BILL ANALYSIS
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|Hearing Date:July 9, 2007 |Bill No:AB |
| |1606 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC
DEVELOPMENT
Senator Mark Ridley-Thomas, Chair
Bill No: AB 1606Author:Arambula
As Amended:June 1, 2007 Fiscal: Yes
SUBJECT: California Economic Strategy Panel: state
economic development strategy.
SUMMARY: Requires the Secretary of Labor and Workforce
Development (L&WD) to collaborate with the Secretary of
Business, Transportation and Housing (BT&H) and the
Secretary of the Department of Food and Agriculture (CDFA)
in leading the preparation of the California Economic
Development Strategic Plan and convening the California
Economic Strategy Panel (CESP). Modifies the composition
of the CESP by adding the Secretary of BT&H, the Secretary
of CDFA, and the Director of the Office of the Small
Business Advocate (OSBA), as members of the panel.
Existing law:
1)Establishes the general duties and powers of the BT&H
Agency.
2)Establishes the Office of Military and Aerospace Support
(OMAS) within the BT&H Agency to provide a central
clearinghouse for all defense retention, conversion, and
base reuse activities in the state and to interact and
communicate with military installations in the state.
3)Assigns the Secretary of L&WD to lead the preparation of
a biennial California Economic Development Strategic Plan
(ED Strategic Plan)
4)Creates the CESP for purposes of preparing the ED
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Strategic Plan which includes:
a) A statement of economic goals for the state.
b) Proposals for legislation. regulations, and
administrative reforms necessary to improve the
business climate and economy of the state.
c) Evaluation of the effectiveness of the state's
economic development programs.
d) A list of key industries in which the state shall
focus its economic development efforts, and strategies
to foster job growth and economic development covering
all state agencies, offices, boards, and commissions
that have economic development responsibilities.
This bill:
1)Adds to the duties of the Secretary of BT&H the task of
developing, in coordination with the CESP, a strategy to
attract new private investment to the state.
2)Adds to the duties of the OMAS, the task of assisting the
CESP in the development of the ED Strategic Plan by
helping to identify the needs of communities impacted by
closed military bases and the economic development
opportunities provided by the aerospace industry.
3)Directs the Secretary of L&WD to collaborate with the
Secretary of BT&H and the Secretary of CDFA in the
preparation of the ED Strategic Plan.
4)Adds to the duties of the CESP:
a) Consultation with several entities including, but
not limited to: OMAS, California Commission on
Industrial Innovation, OSBA, California Transportation
Commission, California Community Colleges, University
of California, California State University, California
Workforce Investment Board, Employment Training Panel,
and the Energy Resources Conversation and Development
Commission.
b) Review the findings and recommendations in the most
recent California Transportation Plan.
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c) Review the findings and recommendations of the most
recent international trade and foreign investment
strategy
1)Adds to the membership of the CESP the following:
a) The Secretary of BT&H.
b) The Secretary of CDFA.
c) The Director of the OSBA.
1)Directs the CESP to deliver the ED Strategic Plan, and a
biennial report on its activities, to the Governor and
the Legislature.
2)Changes the reporting cycle for the preparation and
submission of the ED Strategic Plan, beginning in 2008,
from a two-year cycle to a four-year cycle.
3)Requires the ED Strategic Plan to be posted on the
websites of the CESP and each of the Secretaries.
4)Requires the ED Strategic Plan, in addition to existing
prescribed content, to include the following elements:
a) An assessment of the economic trends that affect
California's economy.
b) An assessment of the needs of business and
industry.
c) A prioritized list of significant short-term and
mid-term issues.
d) A system of accounting that can be used to track,
evaluate, and report on the implementation and success
of the plan.
e) Short term, mid-term, and long-term strategies to
encourage job growth and economic development in this
state.
FISCAL EFFECT: According to the Assembly Appropriations
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Committee analysis, the workload associated with staffing
the CESP, producing the ED Strategic Plan and the
additional private investment component would exceed
$175,000 combined for the three affected agencies.
COMMENTS:
1.Purpose. This bill is sponsored by the Author who
maintains California has the ability to do a better job
of encouraging private investment in the state as a whole
and in California's historically underserved capital
markets, also known as Emerging Domestic Markets (EDMs).
One significant obstacle is the state's failure to have a
comprehensive organizational structure for leading the
state's economic development activities. According to
the Author, implementation of this bill will result in
better coordination of California's economic development
programs by centralizing policy development within CESP
and establishing a more streamlined approach to economic
development planning, funding, and implementation.
2.Background. Since the elimination of the Technology,
Trade and Commerce Agency in 2003, state economic
development and workforce development program delivery
has been distributed among various state agencies and
departments. There is currently no single location where
these programs, services, and activities come together
into a single comprehensive strategy.
In response to this issue, the Administration created in
2005, by a memorandum of understanding, an interagency
team of the Governor's Cabinet, the Economic Development
Partnership (ED Partnership). The ED Partnership is led
by the Secretaries of BT&H, L&WD, and CDFA, and
activities have included the following:
a) Operating the California Business Portal as a
one-stop resource on the Internet for starting,
growing, financing, expanding or relocating a business
to California.
b) Mobilizing action teams to coordinate state,
regional, and local resources to actively assist with
business expansion, retention and job attraction.
c) Ensuring that the CESP's initiatives are merged
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with existing state economic development programs,
along with information developed by the California
Regional Economies Project.
d) Developing specific international trade promotion
strategies with the California International Trade
Partnership Council.
3.California Economy. California is the eighth largest
economy in the world, with a gross state product of over
$1.7 trillion, but the economy is not dominated by a
single industry; rather it is comprised of a variety of
industry clusters throughout the state. California's
largest industry sectors are trade, transportation, and
utilities; encompassing major retail outlets,
import-export businesses, transportation, and
warehousing. The state leads the nation in
export-related jobs.
Small businesses and microenterprises exist in almost
every industry cluster. In many of them, these firms are
essential partners for larger firms, supplying goods and
performing specialized services and functions. Small
businesses form the core of California's $1.7 trillion
economy, comprising more than 90% of all businesses, and
responsible for employing more than 50% of all workers in
the state. California's 2.6 million microenterprises who
employ five persons or less (88% of all businesses) are
responsible for creating jobs, generating taxes and
revitalizing communities. Microenterprises employed over
19% of all workers in California in 2003. In 2002, the
most recent data available, microenterprises generated
$238 billion in taxable revenues. Common types of
microenterprises include engineering consulting, computer
system design, housekeeping, construction, landscaping,
and personnel services.
4.Emerging Domestic Markets (EDM). The term EDM refers to
people, places, or business enterprises with growth
potential that face capital constraints due to systemic
undervaluation as a result of imperfect market
information. Originally coined by the World Bank to
describe economies with low-to-middle per capita income,
as in emerging foreign markets, the term EDM has lately
been used by both the State Treasurer and Cal PERS to
describe "investment ready" communities and businesses in
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the U.S.
These markets include ethnic- and women-owned firms,
urban and rural communities, companies that serve
low-to-moderate-income populations, and other small- and
medium-sized businesses. Current demographic shifts in
California and the U.S. are creating fundamental changes
in how private investment looks at historically
underserved communities and businesses.
Minority purchasing power currently accounts for 33% of
the total purchasing power in California and 20% of the
nation. Purchasing power of minority consumers in the
U.S. is expected to triple from $1.3 trillion in 2000 to
over $4 trillion in 2045, representing over 70% of the
total growth in U.S. purchasing power. Companies focused
on meeting the needs and wants of these high growth EDM
markets should have positive economic futures.
Increasing investments in minority-owned businesses, and
within minority communities, is likely to be key to the
future economic health of California and its business
community.
5.Assembly Oversight Hearing. In March of 2007, the
Assembly Committee on Jobs, Economic Development, and the
Economy (JEDE) and the Assembly Budget Subcommittee 4 on
State Administration held a joint hearing to examine the
state's workforce investment and economic development
programs. The report prepared from the hearing states
that existing policies and programs in California are
fragmented. Program delivery is too often evaluated on
criteria that do not adequately reflect the broader
objective of making California an attractive place to
start, grow, and relocate businesses. The report further
states that these fragmented policies and programs have
resulted in local community developers, such as economic
and community development corporations, packaging
increasingly complex deals that blend multiple funding
sources without necessarily adding any additional value
to the project.
The report concludes that the state needs a more
comprehensive, and streamlined, approach to economic and
workforce development to reduce unnecessary
administrative burdens while increasing program dollars
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for project delivery. Recommendations from the hearing
include, but are not limited to, the following actions:
a) Develop a state policy and strategy for attracting
private investment in California's EDMs which can be
integrated into the State ED Plan and the state
international trade policy and strategy.
b) Streamline state regulatory, licensing, and
permitting requirements for small business and
microenterprise start-ups through on-line, one-stop
application and assistance programs.
c) Develop an integrated strategy on the delivery of
state and local workforce and economic development
programs to provide skilled workers for emerging
industries.
1.Arguments in Support. The Author contends that
implementation of this bill will help move forward the
recommendations of the Assembly JEDE Committee report by
forming a sound foundation for state economic and
workforce development activities. Without analyzing how
the state's economic and workforce development programs
and services work together it is difficult to maximize
the state's leverage of public investments with ongoing
private sector activities.
At its core, this new planning paradigm recognizes that
governments do not create jobs, businesses do.
Therefore, understanding how the private sector finances
and invests its money is key to the state maximizing its
leverage of public dollars in supporting the development
of strong and vital regional economies where small
business and entrepreneurs flourish.
By creating the ED Partnership, the Administration has
acknowledged concerns over the lack of coordination and
focus in the state's economic development programs. This
bill, in part, codifies central elements of the
Administration's overall economic development structure
by strengthening and clarifying the roles of the CESP,
BT&H, L&WD, and CDFA.
7.Prior Legislation. AB 237 , Arambula (2005),would have
provided a similar statutory framework to improve
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economic development policy and program coordination.
This bill was held in the Senate Appropriations
Committee.
8.Recommended Technical Amendments.
a) A typographical error was noted in the current
version of the bill. On page 8, line 6, paragraph (c)
should be numbered (c)(1) to be consistent with the
next paragraph numbered (2).
b) On page 9, line 6, the Office of the Small Business
Advocate is mentioned as a state entity that the CESP
should consult with, but the OSBA is later listed as a
new member of the CESP on page 10, line 35. Committee
staff suggests deleting the reference to the OSBA on
page 9 as a consulting entity.
c) On page 11, line 35, there is a reference to the
"California Economic Development Strategic Plan, as
provided for in subdivision (i)", but there is no
reference to the ED Strategic Plan in that
subdivision. Committee staff suggests changing the
reference to subdivision (a) or striking it
altogether.
1.Conflict Notice. Legislative Counsel has notified the
Committee and the Author that this bill potentially
conflicts with AB 1107 (Arambula), currently before the
Senate Committee on Transportation and Housing, because
both bills amend the same existing statute, Section 15570
of the Government Code. Committee staff has determined
that the conflict does not pertain to any policy or
language differences. It is merely a matter of paragraph
numbering in the proposed amended statute. The Author
has agreed to take amendments in Senate Appropriations
Committee to resolve the conflicting language before each
bill is voted upon by the full Senate.
SUPPORT AND OPPOSITION:
Support:
The California State University
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Opposition:
None received as of July 5, 2007
Consultant:Doug Brown