BILL ANALYSIS
AB 978
Page A
Date of Hearing: January 5, 2009
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel Perez, Chair
AB 978 (V. Manuel Perez) - As Amended: May 7, 2009
SUBJECT : Internet-based one-stop permitting
SUMMARY : Requires the State Chief Information Officer (CIO),
in collaboration with other relevant agencies, to develop an
online master application for businesses to file for state
permits and licenses. Specifically, this bill :
1)Makes several findings and declarations regarding the
importance of small businesses and the unique burdens they
face during these difficult economic times including, but not
limited to:
a) Declares that California's dominance in many economic
areas is based, in part, on the significant role small
businesses play in the state's $1.8 trillion economy;
b) Finds regulatory burdens and costs continue to be a
major concern for small businesses;
c) Finds that while the specific financial impact of state
regulations on small businesses is unknown, state agencies
are required to consider the costs of adopting regulations
on the California economy, in general, and on small
businesses; and
d) Finds that given these difficult economic times for
small businesses, it is fair and appropriate to expend
resources to reduce the cost of obtaining state licenses and
permits by developing an online master application.
2)Requires the CIO to develop an online master application for
businesses to file for state permits and licenses. In
undertaking this work, the CIO is directed to:
a) Establish the requirements for the initiation of the
project;
b) Define the resource requirements and proposed technical
solution that is in compliance with statewide strategies,
AB 978
Page B
policies and procedures; and
c) Consult with state agencies during the initial project
planning to ensure that project proposals are based on
well-defined programmatic needs, clearly identify
programmatic benefits, and consider feasible alternatives
to address the identified needs of businesses that apply
for multiple state licenses and permits over a period of
time.
3) Requires that the Secretary of State and the Secretary of
Consumer Services work with the CIO to ensure that boards and
commissions have the appropriate technical assistance to use
and maintain an online application system.
4) Authorizes the CIO to delegate the development of the actual
application to an appropriate agency.
EXISTING LAW established the Office of the State CIO in August
2007 with statutory authority over strategic vision and
planning, enterprise architecture, information technology
policy, and project approval and oversight.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose: According to the author, small business owners face
many challenges when they want to start or expand a business
in California. They must navigate through many different
agencies to obtain permits and licenses. The process is
lengthy and is not conducive to a positive business climate.
According to the author, licensing and regulatory burdens
continue to be a major concern for small businesses. In a
recent survey by Small Business California, 85% of small
businesses felt the state was heading in the wrong direction.
Regulations placed among the top five issues identified by
small businesses as needing to be immediately addressed by
elected officials in Sacramento. Sixty-one percent of small
business respondents ranked regulations as either their top
priority or a high priority for state action.
The author states that given the current deficit budget
environment, the state must, at a minimum find ways to control
AB 978
Page C
the rising costs of regulatory compliance. This bill is
intended to provide a cost effective and streamlined licensing
and permitting process, thus reducing the cost of doing
business in California.
2)California small business : California's dominance in many
economic areas is based, in part, on the significant role
small businesses play in the state's $1.8 trillion economy.
Businesses with fewer than 100 employees comprise more than
99% of all businesses, and are responsible for employing more
than 57% of all workers in the state.
As an example, small- and medium-sized businesses are crucial
to the state's international competitiveness and are an
important means for dispersing the positive economic impacts
of trade within the California economy. Of the over 52,000
companies that exported goods from California in 2006, 95%
were small- and medium-sized enterprises (SME) with fewer than
500 employees. These SMEs generated nearly half (44%) of
California's exports in 2006. Nationally, SMEs generated only
29% of total exports.
Historically, small businesses have functioned as economic
engines, especially in challenging economic times. During the
nation's economic downturn from 1999 to 2003, microenterprises
(businesses with less than five employees) created 318,183 new
jobs or 77% of all employment growth, while larger businesses
with more than 50 employees lost over 444,000 jobs. From 2000
to 2001, microenterprises created 62,731 jobs in the state,
accounting for nearly 64% of all new employment growth.
Unfortunately during the current recession, small business
have been especially hard hit with small business bankruptcies
up 81% for the 12 months ending September 2009, as compared to
the same period in the previous year. Nationally, bankruptcy
filings were up 44%, according to Equifax Inc.
Because of their importance in the state economy, small
business issues have been a particular focus of the Assembly
Committee on Jobs, Economic Development and the Economy (JEDE)
for the past several years. In March 2009, JEDE produced a
state economic recovery strategy that included several key
recommendations on the needs of small business, including
helping small businesses meet their short term capital needs.
AB 978
Page D
3)Small business studies : Beginning in March 2009 and through
the summer, the Assembly Committee on Jobs, Economic
Development and the Economy held several hearings specifically
to hear from small businesses and manufacturing about their
economic recovery needs. During these hearings small business
prioritized two areas: increasing access to capital and
reducing the costs associated with doing business in
California, including costs related to business permits and
licenses.
The cost of compliance with regulations has also been the
subject several of peer reviewed studies at the federal and
state levels. For the last 10 years, the federal Small
Business Administration has conducted a study that analyzes
the cost of federal government regulations on different sizes
of businesses. This research shows that small businesses
continue to bear a disproportionate share of the federal
regulatory burden. On a per employee basis, it costs about
$2,400, or 45%, more for small firms to comply with federal
regulations than their larger counterparts.
In September 2009, Governor Schwarzenegger released the
state's first assessment on the cost of state regulations on
business. The study was requested by Assemblymember Juan
Arambula in AB 2330 Statutes of 2006. Of note was the reports
estimated total cost of regulations to the State of
California, $493 billion. Since small businesses constitute
99.2 % of all employer businesses in California and all of
non-employer business, the regulatory cost, according to the
report, is shouldered substantially by small business
(averaging $134,123.00 per small business in 2007).
How small business gain access to capital was the topic of
another study, published in April 2009 by Bornstein and Song.
The study found that more than 1.5 million Californians are
now in immediate risk of losing their jobs, and more than 2.1
million California small business jobs may be lost in the
second wave of foreclosures which began in 2009 and will
likely see through 2012. A Toxic Mortgage is an Adjustable
Rate Mortgage, Alt-A or a Sub prime loan. Unfortunately, 51.8
percent of California small business owners used toxic
mortgages to fund their business expenses. California
Hispanic small business owners were the hardest hit, with a
toxic mortgage usage rate of 52.6%. This exceeds the national
average of 31.9 percent by more than 20% points.
AB 978
Page E
4)Related legislation: Below is a list of bills relating to
streamlining the permitting and licensing process.
a) AB 485 (Arambula) : This bill would have created a Master
Business License Center within the State and Consumer
Services Agency to receive and process all state licensing
applications. The Center would have had responsibility to
coordinate review and approve the application by all
relevant regulatory agencies and a master license would have
subsequently been issued to the applicant business. Status:
Held in Senate Committee on transportation and Housing.
b) AB 2098 (Liu) : This bill requires the Department of
Technology Services to design and implement a comprehensive
electronic payment system that will allow all state agencies
to receive and make payments through electronic funds
transfers, credit cards, debit cards, and automated
clearinghouse debits and credits. Status: Signed by the
Governor, Chapter 818, Statutes of 2006.
c) AB 2330 (Arambula) : This bill requires the Office of the
Small Business Advocate to commission a study on the cost of
state regulations on small businesses that is parallel to
the study on the impact of regulatory costs on small firms
conducted by the federal Small Business Administration. The
report is required to make recommendations on how to reduce
the cost of existing and future regulations on small
businesses while achieving the same policy and regulatory
objectives. This bill also convenes a small business
advisory committee to provide advice based on the study and
recommendations. Status: Signed by the Governor, Chapter
232, Statutes of 2006
d) SB 1436 (Figueroa) : This bill requires the Department of
Technology Services to create a link to state agency web
sites at the State of California Internet Portal so small
businesses can access information regarding startup
requirements and regulatory compliance. The bill requires
each state agency that significantly regulates or impacts
small business to designate at least one individual to serve
as a small business liaison for the agency. It also
requires each agency to ensure that the state's procurement
and contracting processes are administered in order to meet
or exceed the 25% small business participation goal.
AB 978
Page F
Status: Signed by the Governor, Chapter 234, Statutes of
2006.
REGISTERED SUPPORT / OPPOSITION :
Support
Assembly Committee on Jobs, Economic Development, and the
Economy (Sponsor)
Opposition
None received
Analysis Prepared by : Mercedes Flores / J., E.D. & E. / (916)
319-2090