BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 936|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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UNFINISHED BUSINESS
Bill No: SB 936
Author: Hertzberg (D), et al.
Amended: 6/29/16
Vote: 21
SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 9-0, 4/11/16
AYES: Hill, Bates, Berryhill, Block, Galgiani, Hernandez,
Jackson, Mendoza, Wieckowski
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SENATE FLOOR: 39-0, 4/21/16 (Consent)
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block,
Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,
Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,
Moorlach, Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Stone,
Vidak, Wieckowski, Wolk
NO VOTE RECORDED: Runner
ASSEMBLY FLOOR: 78-0, 8/11/16 (Consent) - See last page for
vote
SUBJECT: California Small Business Expansion Fund: corporate
guarantees
SOURCE: California Infrastructure and Economic Development
Bank
Governors Office of Business and Economic Development
DIGEST: This bill reduces the required reserve leverage ratio
of the California Small Business Expansion Fund (Fund), which
funds the California Small Business Loan Guarantee Program
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(SBLGP), from 20 percent to 10 percent.
Assembly Amendments correct a drafting error and add, to the
program manager's list of responsibilities, that he or she is
responsible for authorizing the leverage of moneys in the Fund.
ANALYSIS:
Existing law:
1)Establishes the Governor's Office of Business and Economic
Development (GO-Biz), which is administered by a director
appointed by the Governor for the purpose of serving as the
lead state entity for economic strategy and marketing of
California on issues relating to business development, private
sector investment, and economic growth. (Government Code (GC)
§§ 12096 - 12098.5)
2)Establishes, by the Small Business Financial Assistance Act of
2013, the California Small Business Expansion Fund (Fund);
authorizes the approval of certain small business financial
development corporations (FDCs) to act as intermediaries
between the state, small business, and financial institution
in administering loan guarantees; requires the loan guarantees
made under the Fund to be backed by money on deposit or by
receivables due from funds loaned from the expansion fund.
(GC §§ 63088 - 63089.98)
3)Specifies the reserve leverage ratio of the Fund at 20 percent
and will increase that ratio to 25 percent on January 1, 2018.
(GC §§ 63089.5 - 63089.62)
This bill:
1)Decreases the required reserve for purposes of backing loan
guarantees under the Fund from 20 percent to 10 percent and
removes a sunset on this provision, thereby making it
permanent.
2)Increases the maximum amount of liability outstanding at any
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one time in the 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.
Background
GO-Biz is the sponsor of this bill. GO-Biz administers the
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
percent of each dollar of a loan guarantee to be set aside on
reserve in the Fund. After January 1, 2018, the minimum
reserve is scheduled to increase to 25 percent.
This bill will reduce the current reserve level from 20 percent
to 10 percent. 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 Fund is overly conservative.
For the 2015-16 fiscal year, the SBLGP had losses of less than
one percent and historically the SBLGP has never endured losses
over 5.5 percent. The reserve level change will also bring the
SBLGP ratio in line with the federal ten percent ratio
requirement for the federal State Small Business Credit
Initiative.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Assembly Appropriations Committee this bill
will result in "minor/absorbable costs to the Governor's Office
of Business and Economic Development (GO-Biz) to administer
program changes to the SBLGP."
SUPPORT: (Verified8/11/16)
California Infrastructure and Economic Development Bank
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(co-source)
Governor's Office of Business and Economic Development
(co-source)
Association of Financial Development Corporations
California Asian Pacific Chamber of Commerce
California Association for Local Economic Development
California Association for Micro Enterprise Opportunity
California Association of Independent Business
California Bankers Association
California Black Chamber of Commerce
California City Economic Development Corporation
California Chamber of Commerce
California Coastal Rural Development Corporation
California Community Banking Network
California Capital Financial Development Corporation
California Small Business Association
California Southern Small Business Development Corporation
City of Dublin
City of Fountain Valley
City of Long Beach
City of Sacramento
Northern California Small Business Financial Development
Corporation
Orange County Business Council
Pacific Coast Regional Small Business Development Corporation
San Gabriel Valley Economic Partnership
San Jose Silicon Valley Chamber of Commerce
Silicon Valley Economic Development Alliance
Small Business California
Small Business Development Corporation of Orange County
Small Business Majority, California
Solano Economic Development Corporation
Southwest California Legislative Council
Stanislaus Business Development Center
Sun Village Park Association
Superior California Economic Development
Tuolumne County Economic Development Authority
Valley Small Business Development Corporation
OPPOSITION: (Verified8/11/16)
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None received
ARGUMENTS IN SUPPORT: Supporters state that the bill allows
GO-Biz to help more small businesses by providing additional
lending capacity under the SBLGP. They argue that, while the
reserve account protects lenders against losses, the SBLGP has a
promising track record with losses on federal funds less than
one percent since 2011.
Prepared by:Nicole Billington / B., P. & E.D. / (916) 651-4104
8/12/16 13:24:01
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