BILL ANALYSIS �
AJR 37
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Date of Hearing: March 18, 2014
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AJR 37 (Muratsuchi) - As Introduced: February 19, 2014
SUBJECT : Export-Import Bank of the United States
SUMMARY : Memorializes the Legislature's desire for the U.S. Congress
to support legislation reauthorizing the Export-Import Bank of the
United States (Ex-Im Bank). Specifically, this resolution :
1)Makes findings and declarations that, among other things, state:
a) The Ex-Im Bank is the official export credit agency of the
U.S. and exists for the purposes of financing and insuring
foreign purchases of U.S. goods for customers unable or unwilling
to accept the credit risk;
b) The Ex-Im Bank has supported more than $400 billion in U.S.
exports in the past 70 years and helps to cover critical trade
finance gaps by providing loan guarantees, export credit
insurance, and direct loans for U.S. exports in developing
markets where commercial bank financing is unavailable or
insufficient. In Fiscal Year 2012, Ex-Im financing of U.S.
exports exceeded $35 billion, assisting more than 3,400 U.S.
companies and supporting approximately 255,000 export-related
American jobs;
c) The Ex-Im Bank is a self-sustaining agency, which operates at
no cost to the taxpayer and, between the 2008-09 to 2011-12
fiscal years, inclusive, the Ex-Im Bank has generated $1.6
billion in excess revenue for U.S. taxpayers; and
d) Exports are particularly important to the California economy
as California is currently ranked second in exports among all
states. If California's manufacturing base is to grow, we must
continue to expand our ability to export goods from California
facilities. Given the key role the Ex-Im Bank plays in
facilitating export sales, failure to reauthorize it would be
devastating to existing industry and to those that we hope to
create in the future.
2)Resolves that the California Legislature desires the U.S. Congress
to support the reauthorizing of the Ex-Im Bank.
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3)Directs the Chief Clerk to transmit copies of this resolution to the
President and Vice President of the U.S., to the Speaker of the U.S.
House of Representatives, to the Majority Leader of the U.S. Senate,
and to each Senator and Representative from California in the
Congress of the United States.
EXISTING FEDERAL LAW establishes the Ex-Im Bank for the purpose of
financing and insuring foreign purchases of U.S. goods and services to
international markets.
FISCAL EFFECT : None
COMMENTS :
1)Author's Purpose : According to the author, "The Export-Import Bank
is the official export credit agency of the United States that
exists for the purposes of financing and insuring foreign purchases
of United States goods for customers unable or unwilling to accept
credit risk. The Bank has supported more than $500 billion in U.S.
exports in the past eighty years and helps to cover critical trade
finance gaps by providing loan guarantees, export credit insurance,
and direct loans for U.S. exports in developing markets where
commercial bank financing is unavailable or insufficient. It should
be noted that the Export-Import Bank has maintained a very low
default rate of less than 2%. The Bank is currently up for
reauthorization in the U.S. Congress. Given the key role the Bank
plays in facilitating export sales, failure to reauthorize it could
be devastating to a number of industries. This resolution would urge
Congress to reauthorize the Export-Import Bank when it comes up for
consideration this year."
2)Framing the Policy Issue : This resolution seeks state legislative
support for federal advocacy to support the reauthorization of the
Ex-Im Bank. With California businesses being one of the largest
users of Ex-Im Bank programs and the state being one of the hardest
hit in the recession, California's opinion on reauthorization has
particular merit in the national debate.
In deliberating the appropriateness of this resolution, Members may
wish to consider the importance of trade within the California
economy, the continuing need for programs to assist businesses in
accessing capital and new markets, and the ability of the federal
government to operate the Ex-Im Bank without ongoing costs to the
public. Each of these issues is discussed in greater detail below.
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3)Background on the Bank : The Ex-Im Bank is an independent federal
agency that provides a variety of financial and insurance products
that are designed to fill gaps in private export financing. Last
authorized in 2012, the Ex-Im Bank needs to be reauthorized by
September 30, 2014. The Ex-Im Bank operates at no cost to American
taxpayers and, in 2013, the Ex-Im Bank generated more than $1
billion in revenues above the actual amount necessary to operate its
programs and maintain prudent loss reserves.
In the federal fiscal year (FFY) 2013, the Ex-Im Bank approved more
than $27 billion in financial authorizations, which supported an
estimated $37.4 billion in export sales and approximately 205,000
U.S. jobs. Since 2009, the Ex-Im Bank has supported nearly 2.1
million private sector jobs.
Of the total transactions in 2013, approximately 89% (3,413) of the
financial transactions were with small business for a total of $6
billion. Of that $6 billion in small business transactions, $5.2
billion were for direct support of small businesses and $800 million
was attributed to small business inputs within the supply chain of
larger U.S. exporting companies. FFY 2013 was also a historically
high year for women and minority-owned firms, with the Ex-Im Bank
completing 761 transactions for a total of $815.5 million. This
represents one in five businesses assisted in FFY 2013 were a woman-
or minority-owned business.
Between 2012 and 2014, $91billion in financial authorizations went
to 530 California exporters, which supported $10 billion in sales.
Of those exporters, 412 were small businesses, 67 were
minority-owned businesses, and 41 were women-owned businesses. The
three top export destinations for California products were Mexico,
Singapore, and Germany. More businesses in California use the
Ex-Im Bank than from any other state except Texas, 530 vs. 661.
However, of those businesses, California has a significantly higher
number of small businesses, 412 vs. 366.
Other accomplishments in the past several years include an enhanced
risk management approach which materially reduced defaults since the
financial crisis. The default rate for the final quarter of 2013
was 0.267%. Fred Hochberg, the Chair and President of the Ex-Im
Bank attributes the low default rate to the Bank's continued prudent
oversight and due diligence standards. Key changes identified in
Congressional testimony include modernizing the Bank's credit
monitoring techniques, creating a special assets unit to address
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emerging credit issues; improving underwriting, and enhancing credit
loss modeling with qualitative factors. In preparation for
reauthorization, the Ex-Im Bank has met all its reporting
requirements including the preparation of a current business plan,
publication of a small business report, and submittal of quarterly
default reports.
*Information for this comment came from a variety of sources
including, but not limited to, written testimony before the U.S.
Senate Committee on Banking, Housing, and Urban Affairs (January 28,
2014), and the Ex-Im Bank website.
4)California's Trade-Based Economy : International trade and foreign
investment serve as critical components of California's $2.0
trillion economy. If California were a country, it would be the
17th largest exporter and the 14th largest importer in the world.
Merchandise exports from California ($168 billion) accounted for
over 10.6% of total U.S. exports in goods, shipping to over 220
foreign destinations in 2013.
California's land, sea, and air ports of entry served as key
international commercial gateways for the $538 billion in products
entering and exiting the U.S. in 2012. Statewide, 4.4 million
California jobs are dependent on foreign trade. Over 562,700
California workers benefit from jobs with foreign-owned firms, which
accounts for 5.1% of all private sector jobs in the state.
The importance of trade to the California economy is increasing as a
percentage of California jobs tied to trade more than doubled from
1992 to 2011, 10.6% v. 22.0%. Most recently, the value of
trade-related work, as a component of the broader economy was the
subject of a study by the Brookings Institute and JP Morgan Chase,
Export Nation 2013. The report found that between 2003 to 2012
exports drove post-recession growth in the 100 largest metro areas
including Los Angeles, San Diego, and the Inland Empire. The study
is unique in that it collects data by origin or production rather
than origin of export movement, as is the case with the U.S.
Department of Commerce export data.
Using the Export Nation methodology, total California exports for
goods and services in 2012 was $252 billion, as compared to the U.S.
Census Bureau's 2012 number of $162 billion for goods only, as
measured by origin of movement. In 2012, exports represented 8.8%
of California GDP, based on the Export Nation methodology. The top
five metro areas in California include: (1) Los Angeles (37.1%);
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(2) San Francisco (15%); (3) San Jose (13.7%); (4) San Diego
(11.5%), and (5) the Inland Empire (9.2%). Chart 1 includes more
specific data on selected California exports of goods and services,
as expressed in 2012 dollars (adjusted for inflation) and based on
the Export Nation methodology.
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| Chart 1 - Southern California Largest Metro Areas |
| Exports (2007-2012)(in millions, adjusted for inflation) |
-----------------------------------------------------------------
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
| Metropolitan| 2003 Exports | 2012 Exports | Export Share | Export in | Export in | Annualized |
| | (millions) | (millions) | of GDP | Goods 2012 |Services 2012 | 2009-2012 |
| Statistical | | | | | | Growth in |
| Area | | | | | |Manufacturing |
| | | | | | |(Post-Recessio|
| | | | | | | n) |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|El Centro, CA | 432.7954 | 586.8708 | 9.3% | 456.5946 | 130.2762 | 8.9% |
|Metropolitan | | | | | | |
|Statistical | | | | | | |
|Area | | | | | | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|Los | 62850.51 | 93871.65 | 12.0% | 56462.39 | 37409.26 | 4.0% |
|Angeles-Long | | | | | | |
|Beach-Santa | | | | | | |
|Ana, CA | | | | | | |
|Metropolitan | | | | | | |
|Statistical | | | | | | |
|Area | | | | | | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|Oxnard-Thousan| 3997.99 | 6462.674 | 15.2% | 4822.016 | 1640.658 | 3.8% |
|d | | | | | | |
|Oaks-Ventura, | | | | | | |
|CA | | | | | | |
|Metropolitan | | | | | | |
|Statistical | | | | | | |
|Area | | | | | | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|Riverside-San | 7999.825 | 13128.07 | 9.2% | 8407.373 | 4720.697 | 5.9% |
|Bernardino-Ont| | | | | | |
|ario, CA | | | | | | |
|Metropolitan | | | | | | |
|Statistical | | | | | | |
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|Area | | | | | | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|San | 11996.96 | 21613.47 | 11.5% | 13702.52 | 7910.954 | 7.2% |
|Diego-Carlsbad| | | | | | |
|-San Marcos, | | | | | | |
|CA | | | | | | |
|Metropolitan | | | | | | |
|Statistical | | | | | | |
|Area | | | | | | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|San | 15417.44 | 38046.75 | 12.5% | 23306.12 | 14740.64 | -0.7% |
|Francisco-Oakl| | | | | | |
|and-Fremont, | | | | | | |
|CA | | | | | | |
|Metropolitan | | | | | | |
|Statistical | | | | | | |
|Area | | | | | | |
|--------------+--------------+--------------+--------------+--------------+--------------+--------------|
|San | 21384.90 | 34641.22 | 23.8% | 26418.39 | 8222.831 | 10.9% |
|Jose-Sunnyvale| | | | | | |
|-Santa Clara, | | | | | | |
|CA | | | | | | |
|Metropolitan | | | | | | |
|Statistical | | | | | | |
|Area | | | | | | |
--------------------------------------------------------------------------------------------------------
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| Source: Export Nation 2013, Global Cities Initiative, a joint |
|project of Brookings Institute and JP Morgan Chase |
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Trade and foreign investment support new job creation, bring new
technologies and skills to California workers, generate local and
state revenues, and generally strengthen the state's economic base.
In the future, California's economy will become increasingly reliant
on accessing foreign markets where a majority of global economic
growth is expected to occur.
5)Related Legislation : Below is a list of legislation from the
current and prior legislative sessions.
a) AB 29 (John A. P�rez, Feuer and V. Manuel P�rez) Governor's
Office of Business and Economic Development: This bill
establishes the Governor's Office of Business and Economic
Development for the purpose of serving as the lead entity for
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economic strategy and marketing of California on issues relating
to business development, private sector investment and economic
growth. Status: Singed by the Governor, Chapter 475, Statutes
of 2011.
b) AB 311 (V. Manuel P�rez) Bi-National Infrastructure and
Economic Development Bank: This bill would have expanded the
role of the I-Bank to include facilitating infrastructure and
economic development financing activities within the California
and Mexico border region. Status: Held in the Assembly
Committee on Appropriations, 2013.
c) AB 690 (Campos and Medina) Office of California and Mexico
Affairs: This bill repeals and recasts statutory provisions
within the Government Code relating to California and Mexico
relations including adding the Director of the Governor's Office
of Business and Economic Development to the membership of the
California-Mexico Border Relations Council and designating him or
her as Chair. Status: Pending in the Senate Committee on
Business, Professions, and Economic Development.
d) AB 886 (Allen) Export and Import Credit: This bill would have
established a capped and allocated tax credit for importers and
exporters that increase cargo through California air and sea
ports, hire additional staff, or incur capital costs at a
California cargo facility. Status: Held in the Assembly
Committee on Appropriations, 2013.
e) AB 1247 (Medina and Bocanegra) Small Business Finance Center:
This bill establishes the Small Business Finance Center within
the California Infrastructure and Economic Development Bank for
the purpose of establishing a one-stop-shop for small businesses
interested in utilizing state loan and credit program including
export finance guarantees. Status: Signed by the Governor,
Chapter 537, Statutes of 2013.
f) AB 1399 (Medina and V. Manuel P�rez) New Markets Tax Credits:
This bill creates a $200 million state New Markets Tax Credit
Program for the purpose of stimulating economic development and
hasten California's economic recovery, generally paralleling the
federal New Markets Tax Credit. Tax expenditure authority for
this measure is provided through the reallocation of previously
authorized expenditures from the California State Sales and Use
Tax Exclusion Program. Status: Pending in the Senate Committee
on Governance and Finance.
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g) AB 1400 (Assembly Committee on Jobs, Economic Development, and
the Economy) Export Document Certificates: This bill modifies
the state's Export Document Program to accept requests
electronically, expedite approval of existing labels, and extend
the term of the export labels from 180 days to 365 days, in order
to alleviate backlog of exports of food, drug, and medical
devices. Status: Signed by the Governor, Chapter 539, Statues
of 2013.
h) AB 2012 (John A. P�rez) Economic Development Reorganization:
This bill transferred the authority for undertaking international
trade and foreign investment activities from the Business,
Transportation and Housing Agency to GO-Biz. In addition, the
bill transfers the responsibility for establishing an
Internet-based permit assistance center from the Secretary of the
California Environmental Protection Agency to GO-Biz. Status:
Signed by the Governor, Chapter 294, Statutes of 2012.
REGISTERED SUPPORT / OPPOSITION :
Support
California Manufacturers & Technology Association
Orange County Business Council
California Chamber of Commerce
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090