The 2022-23 Budget
Summary. This put up gives some background in regards to the Governor’s Office of Business and Economic Development (GO‑Biz), describes the Governor’s price range proposals for GO‑Biz, and provides feedback and points for the Legislature to think about.
Background
GO‑Biz Coordinates Business Assistance and Economic Development Activities. The state has had numerous financial growth departments over time. Prior to 2003, the bulk of the state’s financial growth packages have been housed throughout the Technology, Trade, and Commerce Agency. The 2003‑04 Budget Act abolished the company and state funding for a lot of of its packages designed to encourage financial growth. GO‑Biz was established statutorily in 2011 to be the lead entity for financial technique and the advertising and marketing of California on points referring to enterprise growth, personal sector funding, and financial progress. Since then, the tasks of the workplace have been expanded considerably. Figure 1 exhibits that the quantity of positions at GO‑Biz has elevated by 66 % during the last 5 years. These workers present a variety of advisory and coordinating roles throughout the administration associated to financial growth. Several items of GO‑Biz function factors of contact for companies contemplating relocating to or increasing in California. For instance, the California Office of the Small Business Advocate (CalOSBA) gives assets for small companies and monetary help for small enterprise advisory facilities. Other items help worldwide traders, assist companies receive details about enterprise permits, administer the California Competes Tax Credit Program, and administer the Cannabis Local Equity Grant Program. Additionally, the California Film Commission, Travel and Tourism Commission, and the Infrastructure and Economic Development Bank have been assigned for oversight functions to GO‑Biz.
Governor’s Proposals and LAO Comments
Local Government Budget Sustainability Fund
Community Economic Resilience Fund (CERF) Established Last Year. The 2021‑22 Budget Act included $600 million one‑time American Recovery Plan (ARP) Act fiscal reduction funds to start out a brand new grant program for areas to develop and implement regional plans to diversify their economies and develop sustainable industries, together with zero‑emission automobile infrastructure, local weather resilience, transit techniques, biomass initiatives, offshore wind, and oil properly capping and remediation. As of early February 2022, the Governor’s Office of Planning and Research, the California Labor Workforce Development Agency, and GO‑Biz nonetheless are creating the CERF. Proposed price range invoice language in Control Section 11.96 would change the funding supply for the CERF from federal ARP fiscal reduction funds to General Fund.
Governor Proposes New $450 Million Fund for Economic Diversification Grants. The Governor proposes to create the Local Government Budget Sustainability Fund to make grants to counties which have excessive poverty or excessive unemployment for financial diversification initiatives. This proposal would complement the CERF, funding extra financial diversification initiatives. The complete request is for $450 million General Fund, over three years: $100 million in 2023‑24, $100 million in 2024‑25, and $150 million in 2025‑26.
Proposal Lacks Important Details. This proposal doesn’t present an in depth justification for the quantity of funding requested or the standards that may be used to make the grants. The administration additionally remains to be creating its statewide financial restoration and financial diversification framework—the Just Transition Roadmap—and the CERF, so we’re unable to guage whether or not this proposal would fill crucial gaps in CERF funding, because the administration has claimed in its feedback to the Legislature, or can be a duplicative extra supply of funding for financial diversification initiatives.
Reject Local Government Budget Sustainability Fund. The administration has not supplied a transparent and compelling justification for the necessity for $450 million, along with the $600 million that already has been supplied, for financial diversification initiatives. Given that this request is for funding starting in 2023‑24, we suggest that the Legislature reject the Local Government Budget Sustainability Fund proposal and direct the administration to return with a extra mature proposal subsequent price range cycle.
Tourism Marketing
Visit California Promotes State as Tourism Destination. The California Travel and Tourism Commission, doing enterprise as Visit California, is a 501(c)(6) nonprofit mutual profit company that operates an enormous advertising and marketing program to extend in‑state, home, and worldwide tourism. Visit California receives funding from assessments on rental automobile firms, inns, and different tourism operators. The assessments are collected by the GO‑Biz Office of Tourism.
COVID‑19 Significantly Impacted State Tourism and Visit California Revenue. Tourism is a crucial business within the state that was impacted by the COVID‑19 pandemic to a better extent than many different sectors of the state’s economic system. While complete shopper spending in California declined by 4 % in 2020, Visit California estimates that direct journey‑associated spending declined by 55 %. The decline in tourism impacts tourism enterprise and, by extension, Visit California’s evaluation revenues, which declined from $124 million in 2018‑19 to $76 million in 2020‑21.
2021‑22 Budget Act Provided $95 Million for Tourism Marketing. The 2021‑22 Budget Act included $95 million for tourism advertising and marketing within the present 12 months. Visit California acquired the funding in October 2021 and has dedicated about $45 million for nationwide and in‑state tourism promoting expenditures. Visit California has a advertising and marketing plan that may exhaust the rest of the $95 million within the present 12 months. The group additionally could have extra tourism advertising and marketing expenditures above the $95 million. None of the $95 million can be used for administrative bills.
Governor Proposes Additional $45 Million for Tourism Marketing. The Governor’s price range consists of $45 million one‑time General Fund for tourism advertising and marketing by Visit California.
Visit California Net Assets Increased Significantly in 2020 and 2021. As income collections started to say no on the onset of the pandemic in 2020, Visit California sharply lowered its expenditures. The discount in expenditures outpaced Visit California’s decline in revenues. Consequently, Visit California has elevated its internet property from $20 million firstly of 2019‑20 to $58 million by the tip of 2021‑22.
Additional State Funding for Marketing Appears Unnecessary. Tourism in California has begun to recuperate however seemingly can be depressed for a while as a result of of ongoing public well being considerations. While Visit California’s evaluation income over the following a number of years will proceed to be depressed to some extent, we don’t suppose evaluation revenues will decline beneath 2020‑21 ranges. Given the state’s $95 million contribution, steady or rising revenues, and the numerous quantity of internet property, we discover that Visit California ought to have the ability to spend considerably above their pre‑pandemic ranges with out extra state funds.
Port Operational and Process Improvements
This merchandise is a component of a bigger Supply Chain Resilience package deal. Our evaluation of the Governor’s full Supply Chain Resilience proposal, together with a extra in‑depth evaluation of this particular merchandise within the context of the opposite related proposals, can be revealed in a separate put up.
Governor Proposes $30 Million for Grants to Ports. The Governor’s price range consists of $30 million General Fund, one time, for grants to make operational and course of enhancements on the state’s ports to assist alleviate provide chain issues.
Grants Might Help Implement Common Standard for Freight Data. The Federal Maritime Commission at the moment is figuring out information interoperability issues at ports. Their preliminary findings can be reported in spring 2022. One attainable use for this funding can be to assist implement suggestions for widespread information requirements.
Improved Data Interoperability Might Address Supply Chain Problems… Ports, ocean carriers, marine terminal operators, truckers, and railroads apparently lack widespread information requirements that may enable for effectively sharing cargo information or different related details about port and cargo dealing with operations. This lack of information requirements may very well be contributing to latest provide chain congestion. The federal Maritime Commission and GO‑Biz imagine that implementing information requirements would assist to alleviate these issues.
…But State Role Is Unclear. In the occasion that GO‑Biz decides to maneuver ahead with a give attention to serving to to enhance information interoperability, we observe that there’s not a transparent position for the state. Federal companies could also be higher located to play a coordinating or incentivizing position. The beneficiaries would primarily be personal, for‑revenue firms. We word that if adopting widespread information requirements would considerably alleviate provide chain congestion, there can be a transparent personal‑sector curiosity in paying to implement the suggestions utilizing their very own funds.
Proposal Lacks Key Details. We are unable to completely consider the deserves of the proposal with out extra details about how the funding can be allotted and used.
Is GO‑Biz Most Appropriate Agency to Administer This Program? Should the Legislature decide that state funding for these enhancements is suitable, it ought to then think about which company is most suited to manage this system. GO‑Biz has a cross‑reducing coordination position for the state’s key financial points however has restricted experience in technical items motion points.
Retail Theft Grants
This merchandise is a component of a bigger Public Safety package deal. Our evaluation of the Governor’s full proposal for addressing organized retail theft, together with a extra in‑depth evaluation of this merchandise within the context of the opposite related proposals, can be revealed in a separate transient.
Governor Proposes $20 Million for Grants to Small Businesses Affected by Retail Theft Incidents. The Governor’s price range consists of $20 million General Fund, one time, to manage grants to small companies victimized by smash‑and‑seize robberies or which have suffered harm brought on throughout retail theft incidents. The administration has urged that it might outline a small enterprise as having lower than $5 million in annual gross income.
Several Practical Considerations Must Be Addressed. GO‑Biz has not finalized key particulars of the proposed new grant program. This is especially regarding as a result of GO‑Biz has no institutional expertise implementing a program like this. There are a number of sensible concerns that may must be addressed and it might be very tough or pricey to take action. These embody:
- What Types of Damages and Losses Would Be Covered and How Much Would Be Covered by the Grant? The vary of harm that may very well be coated by smash‑and‑seize robberies and retail theft incidents is sort of broad. GO‑Biz would want to outline what damages and losses can be eligible and have the executive capability to differentiate between eligible and ineligible damages and losses. In addition, would companies be compensated for your entire quantity of eligible damages or only a portion?
- How Would GO‑Biz Verify Applicant Eligibility? What proof can be required to substantiate claims of damages or losses? Would a police report be required and would that be enough?
- How Would GO‑Biz Verify the Amount of Losses or Damages? Would companies self‑certify their damages or would they should present information? How a lot effort can be invested to confirm the claims for compensation?
- How Would GO‑Biz Verify an Amount Was Not Covered by Insurance? Presumably, damages which can be coated by insurance coverage wouldn’t be eligible for compensation. Many retailers carry enterprise house owners insurance coverage insurance policies that might cowl many widespread damages and losses. However, choices enable protection to fluctuate primarily based on the person wants of completely different companies. Some companies could not have insurance coverage.
Program Could Have Unintended Consequences. It is unclear {that a} sufferer’s compensation mannequin will translate properly to small companies. Would this program have unintended penalties, equivalent to discouraging companies from taking precautions to forestall theft or to hold enough insurance coverage?
Is This Proposal Consistent With Legislature’s Public Safety Goals? In contemplating the person parts of the package deal to deal with organized retail theft, we propose the Legislature think about whether or not the objective of this proposal—to present compensation to some victims of organized retail theft—is in keeping with its broader public security objectives. Depending on the Legislature’s priorities, there could be simpler alternate options to this proposal. In our forthcoming transient, we offer a framework to assist the Legislature suppose by way of its objectives and broadly present numerous alternate options that develop on current packages and are primarily based on analysis.
Immigration Integration
Governor Proposes Package of Funding for Immigration and International Investment Programs. The Governor’s price range consists of $11.6 million General Fund, one time, in 2022‑23, and $500,000 yearly thereafter, to help a number of GO‑Biz features associated to worldwide commerce, funding, and financial growth. Specifically, the proposal would:
- Create a New Grant Program. $8.7 million, encumbered over three years, for a aggressive grant program. The grants can be to supply seed funding to cities or counties for packages that present help to immigrants and immigrant‑owned companies. GO‑Biz plans to make about 20 grants, in quantities between $200,000 to $1 million.
- Expand Business Quick Start Guides. For a few years, GO‑Biz has been producing pamphlets with info to assist entrepreneurs arrange completely different varieties of companies. The proposal would offer $600,000, one time in 2022‑23, and $200,000 ongoing to translate the present guides into languages aside from English, develop the quantity of guides, and to take care of the guides over time.
- Expand Export Training Network. $2 million, one time, to develop an current program within the worldwide affairs and commerce unit of GO‑Biz that helps enterprise house owners export their merchandise to different nations. This growth would give attention to mentoring immigrant and refugee entrepreneurs.
- Fund Trade Missions. $150,000 ongoing to develop cross‑border commerce between California and Mexico.
- Establish New Immigrant Business‑Focused Position. Support one new place to manage grant packages and coordinate different immigrant‑targeted actions.
How Proposal Complements Existing Programs Is Unclear. The state helps many current packages and organizations that present technical help, mentoring alternatives, and monetary help to underserved companies and entrepreneurs from underserved communities. How this proposal would assist deal with challenges particularly confronted by immigrant companies that aren’t addressed by these packages is unclear.
Proposed Local Assistance Program Lacks Key Details. The single largest part of this proposal would fund grants to native governments for packages which may support immigrants or immigrant enterprise house owners. The proposal is conceptual and lacks key particulars, together with:
- Specific Objectives. The proposal gives a broad vary of attainable makes use of for the grant funds which doesn’t clearly point out whether or not the funds are for use for immigrant help providers typically or narrowly focused financial growth packages for entrepreneurs or current enterprise house owners. The proposal is also unclear whether or not the aim is to incentivize innovation—to develop a brand new pilot program—or to deploy packages or finest practices developed in different locations.
- Grant Administration Details. The proposal specifies that funds can be awarded competitively, however it doesn’t specify what standards the brand new program would use to guage the grant functions. While it might be untimely to establish particular standards, a extra mature proposal would describe a course of for creating the standards and different laws for administering the grant program. Other key administrative particulars would come with whether or not particular geographic areas or immigrant communities can be focused and how grant efficiency can be monitored.
- Transparency and Program Evaluation. The proposal doesn’t embody particular reporting necessities or a course of for evaluating whether or not this system was efficient and whether or not it may very well be improved ought to the Legislature later determine to increase or in any other case change the program.
Translation of Business Assistance Materials to Languages Other Than English Has Merit. Many of the state’s residents have a better fluency in a language aside from English. Translating state assets into languages aside from English would have advantage not restricted to immigrants. The Legislature additionally might consider whether or not the Department of Consumer Affairs, the Secretary of State, and different state companies that present providers to companies ought to make extra of their varieties and informational supplies obtainable in languages aside from English.
Need for Export Trade Network Expansion Unclear. California is a serious international exporter. The proposal doesn’t present an evaluation of the particular shortcomings within the present program and how the requested one‑time funding would deal with these shortcomings. The federal authorities additionally gives export and commerce help. Additionally, many personal firms supply consulting providers and technical info to exporters.
Technical Assistance Expansion and Capital Infusion Programs
Technical Assistance Expansion Program (TAEP) Helps Fund Business Training and Consulting Centers. TAEP gives supplemental monetary help to a variety of federally contracted and state supported packages—such as Small Business Development Centers (SBDCs), Women’s Business Centers, Procurement Technical Assistance Centers, Minority Business Development Agency Centers, and Veteran Business Outreach Centers—that present coaching and consulting to small companies and entrepreneurs. In 2020‑21, CalOSBA disbursed about $17 million amongst 83 facilities.
Capital Infusion Program (CIP) Provides Grants to SBDCs. The CIP is a aggressive grant program for SBDCs, with a give attention to increasing help in underserved geographic areas. The 2018‑19 Budget Act funded CIP at $3 million per 12 months for 5 years.
Governor Proposes to Increase and Permanently Fund Small Business Technical Assistance Programs. The Governor’s price range proposes to extend TAEP by $6 million in 2022‑23, from $17 million to $23 million. The price range additionally would make the funding for TAEP and CIP everlasting, a complete of $26 million in 2023‑24 and ongoing.
Increase in Funding Appears to be Supported by Demand From Centers. CalOSBA has demonstrated that the present quantity of funding for technical help facilities is oversubscribed.
Ongoing Funding Reasonable, however Reduces Accountability and Legislative Flexibility. Should the Legislature strongly help continued state funding for the small enterprise coaching and consulting facilities, it might be cheap to contemplate funding on an ongoing foundation. Ongoing funding gives GO‑Biz and the facilities extra certainty. While restricted‑time period funding would possibly make lengthy‑time period planning by the facilities harder, restricted‑time period funding permits for better Legislative oversight and budgetary flexibility.
Inclusive Innovation Hub Program
Inclusive Innovation Hub Program Supports Underserved Start‑Up Businesses. The state created the Innovation Hub program in 2010 to develop formal partnerships between business, startups and entrepreneurs, universities and analysis establishments, and authorities in a selected geographic space, targeted on a selected sector. The Innovation Hub program lapsed in 2020 however was relaunched in 2021 because the Inclusive Innovation Hub, with a better emphasis on outreach to companies and entrepreneurs from underserved areas and communities. The 2021‑22 price range supplied $2.5 million one‑time General Fund to ascertain a brand new community of ten Inclusive Innovation Hub partnerships. GO‑Biz has not but introduced the place the hubs can be positioned or which organizations are taking part in them.
Governor Proposes to Extend and Expand Innovation Hub Program. The price range consists of $20 million General Fund to increase and develop the Inclusive Innovation Hub program and rename it to “Accelerate CA: Inclusive Innovation Hub.” Of that quantity $13 million would fund an growth of the community from 10 hubs to 13 hubs, $6.5 million can be used to create a brand new, one‑time grant program, and $500,000 would pay for GO‑Biz administrative prices.
Grant Program Administered by Inclusive Innovation Hubs. The proposed grant program would offer funds to the Inclusive Innovation Hubs. Each Inclusive Innovation Hub would award as much as $100,000 to 5 new companies that participated in its packages. Each Inclusive Innovation Hub would decide its standards for awarding the grants.
Increasing Number of Inclusive Innovation Hubs to 13 Could Be Reasonable… The proposal would develop the quantity of Inclusive Innovation Hubs from 10 to 13 in an effort to higher align this system with the CERF financial growth initiative (described above within the background of the Local Government Budget Sustainability Fund proposal). In creating the CERF, the administration has proposed a map that divides the state into 13 areas. While the state nonetheless is creating key particulars concerning the CERF program, permitting GO‑Biz to ascertain one Inclusive Innovation Hub in every of the 13 CERF areas may very well be cheap.
…But New Funding Would Be Premature. The Inclusive Innovation Hub program remains to be being established. No particular info is obtainable about this system’s outcomes or wants as a result of it’s nonetheless being carried out. GO‑Biz beforehand requested and acquired one‑time funding of $250,000 per hub to ascertain the brand new program. The proposal doesn’t clearly justify why a big quantity of extra funding would now be required.
Consider Evaluating Effectiveness of Inclusive Innovation Hubs. The effectiveness of the 2010‑2020 Innovation Hub initiative has not, to our data, been evaluated. The administration didn’t research the Innovation Hub packages earlier than offering new funding for Inclusive Innovation Hubs final 12 months. Some Innovation Hubs continued working with out state funds, whereas others grew to become inactive. Regardless of whether or not the legislature approves this proposal, we propose requiring this system to gather details about the Inclusive Innovation Hub packages, equivalent to their different sources of funding, contributors, and particular actions, in addition to measure particular outcomes. Such proof would higher inform future proposals to change, develop, or to increase or finish this system.
Human Resources Staffing
No Concerns With Proposal for Increased Human Resources Staffing. The Governor’s price range consists of $110,000 ongoing General Fund to will increase GO‑Biz human assets by one place. The quantity of positions at GO‑Biz has elevated by 66 % during the last 5 years because the Legislature has elevated the tasks of this division. We are usually not elevating considerations with this proposal as a result of administration and basic administrative bills usually observe will increase in departmental programmatic tasks.