BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 796 (Blumenfield)
Hearing Date: 08/25/2011 Amended: 07/13/2011
Consultant: Brendan McCarthy Policy Vote: G&F 9-0, EQ 6-1
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BILL SUMMARY: AB 796 expands the size of loans that can be
insured by the state under the California Capital Access Program
for Small Businesses.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Allowing larger loans Unknown cost pressures Federal
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STAFF COMMENTS: SUSPENSE FILE.
Under current law, the State Treasurer's Office oversees the
California Capital Access Program for Small Businesses (CalCAP).
Under the CalCAP program, the state provides funds for loan loss
reserve accounts, used by lenders to insure loans against
default. When a participating lender decides to provide a loan
to a small business under the program, the lender and the
borrower both deposit funds into a loan loss reserve account.
The state then deposits matching funds into the loan loss
reserve account. The account is held by the lender and the funds
in the account can be used by the lender to cover losses from a
loan default by any borrower that has a loan enrolled under the
program. The loan loss reserve account reduces a lender's risk
of making the loans, thereby encouraging lenders to make more
loans to small businesses. Under current law, the Treasurer's
Office is limited to depositing $100,000 in a loan loss reserve
account in connection with a single borrower. Because the state
contributes 4 percent of the value of the loan to the loan loss
reserve account, the $100,000 limit has the effect of limiting
loans under the program to a total amount of $2.5 million.
AB 796 expands the CalCAP program, by authorizing the
Treasurer's office to contribute up to $200,000 to a loan loss
AB 796 (Blumenfield)
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reserve account for a single borrower. The larger amount can
only be funded with specified federal funds and the bill
specifies that not more than fifty percent of those federal
matching funds may be used for reserves greater than $100,000.
The Treasurer's Office indicates that any administrative costs
under the bill can be accommodated within existing resources.
By allowing larger loss reserve contributions, the bill will
create cost pressures on available federal funds. (In effect
this bill will allow fewer, larger loans to be made.) The extent
of this cost pressure is unknown and will depend on the demand
for larger loans.
AB 901 (V.M. Perez) creates a new economic development program
and makes similar changes to the CalCAP program as this bill.
That bill will be heard in this committee.
AB 981 (Hueso) expands the CalCAP program by allowing more
lending institutions to participate, allows the Treasurer's
Office to use accumulated interest for other loans, and requires
larger contributions by the state for loans made to borrowers in
certain communities. That bill will be heard in this committee.