BILL ANALYSIS Ó
AB 901
Page 1
Date of Hearing: April 25, 2011
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Mike Eng, Chair
AB 901 (V. Manuel Perez) - As Introduced: February 17, 2011
SUBJECT : Capital Access Loan Program for small business.
SUMMARY : Expands the definition of financial institutions in
the California Capital Access Program (CalCAP) and increases
CalCAP reporting requirements. Specifically, this bill :
1)Adds small business financial development corporation or
microenterprise development organization that meets standards
established by the California Pollution Control Financing
Authority (CPCFA).
2)Requires that when a financial institution contracts with the
CPCFA to use North American Industry Classification System, in
addition, the number of jobs created and the number of jobs
retained.
3)Requires the CPCFA to include in their annual report to the
Governor and Legislature the programmatic results which shall
include:
a) All outstanding loans on the date the report is
issued;
b) New loans issued since the report from the prior
year;
c) Total number of businesses served;
d) Jobs created;
e) Jobs retained;
f) The geographic distribution of the loans; and,
g) The breakdown of businesses served by the industry
sector.
EXISTING FEDERAL LAW enacted the Small Business Jobs Act (H.R.
5297) on Sept. 27, 2010 which creates the Small Business Lending
AB 901
Page 2
Fund Program to direct the Secretary of the Treasury to make
capitol investment in eligible institutions in order to increase
the availability of credit for small business and to amend the
Internal Revenue Code of 1986 to provide tax incentives for
small business job creation. (15 U.S.C. Sec. 631 et seq.)
EXISTING STATE LAW
1)Defines the "California Capital Access Fund" as a fund created
within the CPCFA to be used for purposes of the program.
(Health and Safety Code, Section 44559.1.)
2)Defines "Financial Institution" as a federal- or
state-chartered bank, savings association, credit union,
not-for-profit community development financial institution
certified under Part 1805 (commencing with Section 1805.100)
of Chapter XVIII of Title 12 of the Code of Federal
Regulations, or a consortium of these entities. A consortium
of those entities may include a nonfinancial corporation, if
the percentage of capitalization by all nonfinancial
corporations in the consortium does not exceed 49 percent.
(Health and Safety Code, Section 44559.1)
3)Also, defines, "Financial Institution" as a lending
institution that has executed a participation agreement with
the Small Business Administration under the guaranteed loan
program pursuant to Part 120 (commencing with Section 120.1)
of Chapter I of Title 13 of the Code of Federal Regulations
and meets the requirements of Section 120.410 of Chapter I of
Title 13 of the Code of Federal Regulations, and a small
business investment company licensed pursuant to Part 107
(commencing with Section 107.20) of Chapter I of Title 13 of
the Code of Federal Regulations. For loans where all or part
of the fees and matching contributions are paid by an entity
participating in the program pursuant to subdivision (e) of
Section 44559.2, "financial institution" also includes
financial lenders, as defined in Section 22009 of the
Financial Code, making commercial loans, as defined in Section
22502 of the Financial Code. (Health and Safety Code, Section
44559.1)
4)Requires the CPCFA to annually prepare a report to the
Governor and the Legislature that describes the financial
condition and programmatic results of the capital access loan
program for small businesses. (Health and Safety Code,
AB 901
Page 3
Section 44559.6)
5)Establishes the California Small Business Financial
Development Corporation Law. (Corporations Code, Sections
14000-14091)
FISCAL EFFECT : Unknown.
COMMENTS :
This measure is one of seven measures sponsored by the Assembly
Committee on Jobs, Economic Development and the Economy (JEDE).
AB 901 expands the definition of financial institutions to
include small business financial development corporation or
microenterprise development organization that meets the standard
established by the CPCFA.
This measure will give small business financial development
corporations and microenterprise development organizations
access to the $6 million allocated in AB 1632 (Chapter 731,
Statutes of 2010). Neither of these entities will have access
to funding allocated in the federal Small Business Jobs Act
since this act does not apply to these entities.
According to the California Association for Micro Enterprise
Opportunity (CAMEO), a microenterprise development organization
is defined as a small business with 5 or fewer employees,
including businesses with no employees. However, businesses
with 10 or fewer employees or manufacturing firms with up to 25
employees may be defined as microenterprise for the purposes of
specific services and programs. A microenterprise is a business
that generally requires $35,000 or less in start-up capital and
often does not have access to the traditional commercial banking
sector. CAMEO reports that 85% of all businesses in the US are
micro. These very small firms generate close to 25% of all jobs
in our economy.
Under California law, a small business financial development
corporation is a nonprofit corporation. When this code section
was enacted it was the intent of the legislature "to promote the
economic development of small businesses by making available
capital, general management assistance, and other resources,
including loan services, personnel, and business education to
small business entrepreneurs, including women and minority owned
businesses, for the purpose of promoting the health, safety, and
AB 901
Page 4
social welfare of the citizens of California, to eliminate
unemployment of the economically disadvantaged of the state, and
to stimulate economic development, employment, minority group,
women, and disabled persons entrepreneurship." (Corporations
Code, Section 14002)
AB 901 deletes the Standard Industrial Classification (SIC) and
replaces it with the North American Industry Classification
System (NAICS). This is a necessary change since SIC was
replaced by the NAICS in 1997, but several data sets are still
available with SIC-based data. Both SIC and NAICS classify
establishments by their primary type of activity. NAICS is the
standard used by Federal statistical agencies in classifying
business establishments for the purpose of collecting,
analyzing, and publishing statistical data related to the U.S.
business economy.
NAICS was developed under the auspices of the Office of
Management and Budget (OMB). It was developed jointly by the
U.S. Economic Classification Policy Committee (ECPC), Statistics
Canada, and Mexico's Instituto Nacional de Estadistica y
Geografia, to allow for a high level of comparability in
business statistics among the North American countries.
This measure also expands reporting requirements placed on the
CPCFA. The CPCFA already is required to report to the Governor
and Legislature annually regarding CalCAP but this measure
provides more detailed information that needs to be required in
the report.
As noted below, this measure has similarities to AB 981 which is
sponsored by the California State Treasurer. Both these
measures stem from the federal Small Business Jobs Act. The
committee believes it is imperative that legislation enacted
compliments the federal act and provides California the ability
to obtain and use the federal and state funds efficiently.
The California Association for Local Economic Development would
like to see the financial institution definition expanded even
further by including local revolving fund organizations. This
measure is double-referred to the JEDE committee where they will
consider this amendment.
RELATED LEGISLATION
AB 901
Page 5
AB 981 (Hueso) (2011 Legislative Session) Makes various changes
to the California Capitol Access Loan Program with the intention
of making it easier to implement the Federal Small Business Jobs
Act. To be heard in Assembly Banking and Finance Committee on
April 25, 2010.
PREVIOUS LEGISLATION
AB 1632 (Blumenfield) (Chapter 731, Statutes of 2010)
transferred $32.4 million from the General Fund to support four
small-business and jobs programs that exist in current law.
More importantly, this bill appropriated $6 million to triple
the size of CalCAP and provide statutory flexibility to access
federal funding in the Small Business Jobs Act. According to
the State Treasurer's office, who administers this program, this
appropriation potentially leverages over $135 million in loans,
serving 1,000 businesses and creating or retailing 3, 200 jobs.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association for Local Economic Development (CALED)
CDC Small Business Finance (CDCSBF)
Opposition
None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081