BILL ANALYSIS Ó
AB 2012
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CONCURRENCE IN SENATE AMENDMENTS
AB 2012 (John A. Pérez)
As Amended August 24, 2012
2/3 vote. Urgency
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|ASSEMBLY: |72-0 |(May 3, 2012 ) |SENATE: |31-3 |(August 29, |
| | | | | |2012) |
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Original Committee Reference: J.E.D.&E.
SUMMARY : Transfers the authority for administering the
International Trade and Investment Program (ITI Program) from
the Business, Transportation and Housing Agency (BTH) to the
Governor's Office of Business and Economic Development (GO-Biz).
The bill also makes a number of key programmatic changes. In
addition, the bill transfers the administrative responsibility
for establishing an Internet-based permit assistance center from
the Secretary of the California Environmental Protection Agency
(CalEPA) to GO-Biz.
The Senate amendments:
1)Reset the clock for the development of the strategy to
implement the ITI Program from February 2013 to February 2014
and make key changes to the development process and content of
the international trade and investment strategy (ITI Strategy)
including, but not limited to:
a) Modifying the purpose of the ITI Strategy from serving
as an overall framework for all state activities related to
international trade and investment to more narrowly serving
as a strategy for GO-Biz activities. As a more limited
document in scope, the bill also proposes to increase the
level of specificity by which those activities are detailed
by requiring the inclusion of a business plan and strategy
for foreign trade offices;
b) Removing the requirement that the ITI Strategy be
developed in consultation with, and provide guidance to,
other state entities that have statutory responsibilities
related to workforce development, infrastructure, small
business development, and international trade and
investment;
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c) Removing the specific requirement that the ITI Strategy
be based on current and emerging market conditions, the
needs of investors and workers to be competitive in global
markets, and that trade office activities related to
opening markets to California exports be targeted to small
and medium size businesses;
d) Removing the requirement that the state convene a
statewide business partnership for international trade and
investment to, among other duties, provide advice on the
ITI Strategy; and
e) Removing the requirement that at least one legislative
hearing be held for the purpose of providing comments and
guidance on the ITI and trade office strategies.
2)Authorize the Director of GO-Biz to establish and terminate
international trade and investment offices (foreign offices)
in any location outside the U.S., if:
a) The Director determines that the country where the
foreign office would be located is among those that have
the greatest potential for direct foreign investment in
California, export growth or both; and,
b) The Director includes the foreign office within its
current annual program budget and strategy and business
plan for the year, as specified.
3)Remove, as a consequence of the new trade office authority
granted in 2) above, a number of pre-conditions to the
establishment of a foreign trade office including, but not
limited to:
a) Prior approval of the Legislature through the statutory
authorization of the foreign trade office;
b) Hiring of a senior level trade office manager with
experience in management of public agencies or experience
in international trade, investments, or global businesses.
4)Require the Director of GO-Biz to prepare a budget for the ITI
Program, which includes a strategy and business plan with
measurable goals, objectives, outcomes and timelines; an
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annual assessment of how the ITI Program met its performance
standards in the prior year; a description of how the trade
offices will be funded and staffed; and a description of the
monitoring and oversight procedures used in implementing the
ITI Program. In revising the ITI Program's operations, the
bill encapsulates a majority of the existing requirements.
There are, however, several specific oversight requirements
which are removed including, but not limited to:
a) Having the Secretary of BTH annually report to the
fiscal committees of the Legislature on how the Governor's
proposed budget implements the ITI Strategy;
b) Having the Secretary of BTH annually determine whether
there are sufficient moneys to appropriately oversee trade
offices outside of the U.S. and to notify the Joint
Legislative Budget Committee if there is not;
c) Selecting the locations of foreign trade offices based
on a single set of objective criteria, which is outlined in
the trade office strategy;
d) Having an independent review of each foreign office
following its second full year of operation; and,
e) Prohibiting the State Controller from allocating state
funds for international trade and investment activities if
the ITI strategy is not updated every five years or notice
has failed to be provided that there are insufficient funds
available to appropriately oversee offices outside the U.S.
5)Recast current law relative to acceptance of private sector
moneys for the purposes of promoting foreign trade offices and
international trade and investment events as follows:
a) Authorizes a foreign trade office to be funded in whole
or in part from nonstate funds. Existing law requires that
the state pay all administrative and oversight costs for
the operation of foreign trade offices and some portion of
the costs for each office, not to exceed $100,000. This
existing requirement triggers legislative approval through
the budget process.
b) Authorizes GO-Biz to contract with a nonprofit entity to
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operate a foreign trade office, which could include having
the nonprofit entity soliciting donations on behalf of the
state for the cost of operations. All donations are
required to be disclosed, as specified. Existing law does
not currently provide specific authority for GO-Biz to
contract for services.
c) Authorizes GO-Biz to accept donations from nonstate
sources including federal and private sectors funds for the
purpose of operating the foreign trade offices. The bill
prohibits a donor from donating more than 25% of the annual
budget of a foreign trade office in any calendar year,
including trade offices operated under contract with a
nonprofit entity. Donations to promote a trade event are
also allowed, but have no limitation on the amount.
Existing law prohibits donations in excess of $10,000 per
quarter per donor for promoting either trade related
foreign offices or events.
d) Requires that GO-Biz post specified information on the
source of each trade related donation on its Internet Web
site within 30 days of receiving the donation, as
specified.
6)Make other technical and conforming changes.
7)Add an urgency clause.
EXISTING LAW :
1)Establishes GO-Biz within the Governor's Office for the
purpose of serving as the lead state entity for economic
strategy and marketing of California on issues relating to
business development, private sector investment and economic
growth. GO-Biz also serves as the administrative oversight
for the California Business Investment Service and the Office
of the Small Business Advocate.
2)Establishes BTH for the purpose, among other things, of
overseeing and coordinating the activities of various
government entities and programs with responsibility for
maintaining the strength and efficiency of California's
infrastructure and financial markets. BTH is specifically
designated as the state lead agency in issues of international
trade, excluding agriculture. A recent reorganization plan,
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GRP 2, eliminates BTH on July 1, 2013. A number of the
economic development programs were transferred to GO-Biz as
part of GRP 2 including the California Infrastructure and
Economic Development Bank (I-Bank).
3)Requires the Secretary of CalEPA to establish an electronic
online permit assistance center for businesses. The center,
also known as CALGOLD, is required to have "hyperlinks" and
other online resources and tools that could be used by a
business to streamline and expedite compliance with specified
environmental laws and regulations.
AS PASSED BY THE ASSEMBLY, this bill transferred the authority
for undertaking international trade and foreign investment
activities from BTH to GO-Biz. While the measure passed without
changes to the ITI Program, it was anticipated that
modifications would be included as Senate amendments. In
addition, the bill transferred the responsibility for
establishing an Internet-based permit assistance center from the
CalEPA Secretary to GO-Biz.
FISCAL EFFECT : According to the Senate Committee on
Appropriations, implementation of this bill would result in
$100,000 to $200,000 in 2012-13 and 2013-14 to the General Fund
for workload and contracts to update the trade and investment
studies. An estimated $250,000 to $1 million from private funds
would be required annually depending on the location of the
trade office.
COMMENTS : In February 2010, the Little Hoover Commission (LHC)
undertook a review of the state's economic and workforce
development programs. In its final report, Making up for Lost
Ground: Creating a Governor's Office of Economic Development,
it analyzed the status and effectiveness of current programs
since the 2003 demise of the Technology, Trade and Commerce
Agency (TTCA) and recommended the creation of a new governmental
entity to fill the void left by the dismantled agency.
The report called for a single entity that would promote greater
economic development, foster job creation, serve as a policy
advisor and deliver specific services (i.e., permitting, tax,
regulatory, and other information) directly to the California
business community. In April 2010, Governor Schwarzenegger
issued Executive Order S-05-10 as a means to operationalize the
report and several legislative proposals were also introduced to
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codify LHC recommendations. This bill is a continuation of
these 2010 legislative efforts by Mr. Speaker to create a
permanent single-point-of-contact for business and economic
development activities within state government.
Reorganization and the expansion of GO-Biz: Effective July 3,
2012, the Governor's Reorganization Plan, GRP 2, dismantled BTH
and transferred programs to other existing and new government
entities. GO-Biz is now the umbrella administrative structure
for the I-Bank, the Small Business Loan Guarantee Program, the
California Travel and Tourism Commission, and The California
Film Commission.
Although GRP 2 was quite expansive, it did not address which
government entity would inherit BTH's role as the state's lead
entity for trade and foreign investment. This bill makes the
statutory changes to implement this transfer. Funding and
staffing authority for GO-Biz trade activities was outlined in a
Budget Change Proposal and approved as part of the Budget Act of
2012.
Background on California's foreign trade offices: As noted
above, the TTCA was dissolved as part of the 2003-04 Budget Act
with a majority of the former agency's programs abandoned. Five
foreign trade programs, and all 12 of California's foreign trade
and investment offices were eliminated, due in part, to
long-standing concerns regarding the efficacy and operation of
these offices. Five of these offices operated under contract
(Argentina; Shanghai, China; Singapore; South Korea; and Israel)
and seven were operated by California state employees (Mexico;
Hong Kong, China; Japan; United Kingdom; Germany; Taiwan; and
South Africa). One privately funded foreign trade office
(Yerevan, Republic of Armenia) remained in operation following
the elimination of the TTCA pursuant to SB 1657 (Scott), Chapter
863, Statutes of 2002. Ultimately, the authority for this
privately funded office was not renewed following a very poor
performance review by TTCA in 2006.
Documentation, as early as a 1987 LHC report, called into
question the administration, configuration, accountability, and
purpose of the international trade programs. These criticisms
were echoed in academic studies, state audit reports, and the
Legislative Analyst's Office budget analyses. A 1999 California
Research Bureau report stated that "a historical review suggests
that most trade offices have been established based on a varying
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mix of quantitative and qualitative factors related to political
issues and constituency requests, rather than being guided by a
comprehensive state trade policy."
In reauthorizing foreign trade offices in 2006, a number of
pre-conditions and operating requirements were established
pursuant to SB 1513 (Romero), Chapter 663, Statutes of 2006.
These requirements include, but are not limited to, the
following:
1)A specific strategy and business plan must be provided to the
Legislature that outlines how the offices will operate
including how they will be financed, managed and monitored.
2)The Legislature is required to provide statutory authority.
3)A qualified manager to oversee foreign offices must in place
before any can open.
4)An independent review of the effectiveness of the foreign
trade office must be conducted based on specific performance
measures.
California does not currently operate any foreign trade offices.
Earlier in 2012, Governor Jerry Brown committed to opening a
foreign trade office in China. This bill facilitates the
process for opening offices by removing some of the more
specific statutory requirements that may have delayed or
otherwise inhibited the process.
Background on California Trade and Foreign Investment:
International trade is a very important component of
California's $1.9 trillion economy. If California were a
country, it would be the 11th largest exporter in the world.
California's land, sea, and air ports of entry serve as key
international commercial gateways for products entering the
country.
California exported $159 billion in goods in 2011 (up from $143
billion in 2010), ranking only second to Texas with $163 billion
in export goods. The state's largest export markets include
Mexico ($26 billion), Canada ($17.1billion), China ($14.1
billion), Japan ($13 billion), and South Korea ($8.4 billion.)
Computers and electronic products were California's top exports
in 2011. California was also the leading state for foreign
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direct investment (FDI) in North America, attracting 229
projects (12%) of FDI projects in 2011.
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
FN: 0005745