BILL ANALYSIS Ó
AB 894
Page 1
GOVERNOR'S VETO
AB 894 (V. Manuel Pérez)
As Amended September 1, 2011
2/3 vote
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|ASSEMBLY: |77-0 |(May 31, 2011) |SENATE: |32-2 |(September 7, |
| | | | | |2011) |
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|ASSEMBLY: |78-0 |(September 8, 2011) |
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Original Committee Reference: J., E.D. & E.
SUMMARY : Authorizes the establishment of a loan and loan
guarantee program (Program), administered through the California
Industrial Development Financing Advisory Commission (CIDFAC),
for the purpose of financing the retooling and expansion of
California's manufacturing facilities, enhancing the state's
logistics network, and retaining and creating jobs.
The Senate amendments :
1)Prohibit commencement of the Program until the CIDFAC adopts a
finding that there is sufficient expertise to assess the
credit risk of loan and loan guarantee applicants.
2)Limit the leverage of the guarantee funds to a maximum five to
one.
3)Authorize CIDFAC to enter into agreements with other state
entities to expend unused federal America Recovery and
Reinvestment Act (ARRA) moneys through the Program.
AS PASSED BY THE ASSEMBLY , this bill:
1)Authorized the Program for the purpose of attracting,
AB 894
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retaining and expanding manufacturing facilities. Authority
for implementing the Program expires January 1, 2017.
2)Required CIDFAC to develop and administer the application,
review and evaluation process including the eligibility
standards, rating and ranking criteria and other appropriate
policies and procedures, as specified.
3)Prohibited CIDFAC from commencing operation of the Program
until there is sufficient funding to pay for the cost of
implementation and oversight of the Program.
FISCAL EFFECT : According to the Senate Appropriations
Committee: (1) One-time costs of $221,000 for development of the
Program. The bill requires application fees to cover all
administrative costs. (2) Capitalization cost would be
dependent on the federal program providing funding. No General
Fund (GF) moneys may be used for this purpose.
COMMENTS : AB 894 (V. Manuel Pérez) proposes to proactively
design a flexible state program for the purpose of maximizing
the state's access to federal funds. ÝThe bill precludes the
establishment of the program prior to moneys becoming
available.] Under ARRA, many of the state-level applications
had only a six-week turn around, which resulted in funding
proposals that were not necessarily imbued with the highest
accountability and transparency provisions. Having a
pre-approved and well-designed program in place should result in
a better functioning program, as well as possibly influencing
the design of future federal funding.
New federal funding is expected as the Obama Administration
continues to move forward on its manufacturing initiatives,
following the 2009 release of the President's "Framework for
Revitalizing American Manufacturing" and the 2011 announcement
of a national goal to double exports in the next five years. In
2009 and 2010 the U.S. Congress and the federal Administration
proposed new initiatives in support of the U.S. manufacturing
industry. Amendments added in the Senate also allow the Program
to be used in expending unused ARRA moneys, to the extent
allowed under the federal program guidelines.
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Opposition to the measure, the Associated Builders and
Contractors of California, have raised a concern that one of the
four funding priorities includes applications jointly submitted
by a company and its represented workers.
The California economy and manufacturing: Manufacturing is one
of the top five private industry sectors in the state,
responsible for employing 1.28 million workers (9.1%) and
contributing over $180 billion to the state's $1.9 trillion
gross domestic product (GDP). Manufacturing is California's
most export-intensive activity. Overall, manufacturing exports
represent 9.4% ($120 billion in goods) of California's GDP, and
computers and electronic products constitute 29.3% of the
state's total manufacturing exports. More than one-fifth
(21.9%) of all manufacturing workers in California directly
depend on exports for their jobs.
A robust manufacturing sector has many benefits, including high
wage jobs and a multiplier effect on other industries and
businesses. As an example, the Milken Institute estimates that
every job created in manufacturing supports 2.5 jobs in other
sectors. In some industry sectors, such as the electronic
computer manufacturing, the multiplier effect is 16 to one.
Manufacturing in California, however, even prior to the current
economic recession, faced many challenges maintaining global and
domestic competitiveness. According to the California
Manufacturers and Technology Association, California lost
633,000 manufacturing jobs from its peak in January 2001 to
November 2010. California's loss of manufacturing jobs is not
unusual among Western states. It is, however, more severe with
California losing 34% of its manufacturing jobs between 2001 and
2010, as compared to Arizona (-30%), Oregon (-29%) Texas (-21%)
and Nevada (-12%).
GOVERNOR'S VETO MESSAGE :
"This bill creates the California Manufacturing Competitiveness
Loan and Loan Guarantee Program to be administered by an
advisory commission within the State Treasurer's Office.
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"The objectives of this bill are excellent. However, the loan
programs it creates can be run by the state's Infrastructure
Bank, which already has authority and experience lending
directly to businesses."
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
FN: 0002963