BILL ANALYSIS
-----------------------------------------------------------------------
|Hearing Date:June 28, 2010 |Bill No:AB |
| |1558 |
-----------------------------------------------------------------------
SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: AB 1558Author:V. Manuel Perez
As Amended: June 22, 2010Fiscal:Yes
SUBJECT: State government.
SUMMARY: Urgency Measure. Requires the Secretary of the Labor and
Workforce Development Agency to lead in the preparation of the new
California Economic and Workforce Development Strategy.
Existing law:
1) Designates the Business, Transportation and Housing (BTH) Agency as
the primary state agency responsible for facilitating economic
development in the state.
2) Establishes the biennial California Economic Strategy Panel (CES
Panel), chaired by the Labor and Workforce Development Agency (L&WD
Agency) Secretary (Secretary), to develop an overall state economic
vision and strategy that can guide public policy, including,
examination of the state's economic regions, industry clusters and
cross-regional economic issues.
3) Establishes California Commission for Economic Development for the
purpose of providing continual bipartisan legislative, executive
branch and private sector support and guidance for the best
possible overall economic development of the state.
4) Establishes CA Workforce Investment Board.
5) Requires the Secretary to lead in the preparation of a biennial
California Economic Development Strategic Plan.
This bill:
AB 1558
Page 2
1) Deletes the requirement to produce a biennial California Economic
Development Strategic Plan and the related duties of the Secretary.
2) Requires the Secretary to instead lead the preparation of the
California Economic and Workforce Development Strategy (Strategy)
and in doing so, the Secretary must call on assistance from CES
Panel an California Workforce Investment Board.
3) Requires the Secretary in preparation of the Strategy to make
recommendations regarding an economic development strategic plan
for the state covering a five-year time period and must contain
specified information.
4) Requires the Secretary to prepare a preliminary Strategy, post that
document on the L&WD Agency's Website and submit written notice of
that document's posting to the relevant policy and fiscal
committees of the Legislature, as well as every state agency,
office, board, and commission having economic and workforce
development responsibilities.
5) Requires the Secretary to update the strategy every five tears, on
or before October 31 of each succeeding year.
6) Requires the CES Panel to research, facilitate outreach, and make
policy and fiscal committees to the Governor and Legislature on
issues related to economic and workforce development.
7) Modifies membership of the CES Panel, specifically by:
a) Deleting the Minority Leader of the Senate or his or her
designee.
b) Adding the Director of the Governor's Office of Economic
Development, the Secretary of Business, Transportation and
Housing, the Secretary of Food and Agriculture, the California
Small Business Advocate, and the Executive Director of the
California Council on Science and Technology.
8) Requires the eight members appointed to the CES panel by the
Governor to represent eight specified categories:
a) Local government.
b) Small business.
c) Manufacturing.
d) Workforce development.
e) Economic development.
f) Labor.
AB 1558
Page 3
g) Finance.
h) Academic Institutions.
9) Requires the members appointed by the Governor to be broadly
reflective of the state's population as to gender, ethnicity, and
geographic residence within California.
10)Requires at least seven of the eight Governor's appointments to be
from the private sector.
11)Requires the members appointed by the Speaker and the Senate
Committee on Rules to both be from the private sector.
12)Requires appointments to the CES Panel, beginning January 1, 2011,
to be four-year terms, except the Governor appointments, which must
be made as follows:
a) Requires two members to be appointed on January 1, 2011, and
every four years thereafter.
b) Requires two members to be appointed on January 1, 2012, for a
two-year term. It is not the intent of the Legislature to
disturb the appointment of the members of the CES Panel, as it
existed prior to the enactment of the act that added this
section, whose terms are still ongoing.
13)Requires vacancies to be filled in the same manner as the original
appointments.
14)Requires the CES Panel to meet on call of the Secretary, who must
convene at least two meetings during the year. A quorum is not
required to meet except at the meeting when the Strategy is
approved by a majority of those present.
15)Requires the CES Panel members to serve without compensation but
can be reimbursed for actual expenses incurred in connection with
their duties.
16)Requires the CES Panel to create an assessment addressing specified
considerations as part of CES Panel's deliberations in preparing
the Strategy.
17)Requires as part of its deliberations in preparing the Strategy, as
well as other projects and activities of CES Panel, CES Panel must
do all of the following:
AB 1558
Page 4
a) Consult with other specified state government entities.
b) Review relevant background, findings and recommendations from
specified government documents.
18)Requires CES Panel to review the Strategy within five years after
the date it is finalized, and every five years thereafter, and make
recommendations on how to update the strategy as the panel deems
appropriate. Nothing in this subdivision shall prohibit CES Panel
form reviewing or making recommendations on how to update the plan
more frequently.
19)Declares this act as an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and must go into
immediate effect. The facts constituting this necessity are:
a) In order to preserve the public peace, health, and safety
through the encouragement of economic development throughout the
state's economic regions, it is necessary for this act to take
effect immediately.
FISCAL EFFECT: Unknown. This bill has been keyed "fiscal" by
Legislative Counsel.
COMMENTS:
1. Purpose. According to the Author, economic development programs
are fragmented, lack oversight criteria and do not best serve the
needs of California workers, businesses, and communities.
2. Background. According to the Author, one of the primary ways by
which states compete for businesses and industry is through their
fiscal policies, including income tax and sales and use tax-based
incentives. California's economic development related incentives
include: tax benefit programs that address the purchase and
depreciation of equipment, the undertaking of research and
development of new products and technologies, targeting of private
investments, and special treatment for small businesses under the
state's tax laws.
The Author further asserts that, in addition to tax incentives, the
state funds and/or administers a limited number of programs and
services to assist business and workforce development, including,
but not limited to, the following: the OSBA; the California Small
Business Loan Guarantee Program; international trade and foreign
AB 1558
Page 5
investment activities; the federal Small Cities Community
Development Block Grant Program; the Enterprise Zone Program; the
Employment Training Panel; the California Workforce Investment
Board; the CES Panel; and, the small business and disabled
veteran-owned business enterprise procurement preference programs.
As argued by the Author, however, there is no single location where
these programs, services, and activities come together into a
single comprehensive strategy. Further, recent budget actions have
reduced tax incentives and eliminated key programs and services.
California's budget problems cannot be sufficiently addressed until
the state addresses the needs of workers, businesses, and
investors. A current economic development strategy, as proposed in
this bill, will allow the state to best analyze how existing
programs and services work together. Without such actions it will
be difficult to maximize public investments with ongoing private
sector activities, including current and future federal stimulus
moneys.
The Author further notes that the challenges of bringing together a
coherent, outcome oriented economic and workforce development
program have been discussed by Assembly and Senate policy
committees since the demise of the Technology, Trade and Commerce
Agency (TTCA) in 2003. With the elimination of the TTCA, many have
opined that the state lost focus and, potentially, its ability to
adequately support business development and job creation. Further
compounding the state's ability to decisively act on economic
development recommendations is the CES Panel's failure to meet its
statutory obligation to update the state Economic Development
Strategic Plan every two years. No economic development plan has
been prepared since 2002. Beginning in 2005, JEDE held hearings
and sponsored legislation to, at a minimum, bring greater
coordination of existing state programs and services and call for
an updated economic development strategy.
3. Recent Little Hoover Commission Report and the Creation of a
Governor's Office of Economic Development. On February 25, 2010,
the Little Hoover Commission (Little Hoover) released a report
titled, Making Up for Lost Ground: Creating a Governor's Office of
Economic Development , around the same time of the recent creation
of the Governor's Office of Economic Development (Office). The
report asserts that after the dismantling of the Technology, Trade
and Commerce Agency in 2003, many economic development programs
were moved to either of two distinct agencies: Business,
Transportation and Housing (BTH) and Labor and Workforce
Development (LWD), while the rest were housed in less obvious
AB 1558
Page 6
locations.
There have been previous attempts to bring the leaders of some of
these state agencies together to forge a unified economic
development strategy, but many of these efforts have had trouble
gaining traction and generating stable leadership. For instance,
in 2005 Governor Schwarzenegger established the California Economic
Development Partnership as an interagency cabinet team to
coordinate economic development efforts across departments. This
partnership lacked authority and resources and was ultimately
criticized for potentially adding on another layer to a fragmented
structure.
What still stands now are two main agencies, BTH and LWD, that
oftentimes overlap in their economic development duties yet still
lack the authority and funding to lead policy implementation
related to economic development. While the Governor designated BTH
in charge of economic development, the Legislature deems LWD
through its CES Panel, as the appropriate nexus for the state's
strategic planning, coordination and evaluation of economic
development activities. What's more, the Panel has been the
subject of repeated legislation in recent years to undertake a new
strategic planning effort. For example in 2008, Governor
Schwarzenegger vetoed AB 1606 which would have centralized the
state's economic development programs under the Panel. The
Governor's veto message stated that AB 1606 represented a piecemeal
approach when a more comprehensive solution was needed.
At the same time, the report contends that many government and
non-government stakeholders are not demanding a new state agency
that centralizes state economic development efforts, and Little
Hoover as well does not advocate building a new agency at this
time. Little Hoover asserts that the state has an urgent need to
define a strategy for the economic growth and then build the
appropriate government structure to meet that vision.
Little Hoover stresses that instead of a traditional, top-down
bureaucracy, the state needs a more agile entity placed within the
Governor's Office that can function as a convener and coordinator,
rather than a provider of economic development services. The
Office would serve as the visible national and international point
of contact for existing businesses as well as for local, state, and
federal economic development leaders. According to the report, the
essential functions should include:
Developing a vision for economic growth and a strategic
AB 1558
Page 7
plan that leverages the state's economic development programs
with local, regional, federal and private efforts.
Designating a visible, point of contact and liaison for
information about business growth opportunities, economic
development assistance, and navigating permitting issues and
regulations.
Marketing the state's economic development programs and
business opportunities.
The Office would no longer need BTH or LWD to each contend as the
lead economic development entity of the state, and as the Office
would move forward, it would deem certain economic development
entities unnecessary. By its actions, the Office would establish
that it is not an additional bureaucratic layer or hollow gesture,
but instead it must be a credible networking operation with an
appropriate professional staff. Specifically, the Office would
pull core functions for the California Business Investment Services
(CalBIS) and the CES Panel, as well as partner with and bolster
TeamCalfornia's efforts to market California abroad. In addition,
the Office would include a statewide strategic planning effort with
the full force of the governor behind it in order to engage
stakeholders to implement the plan. The Office would also define
measures of success to evaluate programs, but the Legislature would
take part in evaluation and continually review programs to asses
overlap.
The report concludes that in the short term, the state must improve
its economic development operations to harness and match
California's existing strengths with a long-term economic
development strategy.
1. Previous Related Legislation. AB 699 (Portantino and V. Manuel
Perez) of 2009, would have updated the requirements for the
development of a State Economic Development Strategy, especially in
the areas of technology and innovation, and required it be
submitted to the Legislature by May 1, 2010. This measure was held
in Assembly Appropriations Committee in May 2009.
AB 1916 (Portantino, Arambula, Price, Salas, and Caballero) of
2008, would have updated the membership and requirements of the CES
Panel, especially in the areas of technology and innovation, and
would have required that the next State Economic Development
Strategy be submitted to the Legislature by January 1, 2010. This
measure was vetoed by the Governor in 2008 and his veto message
AB 1558
Page 8
states, "The historic delay in passing the 2008-2009 State Budget
has forced me to prioritize the bills sent to my desk at the end of
the year's legislative session. Given the delay, I am only signing
bills that are the highest priority for California. This bill does
not meet that standard and I cannot sign it at this time."
AB 2711 ( Portantino, Arambula, Price and Salas) of 2008, would have
required the Secretary of the Business, Transportation and Housing
Agency to develop a comprehensive state technology and innovation
strategy to guide future state expenditures and activities. This
measure was held on the suspense file in the Assembly Committee on
Appropriations.
AB 1606 (Arambula and Lieu) of 2007, required the development of a
strategy to increase private investment in California's
historically underserved communities, also known as emerging
domestic markets. The bill also would have centralized the state's
existing economic development programs with the Economic Strategy
Panel, in order to improve their coordination and impact on
California communities. This measure was vetoed by the Governor in
2007, and states in his veto message, "While this bill attempts to
aid in that crucial effort, California needs a new overall strategy
for its role in promoting economic development, not a piecemeal
approach."
AB 1721 (Committee on Jobs, Economic Development and the Economy,
Chapter 631, Statutes of 2007) designated the Business,
Transportation, and Housing Agency as the state's primary agency
responsible for the facilitation of economic development
activities. The bill also established a fund for receiving
federal, state, local, and private economic development moneys that
can be used to further state economic development activities. No
moneys may be used from this fund without a specific appropriation
by the Legislature. The bill also added economic
development-related definitions and authorized the Business,
Transportation, and Housing Agency to administer specified federal
Economic Development Administration disaster recovery moneys.
2. Related Legislation this Session. AB 2734 (John A. Perez) creates
the Office of Economic Development, which includes the California
Business Investment Services Program, within the Governor's Office.
Requires the Office to serve the Governor as the lead entity for
economic strategy and marketing of California and make
recommendations to the Governor and Legislature regarding polices,
programs, and actions to advance statewide economic goals. This
measure has been referred to the Senate Governmental Organization
AB 1558
Page 9
Committee and is set for hearing on June 28, 2010.
SB 1259 (DeSaulnier) would have created the Economic Development
and Job Creation Agency and require the new agency to perform
duties relating to economic development and job creation. It
requires the secretary to develop a reorganization plan and propose
a structure for the agency. The measure was held on the suspense
file in Senate Appropriations Committee.
3. Suggested Author's Technical Amendments. Committee staff believes
that the recent amendments to this bill include drafting errors,
specifically the lack of inclusion of the Minority Leader of the
Senate or his or her designee as a member of the CES panel and the
number of private sector appointees the Governor is required to
make.
a) Committee Staff suggests reinstating the Minority Leader of
the Senate or his or her designee as a member of the CES Panel,
following existing law, as well as precedence set in this bill
with the inclusion of the Minority Leader of the Assembly or his
or her designee.
On page 11, line 25, insert "The Minority Leader of the Senate or
his or her designee."
b) Committee Staff suggests modifying the requirement that seven
of the eight members that the Government appoints to the CES
panel be from the private sector. As the bill is written, all of
the Governor's eight appointees must be from eight specified
categories. At least one of those categories, "local
government," can only be met by an individual in the public
sector. The remaining seven categories, including "economic
development" or "academic institution" could also be met by
someone serving in the public sector. While the majority of the
Governor's appointees to the CES panel will still be from the
private sector, this suggested amendment would allow greater
flexibility in appointing members.
On page 12, line 4, strike "seven" and insert "five"
SUPPORT AND OPPOSITION:
Support:
None on file as of June 21, 2010
AB 1558
Page 10
Opposition:
None on file as of June 21, 2010
Consultant:Antoinnae Comeaux