BILL ANALYSIS �
AB 1675
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Date of Hearing: April 22, 2014
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AB 1675 (Ian Calderon) - As Introduced: February 12, 2014
SUBJECT : Entrepreneur-in-Residence Act of 2014
SUMMARY : Establishes the entrepreneur-in-residence program (EIR
Program) within the Governor's Office of Business and Economic
Development (GO-Biz) for the purpose of improving outreach and
strengthening coordination with the entrepreneur and small business
community. Specifically, this bill :
1)Establishes the EIR Program within GO-Biz, which includes the annual
appointment by the Director of GO-Biz of up to 10 entrepreneurs
within state agencies, departments, and commissions.
2)Specifies the purpose of the program is to provide better outreach
and strengthen the coordination and interaction between the state
and private sector on issues relevant to entrepreneurs and small
businesses. The program is also designed to make state programs
simpler, easier to access, more efficient, and more responsive to
the needs and concerns of small businesses and entrepreneurs.
3)Requires entrepreneurs selected for program participation to meet
one of the following criteria:
a) The individual shall have demonstrated success in his or her
field;
b) The individual shall have demonstrated success in working with
small business concerns and entrepreneurs; or
c) The individual shall have successfully developed, invented, or
created a product and brought the product to the marketplace.
4)Requires GO-Biz to appoint entrepreneurs to a variety of interested
agencies. However, to the extent practicable, no more than two
entrepreneurs can be appointed to serve in the same agency during
the same year. An entrepreneur is prohibited from serving more than
two years in the EIR Program.
5)Sets the following duties for an entrepreneur-in-residence:
a) Assist the agency in improving outreach to small business
concerns and entrepreneurs;
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b) Provide recommendations on inefficient or duplicative
programs;
c) Provide recommendations on methods to improve program
efficiency or establish new initiatives that may be instituted at
the agency.
d) Facilitate meetings and forums to educate small businesses and
entrepreneurs on programs or initiatives of the agency the
entrepreneur-in-residence is serving.
e) Facilitate in-service sessions with employees of the agency
the entrepreneur-in-residence is serving on issues of concern to
entrepreneurs and small businesses.
f) Provide technical assistance or mentorship to small businesses
and entrepreneurs in accessing programs at the agency the
entrepreneur-in-residence is serving.
6)Requires participants of the EIR Program to serve as volunteers and
dedicate at least 40 hours to the program, unless otherwise agreed
upon.
7)Authorizes, at the discretion of the participating agency, the
reimbursement of the actual and necessary expenses of the EIR
participant for discharging his or her duties.
8)Requires EIR Program participants to report directly to both the
Director of GO-Biz and the head of the participating agency.
9)Authorizes the Director of GO-Biz to establish an informal working
group of EIR participants to discuss best practices, experiences,
obstacles, opportunities, and recommendations.
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. Among other programs,
GO-Biz administers the Innovation Hub Program which designates
regional clusters of innovation-based industries.
2)Finds and declares that it is in the public interest to aid,
counsel, assist, and protect the interests of small business
concerns in order to maintain a healthy state economy.
3)Finds and declares that there has been an unprecedented growth in
the number of administrative regulations in recent years and that
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correcting the problems requires the direct involvement of the
Legislature, as well as that of the executive branch of state
government. Further, statute finds and declares that the complexity
and lack of clarity in many regulations put small businesses, which
do not have the resources to hire experts to assist them, at a
distinct disadvantage.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Purpose : According to the author, "AB 1675 will create the
Entrepreneur-in-Residence Act of 2014. The bill will require the
director of GO-Biz to appoint a maximum of 10 entrepreneurs each
year to serve as an entrepreneur-in-residence for the purpose of
encouraging interaction between small business and the state. These
entrepreneurs will have previously navigated the financial,
technical, and government challenges to launch a successful business
in California.
Entrepreneurs are responsible for thousands of jobs in our economy
and viewed as a key to the economic recovery of California. Still,
entrepreneurs face many obstacles such as access to capital and
access to markets but the biggest obstacle to success is often
government itself.
The EIR program will place entrepreneurs in government for limited
periods of time, at no cost to the state. Specifically
entrepreneurs-in-residence will identify within government
inefficient and duplicative programs that negatively impact
entrepreneurs and recommend solutions to streamline procedures,
serve as advocates and mentors within government, recommend ways to
improve programs available to entrepreneurs, facilitate meetings and
forums to educate entrepreneurs on programs and requirements, and
participate in informal working groups of entrepreneurs from various
agencies.
AB 1675 will bring new innovative thinking to agencies and
departments and remove government as the biggest obstacle
entrepreneurs face in California."
2)Framing the Issue : This bill establishes a process for imbedding
entrepreneurs within state agencies so they can help facilitate
change from within the government organization. It is a process
that has been used by the private sector to create leaner
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administrative processes and is more recently being adopted by
local, state, and federal governments.
The analysis includes information on the importance of innovation to
a competitive economy and the cost of current regulations on U.S.
and California businesses. In addition, the analysis provides a
number of examples of EIR programs including an expanded discussion
on San Francisco's recently launched program. Amendments related to
implementation are provided in comment 7.
3)Innovation and California's Future Economy : For decades, California
has been known as a place where innovation and creativity flourish.
A 2007 study on California's global competitiveness identified eight
key dominant and emerging industry clusters including high-tech
manufacturing, biotech, and clean technologies. While the report
found that the state was uniquely positioned to be a preferred
global partner in the areas of innovation, science, and technology,
the study also stated that California was facing significant
challenges from a growing talent pool in other countries and the
global redistribution of manufacturing abroad.
While the global recession may have slowed down growth, the newly
emerging economies of China, India, and Singapore have already made
significant investments in research and development. Emerging
economies around the world have strived to become leaders in
innovation and not merely "copycat" economies of the U.S. Many
foreign countries are actively seeking ways to attract and support
innovation-based industries.
While these dynamics pose challenges to current leading technology
centers, they also offer California new opportunities for
collaboration and cooperation. AB 1675 proposes to take the state's
commitment to another level by establishing an EIR Program to bring
entrepreneurs into state agencies to learn about the existing
systems and make practical suggestions on how agencies can operate
more efficiently and better address the needs of small businesses
and entrepreneurs.
4)Cost of Regulations on Business : Small businesses form the core of
California's $2 trillion economy. Research shows that net new job
creation is strongest among businesses with less than 20 employees,
that they have historically led the state's local and regional
economies out of recessions, and that small businesses are essential
to the state's global competitiveness by meeting niche industry
needs. Reflective of their important role, the JEDE Committee has
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repeatedly voted to support the importance of the state achieving a
regulatory environment that allows small businesses to grow, while
still maintaining public health and safety standards.
There are two major sources of data on the cost of regulatory
compliance on businesses, the federal Small Business Administration
(SBA) and the Office of the Small Business Advocate (OSBA). For the
last 10 years, the federal SBA has conducted a peer reviewed study
that analyzes the cost of federal government regulations on
different size businesses. This research shows that small
businesses continue to bear a disproportionate share of the federal
regulatory burden. On a per employee basis, it costs about $2,400,
or 45%, more for small firms to comply with federal regulations than
their larger counterparts.
The first study on the impact of California regulations on small
businesses was released by the OSBA in 2009. This first
in-the-nation study found that the total cost of regulations to
small businesses averaged about $134,000 per business in 2007. Of
course, no one would advocate that there should be no regulations in
the state. The report, however, importantly identifies that the
cost of regulations can provide a significant cost to the everyday
operations of California businesses.
Regulatory costs are driven by a number of factors including
multiple definitions of small business in state and federal law, the
lack of e-commerce solutions to address outdated paperwork
requirements, procurement requirements that favor larger size
bidders, and lack of the technical assistance to alleviate these
obstacles that inhibit small business success. AB 1675 would place
entrepreneurs within state agencies in order to assist them in
creating leaner and more effective policies and procedures.
5)Similar EIR Programs : EIR Programs are not necessarily a new idea
and have been used in the investment and business world for decades.
According to Dell, a supporter of the bill, the high tech sector
began using the EIR model in the 1980's in order to bring
experienced professionals into the startup process.
The use of EIR Programs to help government agencies is more recently
gaining traction. As an example, in 2012, the Federal Drug
Administration (FDA) established an EIR Program to attract seasoned
entrepreneurs in the medical industry that had successfully
navigated the FDA's regulatory process. The six to seven month
program is designed to help the FDA and small businesses work
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together to introduce new products in the marketplace both quickly
and safely. The FDA not only improved processes, FDA staff also
gained a better understanding of the challenges small businesses
face and how to better network with entrepreneurs in the future.
The goal of one of first EIR placements deliver "transformational
change by combining the best internal and external talent, applying
the principles of lean engineering in rapidly testing, validating,
and scaling new approaches." EIR Programs are a key component of
President Obama's Strategy for American Innovation.
In another example, U.S. Citizenship and Immigration Services
(USCIS) established an EIR initiative with the goal of recruiting a
small "tactical team" of business experts to work with USCIS staff
to help streamline operations and enhance pathways within existing
immigration law to help immigrant entrepreneurs start and grow
businesses in the U.S. This was a 90-day project, which also
included the other entities within the Department of Homeland
Security and was a component of the White House Startup America
initiative.
In March 2014, Virginia enacted an EIR Program (HB 32, Chapter 63,
Statutes of 2014) and several other states are reported to also be
considering EIR Programs, including Texas. AB 1675 is patterned
after the Texas and Virginia legislation.
6)EIR Case Study: San Francisco : In March 2014, San Francisco (SF)
Mayor Edwin M. Lee announced that the City had selected six startup
companies to participate in its new EIR Program. The start-up
businesses were selected from nearly 200 applications to participate
in the 16-week collaboration. Under the program, the selected
businesses will meet with SF government offices for the purpose of
exploring innovative solutions to civic challenges that can lower
costs, increase revenue, and enhance productivity.
Applicants came from 25 cities and countries including businesses in
such areas as education, healthcare, transportation, public
utilities, public safety, infrastructure, and the environment. The
diverse group of applicants ranged from seed-stage startups to later
stage startups and across software, hardware, and services -
including serial entrepreneurs, NASA engineers, employees of leading
technology companies, and several patent holders including some that
have been granted more than 100 patents.
SF departments and agencies selected the finalists through a
competitive process based on their needs and priorities. All
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businesses will be participating on a voluntary basis. SF believes
that the six selected companies, "are at the forefront of developing
innovative solutions to improve government efficiencies, enhance
productivity, and provide better experiences to the public." Two
examples of the six selected participants are:
a) Synthicity (synthicity.com) will work with the San Francisco
Planning Department on new simulation, planning, and urban
development tools and technologies. Synthicity is a software
startup that builds simulation tools and solutions for urban
development and planning.
b) BuildingEye (buildingeye.com) will work with the San Francisco
Municipal Transportation Agency to engage residents and
communities. BuildingEye is a software startup that makes permit
and noticing information easier to discover through a mapping
interface.
7)Programmatic Issues : AB 1675 establishes a new program at GO-Biz,
but lacks a few implementing processes which may be appropriate
amendments to the measure including:
a) Directing GO-Biz to establish procedures for receiving and
reviewing applications;
b) Requiring the approval by the state agency where the
entrepreneur will be placed;
c) Requiring that the entrepreneur enter into a written agreement
with GO-Biz and the state agency where he or she will be placed
which includes hours, duties, goals, expected outcomes, agency
support, and GO-Biz participation;
d) Authorizing the use of state resources to support the
entrepreneur during his or her time with the state including the
use of an office, computer, and other services and equipment; and
e) Reporting activities and outcomes of the program.
8)Related Legislation : Below is a list of related legislation.
a) AB 29 (John A. P�rez, Feuer and V. Manuel P�rez) Office of
Business and Economic Development: This bill established GO-Biz
to include a newly codified California Business Investment
Services and the existing Office of the Small Business Advocate.
Status: Signed by the Governor, Chapter 475, Statutes of 2011.
b) AB 250 (Holden and V. Manuel P�rez) Codification of California
Innovation Hubs: This bill codifies and expands the California
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Innovation Hub Program at GO-Biz for the purpose of stimulating
economic development and job creation through the regional
coordination of federal, state, and local innovation-supporting
resources. Status: Signed by the Governor, Chapter 530,
Statutes of 2013.
c) AB 2138 (Gatto) Innovation Awards: This bill establishes a
pilot project of state agencies to design and implement
innovation contests that detail a procedure, design, or idea that
contributes to the efficiency, economy, or other improvement in
the operations of the agency. Three state agencies, designed by
the Governor, are authorized to award $75,000 in cash prizes.
Status: Pending in the Assembly Appropriations Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Dell
Small Business California
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090