BILL ANALYSIS Ó
SB 936
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Date of Hearing: August 3, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
SB 936
(Hertzberg) - As Amended June 29, 2016
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|Policy |Jobs, Economic Development, |Vote:|9 - 0 |
|Committee: |and the Economy | | |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill makes changes to the California Small Business
Expansion Fund (Expansion Fund) under the Small Business Loan
Guarantee Program (SBLGP). Specifically, this bill:
1)Decreases the required reserve for purposes of backing loan
guarantees under the Expansion Fund from 20 percent to 10
percent and removes a sunset on this provision, thereby making
it permanent.
SB 936
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2)Increases the maximum amount of liability outstanding at any
one time in the Expansion Fund from five to ten times the
amount of funds on deposit, plus any receivables due from
funds loaned from the expansion fund to another fund in state
government.
FISCAL EFFECT:
Minor/absorbable costs to the Governor's Office of Business and
Economic Development (GO-Biz) to administer program changes to
the SBLGP.
COMMENTS:
1)Purpose. The Governor's Office of Business and Economic
Development (GO-Biz) administers the Small Business Loan
Guarantee Program (SBLGP) which provides guarantees to
commercial lenders for loans issued to business owners that
otherwise would not qualify, such as low- to moderate-income
individuals. Current law requires 20% of each dollar of a
loan guarantee to be set aside on reserve in the Expansion
Fund. After January 1, 2018, the minimum reserve is
scheduled to increase to 25%.
This bill, sponsored by GO-Biz, will reduce the current
reserve level from 20% to 10%. GO-Biz is seeking this change
to make more funds available to lend to small businesses.
GO-Biz believes the current loan loss reserve percentage of 20
and the maximum amount required on deposit in the Expansion
Fund is overly conservative. For the 2015-15 fiscal year, the
SBLGP had losses of less than 1% and historically the SBLGP
has never endured losses over 5.5%. The reserve level change
will also bring the SBLGP ratio in line with the federal 10%
ratio requirement for the federal State Small Business Credit
SB 936
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Initiative (SSBCI).
Analysis Prepared by:Misty Feusahrens / APPR. / (916)
319-2081