BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 1215 (Allen) - California Aerospace Commission ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: February 18, 2016 |Policy Vote: B., P. & E.D. 9 - | | | 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: April 18, 2016 |Consultant: Robert Ingenito | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 1215 would establish the California Aerospace Commission to foster the development of aerospace-related activities in the State. Fiscal Impact: The bill does not give guidance on how often the Commission would meet, nor how it would be staffed. Using the Milton Marks "Little Hoover" Commission on California State Organization and Economy (Little Hoover Commission) as a proxy, annual costs to operate and staff the California Aerospace Commission could total about $1 million annually (General Fund, SB 1215 (Allen) Page 1 of ? see Staff Comments). Background: The aircraft industry grew more rapidly over the first half of the twentieth century than any other segment of the California economy. In 1910, William Randolph Hearst offered $50,000 to the first pilot who could fly from California to the East Coast in thirty days or less; however, no one claimed the prize. That same year saw the nation's first public aviation meet, which occurred on Dominguez Ranch near Los Angeles. This event drew over 200,000 people, and the meet established initial aviation speed and endurance records. After World War I, Southern California's airplane designers and manufacturers began to construct a variety of aircraft. By 1935, the output of California's aircraft industry totaled $20 million annually ($340 million in 2013 dollars). The industry steadily grew through World War II and during the Cold War, encompassing a wide range of activities, including military and civilian aircraft, reconnaissance and communications satellites, strategic missiles, and space exploration. The region's economy became linked to the ebbs and flows of defense spending. By the early 1960s, roughly 40 percent of the $6.1 billion U.S. Department of Defense prime contracts for development, test and research work went to California. That proportion continued into the 1980s, and the industry employed roughly 500,000. One of the region's strongest selling points for aerospace was its environment: the clear blue skies and ample open spaces were ideal for testing new aircraft. California also was home to a variety of related industries, particularly petroleum, as well as top-notch research universities and a large labor pool. Defense spending peaked at $557 billion in 1985 (in constant 2009 dollars) and then began a downward trend. The federal government conducted four rounds of Base Realignment and Closure (BRAC) closures between late 1988 and 1993. Nationally, that process led to (1) the closing of 350 large and small military bases, and (2) 55 major realignments. Reportedly, this saved federal taxpayers in excess of $16 billion through 2001 and six billion dollars more each subsequent year. Prior to 1988, California had, by far, the largest military presence of any state, and was home 15 percent of the Department of Defense's (DoD's) total 275,264 personnel and 18 percent of SB 1215 (Allen) Page 2 of ? the major military bases around the country. Correspondingly, the base closures over those four rounds hit the State disproportionately hard. Prior to the mid 1990's, California's response to BRAC was primarily focused on assisting local communities in the reuse of shuttered military bases. In 1994, Governor Wilson issued an Executive Order (W-87-94) which directed the Office of Planning and Research to coordinate the state's effort to assist local communities in developing strategies to protect California bases from further closings, as a means of focusing on the importance military bases have on the state's economy. Subsequent legislation (AB 639, Alby, 1998 and SB 1099, Knight, 1999) codified an Office of Military Base Retention and Reuse (OMBRR), placing it within the Technology, Trade and Commerce Agency (TTCA) and outlining the responsibilities of the office, including the creation of a Defense Retention Grant Program. The grant program aided local communities in preparing for future BRAC rounds. SB 926 (Knight and Ashburn, 2004) then renamed OMBRR to the Office of Military and Aerospace Support (OMAS), signifying the close relationship between military and aerospace activities. OMAS exited through the 2005 BRAC round and subsequently sunsetted in January of 2007. Unlike previous rounds, the fifth BRAC round (2005) focused more on realignment than closure. Along with saving money, a top priority was military force readiness, consolidating assets onto centralized installations from which they can be deployed rapidly and flexibly in support of an evolving global situation, and joint service missions. Implementation of the 2005 BRAC recommendations was completed in 2011. The collapse of the Soviet Union and the end the Cold War led to more than 50 major defense companies consolidating into only six. Employment Development Department (EDD) employment data indicate that the Aerospace Production and Manufacturing sector declined from 214,200 in 1990 to 71,900 in 2013, an average annual decline of 8.7 percent; Los Angeles County's aerospace employment comprises roughly 60 percent of the statewide total, and shrank proportionately over the same time period. Most of SB 1215 (Allen) Page 3 of ? the declines occurred before 2004. However, further job decline is possible to the extent that reduced defense spending results from federal budget cuts. Proposed Law: This bill would do the following: Create 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. Establish that the Commission shall do the following: o Receive grants from state or local government sources or from private businesses or individuals, for California aerospace-related activities, as specified. o 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. o Identify and recommend changes in federal, state, and local statutes and regulations that will enhance the development of California aerospace-related activities. o 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. o Recommend to the Governor and the Legislature appropriate state funding mechanisms and amounts to SB 1215 (Allen) Page 4 of ? promote development of California aerospace-related activities. o 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. o Act as a clearinghouse for aerospace-related issues and information. o Foster and promote activities related to aerospace in all parts of California. 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. The bill was held on the suspense file of this Committee. Staff Comments: The bill as currently drafted gives little guidance concerning (1) the number of Commission members, (2) how they would be staffed, and (3) whether members would receive per diem or have their travel expenses reimbursed. As noted earlier, the Little Hoover Commission could serve as a proxy; it has a $1 million annual budget and is comprised of seven staff: an executive director, three managers, and three analysts. The Little Hoover Commission's personnel costs (salaries and benefits) total about $700,000 annually; operating expenses and equipment comprise the other $300,000 per year.