BILL ANALYSIS �
AB 1460
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Date of Hearing: April 17, 2012
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel P�rez, Chair
AB 1460 (Huber) - As Introduced: January 9, 2012
SUBJECT : California Commission on Industrial Innovation
SUMMARY : Repeals the implementing codes for the California
Commission on Industrial Innovation (Commission) and deletes one
cross reference to the Commission in a separate code.
EXISTING LAW:
1)Establishes the Commission within the Office of the Governor
for purposes of encouraging industrial innovation and
developing policies that maintain California's leadership in
the national economy.
2)Establishes that the Commission shall consist of 25 members,
including five from the public sector, six from labor, and ten
from industries characterized by industrial innovation.
3)Establishes that, for purposes of defining the scope of the
Commission, industrial innovation refers to technology-based
companies that devote at least 5% of sales to research and
development and at least 15% of sales to depreciable
investments. Companies captured within this definition
include, but are not limited to, those making electronic
components, computers, peripherals, instruments, communication
equipment, robotics, biotechnology, photovoltaic, and
aerospace equipment.
4)Requires the Commission to convene representatives of
business, labor, academia and government for purposes of
assessing problems inhibiting, and latent opportunities for,
industrial innovation throughout the state including:
a) Assessing and evaluating programs which improve
productivity while maintaining regard for worker
involvement and satisfaction;
b) Identifying means by which industry and universities can
cooperate on research and development projects and in the
establishment and or expansion of cooperative research and
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development institutes;
c) Identifying models for financing industrial innovation;
d) Identifying management techniques necessary for
successful industrial innovation;
e) Examining and evaluating the effectiveness of any state
programs assisting or hindering industrial innovation; and
f) Identifying shortcomings in the transportation, sewer,
water, energy, and waste disposal systems which inhibit
existing or future industrially innovative firms.
1)Establishes the Governor's Office of Business and Economic
Development, also known as "GO-Biz," to serve as the lead
entity for economic strategy and the marketing of California
on issues relating to business development, private sector
investment, and economic growth. In this capacity, the office
may recommend to the Governor and Legislature policies and
actions to advance statewide economic goals and respond to
emerging economic problems and opportunities; coordinate
efforts to ensure federal grants administered or directly
expended by the state advance statewide economic goals and
objectives; market the business and investment opportunities
available in California with both other states and
internationally; encourage collaboration among research
institutions, startup companies, local governments, venture
capitalist and economic development agencies to promote
innovation; conduct research on how the state can remain on
the leading edge of innovation and emerging sectors; and
support small businesses by providing information about
accessing capital, complying with regulations, and supporting
state initiatives that support small business.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's purpose : According to the author: "The California
Commission on Industrial Innovation (Commission) was created
by Executive Order in 1981 (B-91-81) and made permanent in
statute in 1982. The Commission was envisioned to recommend
effective and aggressive strategies for expanding the state's
economy and employment rate. This Commission no longer exists
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and its proposed activities are supported by other divisions
of government, including the Governor's Office of Economic
Development."
2)Related state and federal programs : According to the Education
Commission of the States, the increasingly globalized economy
has put pressure on the U.S. to increase the skills of its
citizens in the science, technology, engineering and
mathematics (STEM) subjects, areas key to success in a
high-tech world. Below are a number of examples of state
initiatives:
a) Seven states - Arizona, Arkansas, Connecticut,
Minnesota, Missouri, Rhode Island and West Virginia - have
convened councils, commissions or roundtables to provide
recommendations and guidance on how STEM education can be
improved in the state.
b) Five states - Florida, Illinois, Massachusetts, Virginia
and West Virginia - have created specialized grant programs
to be utilized to improve STEM education in the state.
These funds employ a variety of strategies for improving
STEM achievement.
c) Five states - Indiana, Massachusetts, Minnesota, Ohio
and Texas - intend to improve the skills of teachers in
STEM subjects through their initiatives.
d) Two states - Minnesota and Ohio - include opportunities
for students to earn college credit while in high school.
1)Overview of the national and California economy :
Post-recession analysis traditionally divides the economic
cycle into two stages: recovery and expansion. Recovery
describes the period of GDP growth occurring after the economy
hits bottom, or the "trough," and gives way to expansion when
GDP growth surpasses its previous peak. Given this
definition, the national economy entered the expansion phase
of the economic cycle during the third quarter of 2011, when
annualized GDP reached $13.38 trillion, surpassing the
previous GDP peak of $13.36 trillion in the fourth quarter of
2007.
At a more practical level, the U.S. economy added an average
152,000 jobs a month in 2011. In December 2011 and January
2012, however, the economy added 203,000 and 243,000 net new
jobs respectively, pushing national unemployment down to 8.3%.
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At the state level, the California economy has also been
improving at a steady pace. Between 2010 and 2011,
unemployment fell from a high of 12.4% to 11.8% in 2011. In
January 2012 the unemployment rate fell even further to 10.9%,
its lowest rate in three years. In terms of nonfarm jobs
gains from 2010 to 2011, the state outperformed the national
labor market with 1.4% growth compared to 1.2% nationally. In
fact, the state registered job growth across most industries
with the largest percentage gains coming from Information,
Education, and Administrative Support Services. Only Real
Estate and Leasing, Government, Management of Enterprises and
Other Services, saw continued job losses in 2011 but on a
smaller scale than previous years.
In terms of international trade, the state continued to see
sustained growth with the value of two-way trade increasing
11.9% from 2010 (based on year-to date data from January
through November 2011). The rate was slower than the increase
registered in 2010 when the value of two-way trade surged
21.6% over 2009. In 2011, however, the value of imports grew
by 11% while the value of exports through the state's custom
districts rose by 13.8%. It should be noted that while
exports only account for a third of the value of two-way
trade, they suffered a smaller decline through the recession
and have come back more strongly than imports as demand from
Asian trading partners continues to be strong.
According to the March 2012 UCLA Anderson Forecast, state
unemployment should improve to an average of 9.8% in 2013.
Overall the Forecast calls for a steady decrease in the
California unemployment rate over the next two years,
following a slow trajectory towards single-digit unemployment
by the end of 2013 and reaching 7.7 percent by the end of
2014.
In addition, according to Chapman University's A. Gary
Anderson Center for Economic Research, the California
Composite Index, a measure of overall manufacturing activity,
increased to 60.3 in the second quarter of 2012, up from 56.6
during the first quarter. Historically, readings above 50
indicate expansion in the manufacturing sector. This is
significant because, according to an analysis by the Milken
Institute, for every job created in manufacturing, 2.5 jobs
are created in other sectors. At the upper bound, electronic
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computer manufacturing has a multiplier effect of 16 jobs.
2)Industrial economy : California leads the nation in high-tech
industry metrics including employment, wages, payroll and
establishments. On average, tech-workers in California earn
$110,600, 119% higher than the state's average private sector
wage. Overall, high tech businesses had a combined payroll of
$102.9 billion in California, employing 931,000 high tech
workers in 2010, or 78 of every 1000 private sector workers in
2010. A total of 42,000 high-tech establishments were located
in California, highest among any state in 2010.
At a more granular level, in 2010 the state ranked:
a) 1st in computer systems design and related services
employment with 197,800 jobs
b) 1st in internet and telecommunications services
employment with 149,300 jobs
c) 1st in R&D and testing labs employment with 134,700
jobs
d) 1st in engineering services employment with 101,500
jobs
Moreover, throughout the recession, California's economy has
largely been bolstered by the Bay Area, where the region's
high-end manufacturing, information services and high-tech
sector has consistently shown expansion and job gains. In
fact, in February the region added 15,400 jobs and had an
unemployment rate of 8.6%, considerably lower than the
statewide average of 10.9% during the same period.
Given that California is increasingly relying on the job gains
and revenue generating potential of high-tech companies like
Facebook, whose Initial Public Offering is expected to
generate up to $2.5 billion for state coffers, the Committee
may want to consider if repurposing the Commission to help
guide GO-Biz activities is a better alternative to outright
elimination.
While currently GO-Biz is responsible for advising the
Governor on economic development activities, there is no
specific place where high tech business leaders can convene
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and make recommendations to the state.
1)Related legislation: Below is a list of related legislation.
a) AB 2860 (Lieu) Manufacturing Competitiveness : This bill
would have renamed the California Commission on Industrial
Innovation the California Commission on Manufacturing and
repurposed it to focus on the state's manufacturing
competitiveness. Status: The bill was held in Senate
Government Organization, 2006.
b) AB 894 (V. Manuel P�rez) California Manufacturing
Competitiveness Act of 2011 : This bill would have
established a loan and loan guarantee program to enable the
state to draw down federal dollars to support the retooling
and expansion of manufacturing in California. Status: The
bill was vetoed by the Governor. The veto message reads as
follows: "The objectives of the bill are excellent.
However, the loan program it creates can be run by the
state's Infrastructure bank, which already has authority
and experience lending directly to businesses."
c) SB 550 (Padilla) Manufactured Optical Disc : This bill
authorizes law
enforcement officials to inspect commercial optical disc
manufacturing facilities to ensure compliance with existing
laws requiring certain identifying marks on each disc, and
increases the fines for individuals who violate provisions
regulating manufactured optical discs. Status: The bill
was signed by the Governor, Chapter 421, Statutes of 201l.
d) AB 699 (Portantino and V. Manuel P�rez) Update State
Economic Strategy : This bill would have updated the
requirements for the development of a State Economic
Development Strategy, especially in the areas of technology
and innovation, and requires it be submitted to the
Legislature by May 1, 2010. Status: The bill was held in
Assembly Appropriations Committee in 2009.
e) AB 2506 (V. Manuel P�rez) Innovation and Job Creation
Act : This bill authorizes a comprehensive set of
enhancements to tax incentive programs and administrative
procedures including a manufacturing sales tax exemption,
increased R&D credits and secondary education donation
credits for the purpose of creating jobs and supporting
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innovation-based businesses. Status: The bill is pending
in the Assembly Committee on Business, Professions and
Consumer Protection.
f) AB 2711 (Portantino, Arambula, Price and Salas) State
Technology and Innovation Strategy : This bill would have
required the Secretary of the Business, Transportation and
Housing Agency to develop a comprehensive state technology
and innovation strategy to guide future state expenditures
and activities. Status: The bill was held under
submission in the Assembly Committee on Appropriations in
2008.
g) AB 2860 (Lieu) Industrial Innovation Commission : This
bill would have renamed the California Commission on
Industrial Innovation (Commission) the California
Commission on Manufacturing Competitiveness and Innovation,
specified the Commission should avoid recommendations that
could diminish certain worker protections, and made
conforming changes to the enabling statute. Status: The
bill was held in the Senate Appropriations Committee in
2007.
REGISTERED SUPPORT / OPPOSITION :
Support
None Received
Opposition
None Received
Analysis Prepared by : Oracio Gonzalez / J., E.D. & E. / (916)
319-2090