5 Proposed State Bills Have Consequences for Small Business
State legislators are debating five bills that could make a difference to small businesses.
The measures would help fund start-up companies, create small-business networks, exempt home-based businesses from local taxes and impose new requirements on temporary employment agencies. They will die if they don’t pass their house of origin by May 29.
* SB 1688--Small-Business Networks: With 30 state agencies offering 84 economic development programs, and a maze of similar efforts in cities and counties statewide, small-business owners can get lost before they ever find help. Under the bill proposed by state Sen. Betty Karnette (D-Long Beach), $1 million would be spent to create public-private networks for various industries. These networks would provide small businesses with information on state-run and other programs and services.
How the networks are set up and what they would do would vary by industry. A garment industry or a restaurant industry network might rely less on Internet communication than would a biotech or telecommunications network. The networks might develop contracting opportunities, publish research, test products or develop supply chains, for example.
The measure would revive the state’s Small Business Advocate position, currently vacant, to oversee the networks.
“I introduced SB 1688 in response to requests from small businesses throughout California, asking for assistance in navigating through the state bureaucracy,” Karnette said.
* SB 2189--Small-Business Venture Fund: Under federal law, venture capital funds with more than 100 investors must not only register with the Securities and Exchange Commission but also follow complex rules under a 1940 federal investments act. The result is that venture capital funds that want to grow but maintain fewer than 100 investors end up seeking money from the very wealthy or from pension funds or institutional sources. The result is only the largest ventures are funded while smaller start-ups and investors are ignored.
In 1996, Congress created an exemption that allows venture capital funds to grow beyond 100 investors and not come under the federal rules, so long as the funds are regulated by state law, 80% of the securities are sold to residents of that state and fund managers help manage the companies in which they invest. SB 2189, authored by state Sen. John Vasconcellos (D-Santa Clara), would take advantage of this exemption in California, with oversight by the state Department of Corporations.
“The bill has two advantages in California,” said Lee Petillon, an attorney with Petillon & Hansen in Torrance. “It supplies much-needed capital to growing California businesses and, on the other side of the coin, opens up the field of much more lucrative investing to a much larger group of Californians.”
Supporters such as Petillon say the bill would help ease an estimated $5.4-billion funding need in California.
* AB 1752--California Seed Capital and Early Stage Corp.: Proposed by Assemblywoman Susan A. Davis (D-San Diego), the bill would create an independent corporation with $5 million in state money, repayable in five years at 8% interest. The corporation would use the money as a pump-primer to spur private money, pension funds and city and county funds to join in creating a bigger pot, as much as $100 million, to invest in companies in underfunded areas such as Los Angeles, and in those owned by women and minorities.
* AB 2065--Home-Based Business Exemption: The controversy in Los Angeles about registering home-based businesses and requiring them to pay city taxes prompted the Writers Guild to take the battle to the state. The bill by Assemblyman Tony Cardenas (D-Sylmar) would exempt home-based businesses that minimally impact neighborhoods.
Supporters include writers, artists, musicians and cartoonists who argue that they do not run businesses but are independent contractors who place no burden on city services. Opponents include a dozen cities and the American Planning Assn., which counter that nearly a third of businesses in some areas are home-based and that the exemption would devastate city revenues and zoning control.
* SB 1743--Temporary Employment Agencies: Seeking to counter the trend of employers using temporary workers in place of full-time staff employees, the California Labor Federation (AFL-CIO) persuaded state Sen. Patrick Johnston (D-Stockton) to propose this strongly contested bill. It would require temporary employment agencies to reveal in paychecks the hourly fee they charge employers.
“It’s right-to-know legislation,” said labor federation President Tom Rankin. “It’s a tool for workers to find the best-paying agency.”
The temporary employment agencies perform a limited function yet siphon off money that could go to workers, Rankin argued, a charge countered by the temporary agencies that say they do more than simply pass along wages. They seek and compete for the jobs from companies, recruit job seekers to fill them, pay taxes and workers’ compensation costs, bear liability responsibility, process W-2s and comply with state and federal labor laws, all high-cost tasks.
“The companies are paying for our service, not just the cost of employees,” said Shannon Ellis, a member of the California Assn. of Temporary and Staffing Services.
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Times staff writer Vicki Torres can be reached at (213) 237-6553 or via e-mail at vicki.torres@latimes.com
