BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    SB 1219  


                                                                    Page  1





          Date of Hearing:  August 3, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          SB 1219  
          (Hancock) - As Amended August 1, 2016


           ----------------------------------------------------------------- 
          |Policy       |Jobs, Economic Development,    |Vote:|8 - 0        |
          |Committee:   |and the Economy                |     |             |
          |             |                               |     |             |
          |             |                               |     |             |
           ----------------------------------------------------------------- 


          Urgency:  No  State Mandated Local Program:  YesReimbursable:   
          No


          SUMMARY:


          This bill, beginning July 1, 2017, includes employment social  
          enterprises (ESEs) within the Small Business Procurement and  
          Contract Act, for the purpose of allowing them to participate in  
          state contracting bid preferences. Specifically, this bill:


          1)Defines "employment social enterprise" as a social purpose  
            corporation, benefit corporation or nonprofit corporation  
            based in California, as specified. Requires, among other  
            things, the enterprise to earn 51% or more of its revenue from  
            the production or assembly of goods or the provision of  








                                                                    SB 1219  


                                                                    Page  2





            services, or a combination of both and be comprised of at  
            least 80%  of enterprise participants who face multiple  
            barriers to employment. 


          2)Requires state agencies to expand procurement goals to include  
            ESEs and give the same special consideration as currently  
            provided to small businesses and microbusinesses, including  
            the reduction of required experience and the level of  
            inventory normally required for state contracting, among other  
            potential adjustments.


          3)Applies the 5% small business and microbusiness bid preference  
            to ESEs for state contract bid packages, including a contract  
            with the California State University.  A single preference may  
            not exceed $50,000 or when added to other preferences, the  
            total value cannot exceed $100,000.


          4)Expands the duties of the Office of the Small Business and  
            Disabled Veteran Business Enterprise Services to include  
            support to employment social enterprises, including, but not  
            limited to: compiling and maintaining a comprehensive bidders  
            list of qualified employment social enterprises; assisting  
            employment social enterprises comply with bidding procedures;  
            and making an effort to develop certification application that  
            can be adopted by cities, counties, and special districts. 


          5)Requires the Department of General Services to certify and  
            determine eligibility of ESEs, and provide access to a public  
            list of certified ESEs online for local agencies to confirm  
            certification. Authorizes DGS to assign certification  
            requirements, as specified, to another state or local entity. 


          FISCAL EFFECT:









                                                                    SB 1219  


                                                                    Page  3






          1)One-time General Fund costs, in the range of $5.5 million to  
            $7.5 million, to make programming changes to FI$Cal to modify  
            system functionality to accommodate the ESEs in the processing  
            of procurements. As a point of comparison, developing the  
            certification systems for the small business and disabled  
            veteran business enterprise programs cost roughly $8 million. 


          2)DGS indicates they would need 3 positions and $406,000  
            (special funds) to conduct outreach to ESEs and departments to  
            make them aware of the new status, assist ESEs through the  
            certification process, review applications and certify ESEs.


          COMMENTS:


          1)Background. The Small Business Procurement and Contract Act  
            was implemented in 1973 to establish a preference for small  
            business within the state's procurement process with the goal  
            of increasing the number of contracts between small business  
            and the State. 


            Under current law, certified small businesses and  
            micro-businesses are entitled to a 5% bid preference on  
            applicable state solicitations once eligibility requirements  
            have been satisfied. Additionally, certified small business  
            and microbusiness are eligible for the State's Small Business  
            Participation Program.  This program sets a goal for the use  
            of small businesses in at least 25% of the State's overall  
            annual contract dollars.  


            Employment social enterprises (ESEs) are businesses that  
            provide jobs for individuals who have experienced significant  
            barriers to employment, including youth and inexperience,  
            previous incarceration, homelessness, or mental health  








                                                                    SB 1219  


                                                                    Page  4





            disorders.  Most social enterprises, in addition to employment  
            opportunities also provide on-the-job skills development,  
            counseling and other support such as clothing, food, and  
            housing.


          2)Purpose. According to the author, ESEs cannot meet small  
            business requirements due to their nonprofit status or annual  
            number of employees. This bill would define and grant  
            preferences for ESEs to secure state business development  
            services and procurement contracts.


          3)Related legislation. SB 1176 (Galgiani), pending in this  
            committee, would revises the definition of a small business  
            and microbusiness by increasing the threshold for a small  
            business to $30 million, increasing the threshold for a micro  
            business to $5 million, and requiring those dollar amounts to  
            be adjusted to reflect increases in the California Consumer  
          Price Index biennially. 








          Analysis Prepared by:Misty Feusahrens / APPR. / (916)  
          319-2081

















                                                                    SB 1219 


                                                                    Page  5