum
loan loss reserve of only begin delete 20 end delete begin insert 10 end insert percent, unless the program manager
authorizes a higher leverage ratio for an individual corporation
pursuant to subdivision (b) of Section 63089.56, so that the
financing needs of small business may be met as fully as possible
within the limits of corporations’ trust fund account balance.

(b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President
of the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where
the dollar amount of the loan is less than one hundred thousand
dollars ($100,000), so that at least 15 percent of the dollar value
of loans guaranteed by the corporation is for those loans. The
corporation shall comply with this requirement within one year of
the date the emergency or disaster is declared. Upon application
of a corporation, the executive director may waive or modify the
rule for the corporation if the corporation demonstrates that it made
a good faith effort to comply and failed to locate lending
institutions in the region that the corporation serves that are willing
to make guaranteed loans in that amount.

begin delete

(c) This section shall remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

end delete

SEC. 4.  

Section 63089.62 of the Government Code, as added
by Section 4 of Chapter 537 of the Statutes of 2013, is repealed.

begin delete

63089.62.  

(a) It is the intent of the Legislature that the
corporations make maximum use of their statutory authority to
guarantee loans and surety bonds, and administer other financial
products, including the authority to secure loans with a minimum
loan loss reserve of only 20 percent, unless the program manager
authorizes a higher leverage ratio for an individual corporation
pursuant to subdivision (b) of Section 63089.56, so that the
financing needs of small business may be met as fully as possible
within the limits of corporations’ trust fund account balance.

(b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President
of the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where
the dollar amount of the loan is less than one hundred thousand
dollars ($100,000), so that at least 15 percent of the dollar value
of loans guaranteed by the corporation is for those loans. The
corporation shall comply with this requirement within one year of
the date the emergency or disaster is declared. Upon application
of a corporation, the executive director may waive or modify the
rule for the corporation if the corporation demonstrates that it made
a good faith effort to comply and failed to locate lending
institutions in the region that the corporation serves that are willing
to make guaranteed loans in that amount.

(c) This section shall remain in effect only until January 1, 2018,
and as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2018, deletes or extends that date.

end delete