BILL ANALYSIS Ó
AB 901
Page 1
ASSEMBLY THIRD READING
AB 901 (V. Manuel Pérez)
As Amended May 27, 2011
Majority vote
BANKING & FINANCE 12-0 ECONOMIC DEVELOPMENT 6-0
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|Ayes:|Eng, Achadjian, Charles |Ayes:|V. Manuel Pérez, Grove, |
| |Calderon, Fletcher, | |Beall, Block, Hueso, |
| |Fuentes, Skinner, Harkey, | |Morrell |
| |Roger Hernández, Lara, | | |
| |Morrell, Perea, Torres | | |
| | | | |
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APPROPRIATIONS 17-0
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|Ayes:|Fuentes, Harkey, | | |
| |Blumenfield, Bradford, | | |
| |Charles Calderon, Campos, | | |
| |Davis, Donnelly, Gatto, | | |
| |Hall, Hill, Lara, | | |
| |Mitchell, Nielsen, Norby, | | |
| |Solorio, Wagner | | |
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SUMMARY : Expands the definition of financial institutions eligible
to participate in the California Capital Access Program (CalCAP) and
increases CalCAP reporting requirements. Specifically, this bill :
1)Adds, to the definition of financial institutionx, 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 the North American Industry Classification System, in
addition, report 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:
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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 September 27, 2010, which creates the Small Business Lending 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 businesses 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% (Health and Safety Code Section 44559.1).
3)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
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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 Financial Code Section 22009, making
commercial loans, as defined in Financial Code Section 22502
(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 Section 44559.6).
5)Establishes the California Small Business Financial Development
Corporation Law (Corporations Code Sections 14000-14091).
FISCAL EFFECT : According to the Assembly Appropriations Committee,
minor and absorbable costs to the CPCFA.
COMMENTS : This bill is one of seven measures sponsored by the
Assembly Jobs, Economic Development and the Economy (JEDE)
Committee. AB 901(V. Manuel Pérez) expands the definition of
financial institutions to include a small business financial
development corporation or microenterprise development organization
that meets the standard established by the CPCFA.
This bill will give small business financial development
corporations and microenterprise development organizations access to
the $6 million allocated in AB 1632 (Assembly Budget Committee),
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 five 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
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$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 U.S. are microenterprises. 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 Corporations Code
Section 14002 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 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).
This bill 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 bill also expands reporting requirements placed on the CPCFA.
The CPCFA is already required to report to the Governor and
Legislature annually regarding CalCAP but this bill provides more
detailed information that needs to be required in the report.
Related legislation . AB 981 (Hueso) of 2011 would make various
changes to the California Capitol Access Loan Program with the
intention of making it easier to implement the Federal Small
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Business Jobs Act.
Previous legislation . AB 1632 (Blumenfield), Chapter 731, Statutes
of 2010, transfers $32.4 million from the General Fund to support
four small-business and jobs programs that exist in current law.
More importantly, AB 1632 appropriates $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.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081
FN: 0000853