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