BILL ANALYSIS �
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|Hearing Date:June 16, 2014 |Bill No:AB |
| |1675 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Ted W. Lieu, Chair
Bill No: AB 1675Author:Ian Calderon
As Amended:May 1, 2014 Fiscal: Yes
SUBJECT: Entrepreneur-in-Residence Act of 2014.
SUMMARY: Enacts the Entrepreneur-in-Residence Act of 2014,
authorizing the Governor's Office of Business and Economic Development
(GO-Biz) to appoint up to 10 entrepreneurs-in-residence annually to
provide expertise and assistance in bringing about greater
accessibility and streamlining processes for small businesses dealing
with state government.
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. (Government
Code (GC) �12096 et. seq.)
2)Provides that the Director of GO-Biz shall ensure the GO-Biz Web
site contains information on the licensing, permitting and
registration requirements of state agencies, and shall include, but
not be limited to information that does all of the following: (GC �
12019.5)
a) Assists individuals with identifying the type of applications,
forms, or other similar documents an applicant may need.
b) Provides a direct link to a digital copy of all state
licensing, permitting, and registration applications, forms, or
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other similar documents which are made available for download.
c) Instructs individuals on how and where to submit applications,
forms, or other similar documents.
1)Requires the Director of GO-Biz to ensure that the office's Internet
Web site is user-friendly, providing accurate update information and
contains information on the fee requirements and fee schedules of
state agencies and assists with identifying the types of fees, fee
due dates as well as how and where to submit payments. (Id.)
2)Authorizes GO-Biz as the lead entity for economic strategy and the
marketing of California on issues relating to business development,
private sector investment and economic growth. Authorizes GO-Biz, in
this capacity, to coordinate the development of policies and
criteria to ensure that federal grants administered or directly
expended by state government advance statewide economic goals and
objectives. Authorizes GO-Biz to market the business and investment
opportunities available in California by working in partnership with
local, regional, federal, and other state public and private
institutions to encourage business development and investment in the
state. Authorizes GO-Biz to support small businesses by providing
information about accessing capital, complying with regulations, and
supporting state initiatives that support small business. (GC �
12096.3)
3)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 preserve free competitive enterprise and
maintain a healthy state economy. Establishes the Office of Small
Business Advocate (OSBA) within GO-Biz in order to advocate the
causes of small business and to provide small businesses with the
information they need to survive in the marketplace. (GC � 12098)
4)Requires OSBA to prepare and submit a written annual report to the
Governor and to the Legislature that describes the activities and
recommendations of OSBA, including an evaluation of the efforts of
state agencies and, where appropriate, specific departments, that
significantly regulate small businesses to assist minority and other
small business enterprises, and making recommendations that may be
appropriate to assist the development and strengthening of minority
and other small business enterprises. (GC � 12098.4 (b))
This bill:
1) Establishes the Entrepreneur-In-Residence program (EIR Program)
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within GO-Biz for the purpose of utilizing the expertise of
private-sector entrepreneurs to help make state governmental
activities and practices more streamlined and accessible to small
businesses.
2) Authorizes the Director of GO-Biz to appoint up to 10 EIRs annually
in a variety of interested state agencies, with the approval of the
state agency. Provides that no more than two EIRs should serve at
the same state agency, to the extent practicable and that EIRs can
serve a maximum of two years.
3) Provides that an EIR must demonstrate success working with
California small businesses and entrepreneurs and have successfully
developed, invented, or created a product and brought the product
to the marketplace.
4) Provides that an EIR shall not have a conflict of interest with the
activities of the state agency where they are placed, including,
but not limited to, having any existing business before the state
agency in which they are proposing to be placed or are placed.
5) Requires the Director of GO-Biz to establish procedures for:
engaging state agencies about prospective EIR appointment;
screening prospective appointees; and creating a standard
memorandum of understanding (MOU) that outlines expectations of EIR
program participation, including, but not limited to, hours,
duties, goals, expected outcomes, agency support, and office
participation. States that the MOU shall set the benchmarks and
metrics for evaluating the success of the EIR placement.
6) Requires an EIR to provide recommendations to the head of the state
agency on how to streamline, eliminate, or modify potentially
inefficient or duplicative activities, processes, and programs at
the state agency. Requires an EIR to provide recommendations on
methods to improve program efficiency or new initiatives that may
be instituted to address the needs of small businesses and
entrepreneurs. Requires an EIR to assist in improving outreach and
service to small business concerns and entrepreneurs. Provides
that an EIR shall serve on a voluntary basis but dedicate at least
16 hours per week to the program.
7) Requires the Director of GO-Biz to establish an informal working
group of EIRs to discuss best practices, experiences, obstacles,
opportunities, and recommendations and prepare an annual report on
the program, submitted to the Governor and the Assembly Committee
on Jobs, Economic Development, and the Economy.
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8) Establishes EIR program goals of:
a) Making state programs simpler, easier to access, more
efficient, and more responsive to the needs and concerns of small
businesses and entrepreneurs.
b) Providing for better outreach by the state to the private
sector.
c) Strengthening coordination and interaction between the state
and the private sector on issues relevant to entrepreneurs and
small business concerns.
FISCAL EFFECT: This bill is keyed "fiscal" by Legislative Counsel.
According to the Assembly Committee on Appropriations Committee
analysis dated May 7, 2014, this bill will result in General Fund
administrative costs in the range of $250,000 to $300,000. The
analysis also notes that GO-Biz anticipates needing two additional
positions to implement and administer the program, and estimates that
there are costs associated with preparation of an annual report.
COMMENTS:
1. Purpose. This bill is sponsored by the Author . According to the
Author, "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 state agencies, with the approval of the state
agency, for a maximum of 2 years, with no cost to the state, to
help identify and resolve problem areas slowing down entrepreneurs
from creating jobs and bringing new products to market in
California." The Author intends for entrepreneurs-in-residence to
identify inefficient and duplicative programs within government
that negatively impact entrepreneurs trying to start or expand a
business and recommend solutions to streamline procedures, serve as
visible advocates and mentors for entrepreneurs 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.
The Author cites a recent survey of 500 CEOs across the country
that ranked California the worst state for business and notes that
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the Small Business and Entrepreneurship Council also ranked
California 50th in their report of "Best to Worst State Tax Systems
for Entrepreneurship and Small Business". The Author states that
this bill "will bring new innovative thinking to agencies and
department, create advocates within government, provide
recommendations to streamline regulations and procedures, and
remove government as the biggest obstacle entrepreneurs and small
businesses face in California."
2. Small Businesses in California. California small businesses
comprised 96% of the state's 60,000 exporters in 2009, which
accounted for over 44% of total exports in the state. Nationally,
small businesses represented only 31.9% of total exports. These
numbers include the export of only goods and not services.
Business owners, with no employees, make up the single largest
component of businesses in California; 2.8 million out of an
estimated 3.5 million firms in 2010. As these businesses grow,
they continue to serve as an important component of California's
dynamic $1.9 trillion economy. Microenterprises, meaning
businesses with less than five employees represent approximately
93% of all businesses in the state, or approximately 3.2 million of
all businesses. Businesses with 99 or less employees comprise
nearly 98% of all businesses and employee approximately 38% of all
workers. These non-employer and small employer firms create jobs,
generate taxes, and revitalize communities.
In hard economic times, smaller size businesses often function as
economic engines. In this most recent recession the trend
continued, with the number of nonemployer firms increasing from 2.6
million firms ($137 billion in revenues) for 2008, to 2.8 million
firms ($138 billion in revenues) for 2010. In the post-recession
economy, small businesses are expected to become increasingly
important due to their ability to be more flexible and better
suited to meet niche market needs.
Their small size, however, also results in certain challenges in
meeting regulatory requirements, accessing capital, and marketing
their goods and services. Small businesses are responsible for
paying a variety of fees to numerous state agencies throughout the
year, depending on the nature of their business and navigating
these fees, in addition to the state's regulatory system in
general, may prove challenging to these businesses with limited
resources.
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3. Governor's Office of Business and Economic Development (GO-Biz).
In February 2010, the Little Hoover Commission 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 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
recommendations including the creation of the Governor's Office of
Economic Development (GOED).
In October 2011, the Governor signed AB 29 (cited and described
below), which effectively codified GOED and changed its name to
GO-Biz, effective January 1, 2012. Since its inception, the office
has served over 3,000 businesses, 95% of which are small. The most
frequent types of assistance include help with permit streamlining,
starting a businesses, relocation and expansion of businesses, and
regulatory challenges.
According to GO-Biz, the Office of Small Business Advocate (OSBA)
advocates the causes of small business and provides small business
owners with the information needed to succeed in the California
marketplace. OSBA staff provides assistance to the state's small
business community on issues ranging from regulations to
procurement. Depending on the issue, staff can refer small
businesses to appropriate contacts in State government, business,
and service organizations. OSBA staff also serves on various State
interagency working groups and task forces to represent small
business interests in state legislation, policy, and procedures.
In March 2012, the Governor initiated a reorganization process to
realign the state's administrative structure. Key changes include
dismantling of the Business, Transportation and Housing Agency
(BTH) and the shifting of a number of key programs and services to
GO-Biz including the Small Business Loan Guarantee Program, the
California Travel and Tourism Commission, the California Film
Commission, the Film California First Program and the
Infrastructure and Economic Development Bank (I-Bank). GO-Biz also
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administers the "Made In California" program for the purpose of
encouraging consumer product awareness and to foster the purchases
of products manufactured in California.
4. EIR Models. According to the Author, EIR programs have been
created in San Francisco and Los Angeles as well as two other
states and are being considered in many others.
In March of this year, Mayor Ed Lee announced that San Francisco
selected six startup companies to participate in a EIR program
designed as a voluntary, sixteen-week collaboration to bring
together the private sector and city departments to explore
innovative solutions to civic challenges that can lower costs,
increase revenue, and enhance productivity. According to a press
release announcing the program, nearly 200 startups from 25 cities
and countries around the world applied to the program across a
number of areas such as education, healthcare, transportation,
public utilities, public safety, infrastructure, and the
environment. 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.
In May of this year, Mayor Eric Garcetti launched L.A.'s EIR
program, appointing two entrepreneurs to spend a year developing
ideas to boost L.A.'s economy and create jobs. According to the
Mayor's office website, the one-year residency is designed to
provide the opportunity to focus on the development and delivery of
projects focused around the following: measuring best practices
and developing initiatives and policies aimed at growing, assisting
and sustaining entrepreneurs in Los Angeles; partnering with
foundations, investors, and corporations to model programs and
events targeted at the entrepreneurial community; convening local
educational institutions to foster entrepreneurship in students;
fostering connections between start-ups, entrepreneurs and
prospective venture capital and mentors; and partnering with the
Mayor's Office of Budget and Innovation and the Mayor's Office of
Economic Development in developing business solutions and helping
to streamline government.
5. Related Legislation. AB 250 (Holden, Chapter 530, Statutes of
2013) codifies and expanded the iHub program for the purpose of
stimulating economic development and job creation through the
regional coordination of federal, state, and local
innovation-supporting resources.
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AB 393 (Cooley, Chapter 124, Statutes of 2013) required the
Director of GO-Biz to ensure that the office's Internet Web site
contains information on the fee requirements and fee schedules of
state agencies.
AB 837 (Campos) required annual reporting to GO-Biz by the
California Small Business Development Center Leadership Council on
its activities in any year that the state contributes funds to the
program and also specifies the contents of the report. ( Status:
This bill passed out of this Committee on June 17, 2013 with a 10-0
vote but was amended to deal with a different topic.)
SB 1327 (Canella, Chapter 763, Statutes of 2012) required GO-Biz to
use its Web site to assist individuals with licensing, permitting,
and registration requirements necessary to start a business.
AB 32 (Lara) of 2012 would have required OSBA to establish a
program that supports entrepreneurship as a form of economic
development and job creation in communities throughout this state.
( Status: The bill was never heard in its first policy committee.)
SB 1327 (Canella, Chapter 763, Statutes of 2012) required GO-Biz to
use its Web site to assist individuals with licensing, permitting,
and registration requirements necessary to start a business.
AB 29 (John A. P�rez, Chapter 475, Statutes of 2011) established
GO-Biz within the Governor's Office for the purpose of serving as
the lead entity for economic strategy and marketing of California
on issues relating to business development, private sector
investment and economic growth.
AB 1632 (Blumenfield, Chapter 731, Statutes of 2010) included
transfers of $32.4 million from the General Fund to support
small-business and jobs programs.
AB 2287 (Bass) of 2010, would have established the Office of
Economic Development, which includes the California Business
Investment Services Program, within the then-Governor's Economic
Development Office. ( Status: This bill was held in the Assembly
Committee on Jobs, Economic Development and the Economy.)
AB 2714 (V. Manuel Perez) of 2010 would have transferred the OSBA
from the Governor's Office of Planning and Research (OPR) to the
Business Transportation and Housing Agency (BTH). ( Status: The
bill was held in the Assembly Committee on Appropriations.)
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AB 2734 (John A. Perez) of 2010 created the Office of Economic
Development which included the California Business Investment
Services Program within the Governor's Office. Required the Office
to serve the Governor as the lead entity for economic strategy and
marketing of California and make recommendations to the Governor
and Legislature regarding polices, programs, and actions to advance
statewide economic goals.
( Status : This measure was vetoed by the Governor in 2010. In his
veto message, the Governor indicated that he was "disappointed at
the insistence of the State Senate to make the director of this
office subject to confirmation, which inappropriately infringes on
the rights and powers of my office.")
AB 2206 (Price) of 2008 would have re-established the California
Small Business Development Center Program through the auspices of
the Business, Transportation, and Housing Agency. ( Status: The
bill was held in the Assembly Committee on Appropriations.)
AB 2854 (Mendoza) of 2008 would have required, contingent upon
funding becoming available, the establishment of a one-stop web
site for small business-related announcements and funding
opportunities offered by state agencies. ( Status : This measure
was vetoed by the Governor in 2008. In his veto message, the
Governor indicated that the requirements in the bill were redundant
and unnecessary.)
SB 1436 (Figueroa, Chapter 234, Statutes of 2006) enhanced the
state's technical assistance to small businesses by improving the
state's Internet information for small businesses and required the
designation of agency-level small business liaisons.
AB 3058 (Assembly Committee on Jobs, Economic Development and the
Economy, Chapter 233, Statutes of 2006) enhanced the duties of the
OSBA to include advocacy on disaster preparedness and recovery,
including the provision of technical assistance, required the OSBA,
in cooperation with the Office of Emergency Services, to develop a
handbook for small businesses on emergency preparedness, responding
in an emergency, and recovery strategies and required the OSBA,
with the assistance of Office of Emergency Services, to hold at
least three meetings, in different locations in California, to
share best practices on disaster preparedness for small businesses.
6. Arguments in Support. Small Business California supports this
bill, writing that "entrepreneurs are responsible for thousands of
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jobs in our economy and viewed as key to the economic recovery of
California and the nation. About two thirds of all new jobs
created in the United States are the result of small businesses and
entrepreneur startups and expansions."
According to Dell , the concept of an Entrepreneur-In-Residence goes
back to the 1980s when the high tech sector created these to bring
experienced professionals into the startup process. Dell notes
that many venture capital firms use this model to nurture
successful companies and that entrepreneurs are being used in
universities, chambers of commerce and government at all levels.
Dell ads that this bill makes sure government is helping, not
harming entrepreneurs.
7. Suggested Technical Amendments.
a) Due to a drafting error, this bill places the EIR program in
existing Government Code sections for the iHub program. It is
not the Author's intent to replace the iHub program with the
proposed EIR program, thus the bill needs to be amended to change
the code sections it currently references and instead place the
EIR program in available Government Code sections.
b) The bill requires GO-Biz to provide a report to the Governor
and Assembly Committee on Jobs, Economic Development and the
Economy. It is custom and practice for reports to the
Legislature to be made available to the appropriate policy
committees with subject matter jurisdiction for a particular
issue.
On page 6, lines 19-20, strike "Assembly Committee on Jobs,
Economic Development and the Economy" and replace with " the
appropriate policy committees of the Legislature ".
SUPPORT AND OPPOSITION:
Support:
Dell
Small Business California
Opposition:
None on file as of June 11, 2014.
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Consultant:Sarah Mason