BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON
          BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
                              Senator Jerry Hill, Chair
                                2015 - 2016  Regular 

          Bill No:            SB 1215         Hearing Date:    April 4,  
          2016
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          |Author:   |Allen                                                 |
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          |Version:  |February 18, 2016                                     |
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          |Urgency:  |No                     |Fiscal:    |Yes              |
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          |Consultant|Nicole Billington                                     |
          |:         |                                                      |
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                      Subject:  California Aerospace Commission


          SUMMARY: Establishes the California Aerospace Commission to  
          foster the development of activities in California related to  
          the aerospace industry. 

          Existing law:
          
          1)Establishes the Spaceport Office in the Department of  
            Transportation to seek and obtain federal funding for the  
            commercialization of private space activities in the state.   
            (Government Code (GC) § 14007.2)

          2)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.  (GC §§ 12096 -  
            12098.5)

          3)Authorizes GO-Biz as the lead entity for economic strategy and  
            the marketing of California on issues relating to business  
            development, private sector investment, and economic growth.   
            Authorizes GO-Biz, in this capacity, to coordinate the  
            development of policies and criteria to ensure that federal  
            grants administered or directly expended by state government  
            advance statewide economic goals and objectives.  Authorizes  







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            GO-Biz to market the business and investment opportunities  
            available in California by working in partnership with local,  
            regional, federal, and other state public and private  
            institutions to encourage business development and investment  
            in the state.  Authorizes GO-Biz to support small businesses  
            by providing information about accessing capital, complying  
            with regulations, and supporting state initiatives that  
            support small business.  (GC § 12096.3)

          4)Requires GO-Biz to designate Innovation Hubs (iHubs) within  
            the state to stimulate partnerships, economic development, and  
            job creation by leveraging assets to provide an innovation  
            platform for startup businesses, economic development  
            organizations, business groups, and venture capitalists.  (GC  
            § 12099.1)

          This bill:

          1)Creates the California Aerospace Commission (Commission) to  
            foster the development of activities in California related to  
            aerospace, including, but not limited to, aviation, commercial  
            and governmental space travel, unmanned aerial vehicles,  
            aerospace education and job training, infrastructure and  
            research launches, manufacturing, academic research, applied  
            research, economic diversification, business development,  
            tourism, and education. 

          2)Establishes that the Commission shall: 

             a)   Be an official recipient of grants from state or local  
               government sources or from private businesses or  
               individuals, for California aerospace-related activities,  
               including, but not limited to, studies, services,  
               infrastructure improvements, and modernization.

             b)   Be an advocate in support of California  
               aerospace-related activities, including, but not limited  
               to, the businesses, facilities, programs, developments,  
               alterations, modifications, educational activities, and  
               other programs impacting those activities.

             c)   Identify and recommend changes in federal, state, and  
               local statutes and regulations that will enhance the  
               development of California aerospace-related activities.








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             d)   Report on the economic and employment impacts of  
               California aerospace-related activities to the Governor and  
               the Legislature and other state agencies and commissions  
               that adopt regulations or make decisions or determinations  
               that affect those activities.

             e)   Recommend to the Governor and the Legislature  
               appropriate state funding mechanisms and amounts to promote  
               development of California aerospace-related activities.

             f)   Provide recommendations to the Governor and the  
               Legislature in the form of strategic planning documents,  
               with regard to the development of California  
               aerospace-related activities. 

             g)   Act as a clearinghouse for aerospace-related issues and  
               information.

             h)   Foster and promote activities related to aerospace in  
               all parts of California.
          
          
          FISCAL EFFECT: Unknown.  This bill is keyed "fiscal" by  
          Legislative Counsel. 
          

          COMMENTS:
          
          1.Purpose.  The  Author  is the sponsor of this bill. According to  
            the Author, aerospace employs over 200,000 Californians  
            directly and supports more than half a million jobs in related  
            fields. The Author notes that California leads the United  
            States in aerospace services, including the design and  
            manufacture of aircraft, spacecraft, and commercial  
            satellites, and is home to the burgeoning private space  
            industry. "The Golden State is an unmatched pioneer in  
            aerospace education, through its exceptional science,  
            technology, engineering, and mathematics (STEM) education  
            programs at its world-class research universities. Yet, within  
            California government, there is currently no official, unified  
            voice advocating on behalf of aerospace interests," the Author  
            writes.









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          2.History of Aerospace in California. California's robust  
            aerospace industry suffered a significant downsizing and  
            restructuring with the decline in military spending following  
            the end of the Cold War and as a result of numerous Defense  
            Base Realignment and Closure rounds.  In the early 1990s,  
            there were efforts to retain many of California's aerospace  
            companies and jobs through the development of commercial space  
            activities on California's Central Coast at Vandenberg Air  
            Force Base.  These efforts generated legislation (AB 279,  
            1993) to designate the California Spaceport Authority  
            (Authority). 
            
            The Authority was originally created to recognize the support  
            and unique services required for operations related to space  
            flight.  A nonprofit corporation was designated as the  
            Authority with a mission of developing the commercial space  
            industry in California and assisting with defense conversion  
            efforts.   AB 1475  (Bordonaro, Chapter 938, Statutes of 1997)  
            then designated a new nonprofit corporation as the Authority  
            and also created two grant programs to foster space  
            flight-related infrastructure and associated activities - The  
            Space Flight Competitive Grant Program and the Highway to  
            Space Competitive Grant Program.  These grant programs were  
            ultimately administered by two separate nonprofit entities;  
            however, both were responsible for the promotion of commercial  
            space flight activities in the state. 

            In 2003, all space flight related promotions and programs were  
            consolidated under one entity and grant program with the  
            passage of  AB 1532  (Nakano, Chapter 627, Statutes of 2003),  
            which tasked the Authority with responsibility for attraction  
            and promotion of space flight industries in California and the  
            administration of the space enterprise development program.   
            Following the 2008 economic downturn, state and private  
            funding for the Authority became limited.  In 2010, the  
            nonprofit corporation selected to administer the space  
            enterprise development program shuttered, and no action was  
            taken to select another nonprofit to administer the program.   
            Language in the Government Code related to the Space  
            Enterprise Development Program under the Business,  
            Transportation and Housing Agency was repealed in 2014.  

          3.Current Status of Aerospace Industry.  According to a 2012  
            report by the Los Angeles Economic Development Corporation  








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            (LAEDC), the aerospace industry is comprised of companies that  
            manufacture aircraft (civil and military), missiles,  
            satellites, and other space vehicles and the companies that  
            manufacture and distribute parts and components.  Buyers of  
            these products include private industry, the military, and  
            government space administrations.  The report notes that,  
            today, aerospace is a highly concentrated industry, dominated  
            by a small number of large firms that are supported by a large  
            number of smaller contractors.  Profitability within this  
            capital intensive industry depends largely on technical  
            expertise, innovation, and the ability to accurately price  
            long-term contracts for programs that may take years to  
            design, develop, and build. 
            
            According to a brief prepared by the California Research  
            Bureau, aerospace is one of the nation's standout industries.   
            Its workforce is highly skilled and well paid; its exports  
            grow our economy, and it serves as a continuing source of  
            innovation. Aerospace encompasses a diverse range of  
            productive activities, including the manufacturing of both  
            civilian and military aircraft, space vehicles, guided  
            missiles and associated parts.  In 2011, the aerospace  
            industry produced more than $183 billion in goods nationally.   
            With over $31 billion worth of goods produced, California's  
            aerospace industry represents 17 percent of this total.   
            Overall, aerospace represented more than 72 percent of all  
            transportation equipment manufacturing in California in 2011.   
            Across all manufacturing sectors, aerospace contributed more  
            than 6.3 percent of the $495 billion in manufactured goods  
            produced in California in 2011. 

            Aerospace is particularly attractive for economic development  
            due to the various "spillover effects" the industry brings  
            with it.  This can represent the promotion of related  
            industries through the supply chain, such as engine and engine  
            parts, electrical components, hydraulics and fluid power  
            subassemblies, intake and exhaust systems, even including  
            seating and interior trim manufacturing.  Other support  
            services such as transportation and logistics support,  
            managerial services, construction, and utilities also see an  
            increase in demand due to California's large aerospace  
            industry. 

            New technological trends are diversifying aerospace beyond  








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            military, defense, and commercial air travel markets.  The  
            expansion of unmanned aerial vehicles (UAVs, or drones) from  
            purely military to law enforcement and civilian uses is one  
            such trend.  The other is the growth of commercial  
            spaceflight.  Two big names in commercial space are SpaceX and  
            Scaled Composites, both of which were founded in and are based  
            in California, with manufacturing facilities located in the  
            state. SpaceX was the first private entity to launch a liquid  
            fueled rocket into orbit, the first to successfully attach a  
            craft to the International Space Station (ISS), and is  
            currently fulfilling a $1.6 billion contract to supply the  
            ISS.  The first facility in the country to be certified by the  
            FAA as a spaceport is also in California, the Mojave Air &  
            Space Port.  This has been the test site for many competitors  
            in the Ansari X Prize-a $10 million prize for the first  
            nongovernmental organization to successfully launch and  
            recover a reusable manned spacecraft twice within a two-week  
            period. The winner of the X Prize, Scaled Composites, is based  
            in Mojave and uses the spaceport as the initial test site for  
            its projects.  A spinoff called the Spaceship Company is  
            currently under contract with Virgin Galactic to build the  
            first private fleet of space vehicles for space tourism.

            However, California has faced challenges in retaining even  
            some California-based companies' manufacturing, testing and  
            launching activities.  For example, the Mojave-based XCOR  
            Aerospace moved its commercial space research and development  
            center headquarters to Midland, Texas and will be establishing  
            an operational and manufacturing site at the Kennedy Space  
            Center in Florida with the assistance of Space Florida.   
            SpaceX, based in Hawthorne, selected a site in Texas for a new  
            launch facility and currently launches its Falcon 9 rockets  
            from a Florida site, although it has also used Vandenberg Air  
            Force Base in Lompoc, California. Since 2003, SpaceX has  
            tested rockets at McGregor Air Force Base in Texas.  While  
            Virgin Galactic has facilities in Mojave, Los Angeles, and  
            Long Beach, it also has plans to launch from New Mexico's  
            Spaceport America.

          4.Governor's Office of Business and Economic Development  
            (GO-Biz) and Current Aerospace Development Efforts.  In  
            February 2010, the Little Hoover Commission undertook a review  
            of the state's economic and workforce development programs. In  
            its final report, Making up for Lost Ground: Creating a  








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            Governor's Office of Economic Development, it analyzed the  
            status and effectiveness of current programs since the 2003  
            demise of the Technology, Trade and Commerce Agency (TTCA) and  
            recommended the creation of a new governmental entity to fill  
            the void left by the dismantled agency.

            The report called for a single entity that would promote  
            greater economic development, foster job creation, serve as a  
            policy advisor, and deliver specific services directly to the  
            California business community.  In April 2010, Governor  
            Schwarzenegger issued Executive Order S-05-10 as a means to  
            operationalize the report recommendations including the  
            creation of the Governor's Office of Economic Development  
            (GOED).

            In October 2011, the Governor signed  AB 29  (John A. Pérez,  
            Chapter 475, Statutes of 2011), which effectively codified  
            GOED and changed its name to GO-Biz. Since its inception, the  
            office has served thousands of businesses, 95% of which are  
            small. The most frequent types of assistance include help with  
            permit streamlining, starting a business, relocation and  
            expansion of businesses, and regulatory challenges. 

            In March 2012, Governor Brown initiated a reorganization  
            process to realign the state's administrative structure.  Key  
            changes include dismantling of the Business, Transportation  
            and Housing Agency (BTH) and the shifting of a number of key  
            programs to GO-Biz including the Small Business Loan Guarantee  
            Program, the California Travel and Tourism Commission, the  
            California Film Commission, the Film California First Program,  
            and the Infrastructure and Economic Development Bank (I-Bank).  
             GO-Biz also administers the "Made In California" program for  
            the purpose of encouraging consumer product awareness and to  
            foster the purchases of products manufactured in California.   
            GO-Biz also now has authority for undertaking international  
            trade and foreign investment activities, including  
            establishing any international trade and investment office (AB  
            2012, Perez, Statutes of 2012).  GO-Biz has partnered with the  
            Bay Area Council to open a California-China Trade and  
            Investment office in Shanghai and is authorized under current  
            law to accept private monies to establish, fund, and operate  
            these offices. 

            A key initiative of GO-Biz is the "strike teams" which can be  








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            mobilized to help attract and/or retain specific businesses.   
            Strike teams are especially well suited to engage with major  
            employers and have been successfully activated to assist Bayer  
            Healthcare, Jazz Semiconductor, and Baxter Pharmaceutical to  
            locate and/or expand in California.
                 
            Among these other programs, GO-Biz also administers the  
            Innovation Hub (iHub) program.  According to GO-Biz, in the  
            spring of 2010, the state launched its new, forward-thinking  
            iHub program in an effort to harness and enhance California's  
            Innovative spirit.  The iHubs improve the state's national and  
            global competitiveness by stimulating partnerships, economic  
            development, and job creation around specific research  
            clusters through state-designated iHubs.  The iHubs leverage  
            assets such as research parks, technology incubators,  
            universities, and federal laboratories to provide an  
            innovation platform for startup companies, economic  
            development organizations, business groups, and venture  
            capitalists.   AB 250  (Holden, Chapter 530, Statutes of 2013)  
            codified the iHub program at GO-Biz and expanded the program.   
            There are currently 16 regional iHubs located throughout the  
            state.

                     CalValley Tech iHub in the Central Valley
                     Cleantech Los Angeles iHub
                     Coachella Valley iHub 
                     CNMI iHub in Torrance
                     East Bay Green Corridor iHub
                     iDEA iHub in Ridgecrest
                     i-GATE iHub in Livermore
                     iHub San Diego
                     iHub San Joaquin in San Joaquin County
                     Inland SoCal Link iHub in Riverside
                     Innovate North State iHub in Chico
                     North Bay iHub in Santa Rosa
                     OCTANe iHub in Orange County
                     Sacramento iHub in the Sacramento Region
                     San Jose/Silicon Valley iHub
                     SF iHub in San Francisco  

            California's iHub for Defense, Energy and Aerospace, named  
            iDEA Hub (referenced above), was founded in October 2013.   
            Based in Ridgecrest the iDEA Hub's region encompasses  
            California's Kern, Ventura, Orange, Los Angeles, and San Diego  








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            Counties and provides an ideal backdrop to encourage defense,  
            energy, and aerospace technology and businesses.  The iDEA Hub  
            provides a focus both on small emerging technology companies  
            and university research teams, as well as established  
            high-tech businesses.  The iDEA Hub in Ridgecrest facilitates  
            advancement of the aerospace industry by: promoting the  
            region's innovation ecosystem nation- and world-wide,  
            facilitating partnerships between government, industry, and  
            academia, connecting private sector capital with technology  
            commercialization opportunities, pursuing funded research  
            opportunities, promoting and hosting STEM activities in the  
            region, and helping businesses attract and retain a qualified  
            workforce. 

          1.Related Legislation This Year.  AB 2600  (Lackey) would request  
            the Regents of the University of California to establish the  
            California Institute for Aerospace to achieve specified goals  
            relating to the development of the aerospace industry in the  
            state and would request the regents to locate the California  
            Institute for Aerospace at a satellite campus within 20 miles  
            of Edwards Air Force Base or United States Air Force Plant.   
            ( Status:  The bill is pending in the Assembly Committee on  
            Higher Education.)

          2.Prior Related Legislation.  SB 506  (Fuller) of 2015 would have  
            established a military and aerospace program within the  
            Governor's Office of Business and Economic Development  
            (GO-Biz), tasked with activities related to state and local  
            defense retention, conversion and base reuse activities and  
            urged local governments impacted by military installations to  
            cooperate in efforts to retain these installations and  
            recognizes a local retention authority for each active  
            military installation in the state.  (  Status:  The bill was  
            held in the Senate Committee on Appropriations.) 
          
             AB 2763  (Committee on Accountability and Administrative  
            Review, Chapter 401, Statutes of 2014) reallocated specific  
            duties of the abolished Business, Transportation and Housing  
            Agency to GO-Biz and the Transportation Agency and eliminated  
            language regarding the Space Enterprise Development Program. 

             AB 250  (Holden, Chapter 530, Statutes of 2013) codified the  
            iHub program at GO-Biz and expanded the program.  
            








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             AB 737  (Fox) of 2013 would have required GO-Biz to prepare and  
            submit a proposal for an unmanned aircraft test site to the  
            FAA on or before May 6, 2013.  
            (  Status:   The bill was never heard in a policy committee of  
            the Senate in order to be considered in the 2013-14 Session.)

             AB 1997  (Gorrell) of 2013 would have provided that tax  
            exemptions for persons engaged in aircraft manufacturing, for  
            use primarily in manufacturing, processing, refining,  
            fabricating, or recycling of property, or research and  
            development also applies to local sales and use taxes and  
            those specified state taxes with respect to qualified tangible  
            personal property purchased by a qualified person that is  
            engaged in aircraft manufacturing of unmanned aerial vehicles.  
             (  Status:   The bill was never heard in a policy committee of  
            the Legislature.) 

             AB 29  (John A. Pérez, Chapter 475, Statutes of 2011)  
            established GO-Biz within the Governor's Office for the  
                                                                         purpose of serving as the lead entity for economic strategy  
            and marketing of California on issues relating to business  
            development, private sector investment and economic growth.  

             AB 2711  (Portantino) of 2008 would have required Business,  
            Transportation and Housing Agency to develop a comprehensive  
            state technology and innovation plan.  (  Status:   The measure  
            was held in the Assembly Committee on Appropriations.) 
           
              SB 1698  (Ashburn, Chapter 681, Statutes of 2006) extended the  
            authority for Office of Military and Aerospace Support for two  
            years, until January 1, 2009, and expanded its duties to  
            include outreach to the aerospace industry for the purpose of  
            fostering aerospace enterprises in California.  

             AB 1532  (Nakano, Chapter 627, Statutes of 2003) transferred  
            the Technology Planning Program, California Space Enterprise  
            Competitive Grant Program, and the Challenge Grant Program in  
            the TTCA to the Business, Transportation and Housing Agency  
            and referred to these programs as the Space Enterprise  
            Development Program.  
             
            AB 1475  (Bordonaro, Chapter 938, Statutes of 1997) established  
            the California Space and Technology Alliance as the primary  
            California Space Authority  to oversee the operations of the  








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            California Space Flight Competitive Grant Program and the  
            Highway to Space Program.


          SUPPORT AND OPPOSITION:
          
           Support:   

          California Conference of Machinists

           Opposition:   None on file as of March 29, 2016.


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