BILL ANALYSIS                                                                                                                                                                                                    Ó





          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 1215 (Allen) - California Aerospace Commission
          
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          |Version: February 18, 2016      |Policy Vote: B., P. & E.D. 9 -  |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: April 18, 2016    |Consultant: Robert Ingenito     |
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          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,  








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          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  







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          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  







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          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  







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                    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.