BILL ANALYSIS
SB 967
Page 1
Date of Hearing: August 4, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 967 (Correa) - As Amended: June 1, 2010
Policy Committee: Business and
Professions Vote: 7-4
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill provides a 5% bid preference on certain state
contracts to contractors employing predominantly California
workers. Specifically, this bill:
1)Requires, by July 1, 2011, that a 5% bid preference be
provided-on state contracts for goods and services and on
state bids or proposals for distribution of federal American
Recovery and Reinvestment Act (ARRA) funds-to contractors who
certify that 90% of their employees performing work on a
contract are residents of California.
2)Requires the Department of General Services (DGS), by July 1,
2011, to establish a process for verifying that a business
qualifies for the 5% preference.
FISCAL EFFECT
1)Unknown but significant annual state costs (General Fund and
special funds), potentially in the millions to tens of
millions of dollars, to the extent state contracts are awarded
to other than the lowest bidder due to the preference. Also,
to the extent the bill dissuades some businesses from bidding
on state contracts, costs could increase due to reduced
competition. (According to DGS, in 2008-09, state contracting
for non-IT goods and services totaled $7.9 billion.)
2)Similarly, to the extent the ARRA funds were awarded to other
than the lowest bidder, fewer projects would be funded within
the state allotment of ARRA dollars.
SB 967
Page 2
3)To the extent application of the bid preference results in
more employment of California residents, the increased state
costs would be offset to some extent by increased income and
sales tax revenues.
4)Significant administrative costs for state contracting
agencies to verify compliance with the 90% residency
requirement for successful bidders that receive the bid
preference. DGS would incur one-time costs of around $150,000
and ongoing costs exceeding $1 million for this work,
including auditing compliance. State agencies with significant
contracting workload would also incur some administrative
costs.
COMMENTS
1)Purpose . According to the author's office, "With record
unemployment, California must do everything in its power to
spur job creation - an even bigger challenge when facing a
budget deficit. With so many Californians out of work,
taxpayer money should not be spent on contracts that simply
create jobs in other states or countries. Bid preferences are
a way to use state dollars to incentive certain behavior. In
this case, we want to spur the creation of California jobs."
The author's office contends that providing a bid preference
to contractors employing California residents will benefit the
state because personal income and sales taxes resulting from
those employees will increase revenue for the state and reduce
the number of unemployed individuals relying on government
assistance programs.
2)Opposition . The California Chamber of Commerce argues the bill
will limit bidders, thus reducing competition and driving up
prices on state contracts. The chamber is also concerned about
retaliatory policies from other states that could negatively
impact California companies.
3)Prior Legislation . In 2005, similar legislation (AB 1654, De
La Torre), was held on this committee's Suspense File.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081
SB 967
Page 3