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