BILL ANALYSIS
AB 2714
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Date of Hearing: April 20, 2010
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel Perez, Chair
AB 2714 (V. Manual Perez) - As Introduced: February 19, 2010
SUBJECT : Office of the Small Business Advocate
SUMMARY : Transfers the Office of the Small Business Advocate
(OSBA) from the Governor's Office of Planning and Research (OPR)
to the Business Transportation and Housing Agency (BTH).
Specifically, this bill :
1)Eliminates the OSBA within OPR and reestablishes it at BTH.
This change would be effective January 1, 2011.
2)Adds the OSBA to the Small Business Board located at BTH.
EXISTING LAW
1)Establishes the OSBA, within the OPR, for the purpose of
advocating for small business causes. Among other duties, the
OSBA maintains a website to provide key information for small
businesses, advocates the small business position on
legislation and regulations being considered by the
Administration, and serves as the state's primary liaison on
small business issues.
2)Finds and declares that it is in the public interest to aid,
counsel, assist, and protect, insofar as is possible, the
interests of small business concerns in order to maintain a
healthy state economy.
3)Establishes the California Small Business Board, within BTH,
for, among other purposes, advising the Governor, the director
of the Small Business Loan Guarantee Program, and the
Legislature on issues and programs affecting California's
small business community.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's purpose : In 2009, the Joint Legislative Budget
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Committee voted to eliminate OPR and relocate those programs
and services that were deemed useful and necessary to other
state entities. The Governor's budget for 2010-11 proposes to
transfer the OSBA to BTH.
Given the very important role of the OSBA in identifying and
supporting the needs of small business, the author states that
it is essential that policy makers keep the activities of the
OSBA front and center during this legislative session. This
bill codifies the Governor's budget recommendation, provides a
vehicle for further policy discussions on where best to locate
the OSBA, and ensures that the OSBA will not be inadvertently
deleted from statute when the OPR statutes are struck as part
of some potential future budget deal.
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 nearly 98%
of all businesses and are responsible for employing more than
37% 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, 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 in
California have been especially hard hit and have been unable
to play their previous roles in economic recovery. Equifax
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Inc. reports that small business bankruptcies are 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%.
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,
the need for regulatory reforms, and workforce development
programs that link to the needs of businesses.
3)Small business studies : Beginning in March 2009 and through
the summer and fall, 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, Chapter 232, Statutes of 2006. Of note
was the report's 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
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to the report, is shouldered substantially by small business
(averaging $134,123.00 per small business in 2007).
How small businesses 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% 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% by more than 20% points.
4)Related Legislation :
a) AB 177 (Ruskin and V. Manuel P?rez) - Penalties under
the Small Business Act : This bill increases and conforms
penalties for persons who falsely engage in activities
relating to the Small Business Procurement and Contract
Act, including small businesses, microbusinesses, and
disabled veteran-owned business enterprises. Status: The
bill is pending in Senate Governmental Organization, set
hearing on April 4, 2010.
b) AB 978 (V. Manuel P?rez and Logue) - Streamlined State
Licensing : This bill 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. This
bill will provide guidance to a $30 million information
technology project, which has been approved in a prior
budget year. Status: The bill is pending in Senate
Governmental Organization.
c) AB 2330 (Arambula) - Small Business Costs Study : This
bill requires the OSBA to commission a study of the costs
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 OSBA is required to make
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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) AB 2854 (Mendoza) - Small Business One-Stop Website :
This bill requires, contingent upon funding becoming
available, the establishment of a one-stop web site for
small business-related announcements and funding
opportunities offered by state agencies. The web site is
only required to be maintained by the OSBA, until January
1, 2014, when the provisions of this bill sunset. Status:
Vetoed by the Governor in 2008.
e) AB 3058 (JEDE) - Small Business Disaster Preparedness :
This bill reduces economic losses attributable to
disasters, by providing technical assistance to small
businesses on disaster preparedness. Specifically, the
bill: (1) enhances the duties of the OSBA to include
advocacy on disaster preparedness and recovery, including
the provision of technical assistance; (2) requires the
OSBA, in cooperation with the Office of Emergency Services,
to develop a handbook for small businesses on emergency
preparedness, responding in an emergency, and recovery
strategies; and, (3) requires the OSBA, with the assistance
of Office of Emergency Services, to hold at least three
meetings, in different locations in California, to share
best practices on disaster preparedness for small
businesses. Status: Signed by the Governor, Chapter 233,
Statutes of 2006.
f) SB 1436 (Figueroa) - Small Business Regulatory
Standards : 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. It 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
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exceed the 25-percent small business participation goal.
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 known
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090