Legislative Analyst's Office

Analysis of the 2001-02 Budget Bill

Technology, Trade, and Commerce Agency (2920)

The Technology, Trade, and Commerce Agency, created in 1992, is the state's primary economic development entity for promoting the establishment, retention, and expansion of business, employment, and international trade in California. It promotes tourism and foreign investment as well. The agency also has been designated as the entity leading the state's efforts in defense conversion.

The budget proposes expenditures of $331.2 million from various funds, including $100.9 million from the General Fund, for the agency in 2001-02. The total budget is $16.4 million, or 4.7 percent, less than estimated current-year expenditures. This decrease is due primarily to an $8 million reduction in one-time General Fund expenditures for the Small Business Loan Guarantee program and an $8.9 million reduction in spending for the removal and replacement of underground storage tanks.

Vague Proposal for Consultant Funds for Military Base Retention and Reuse

We recommend that the Legislature (1) delete $100,000 of the requested contract funds because they are proposed for lobbying activities and (2) approve the remaining $400,000 request for contract funds for one year only because the agency has not provided a more definite plan for the funds. (Reduce Item 2920-001-0001 by $100,000.)

The budget proposes $3.6 million General Fund in each of the next two years for the Office of Military Base Retention and Reuse, which was established by Chapter 952, Statutes of 1998 (AB 639, Alby). This amount includes:

Chapter 425, Statutes of 1999 (SB 1099, Knight), created the California Defense Retention and Conversion Council and specified particular activities related to retaining existing military bases and converting closed military bases for other uses. During last year's budget process, the Legislature approved $100,000 in consultant funds each for 2000-01 and 2001-02 for projects required by Chapter 425, including a study on the encroachment of development upon military bases, development of a base retention strategic plan, and an update of the existing base reuse strategic plan. However, according to the agency, the budgeted funds are not sufficient to complete these required reports. Thus, the agency proposes an additional $500,000 in contract funds for each of the next two years to develop the state's base retention efforts for anticipated base closure decisions. This funding includes $300,000 for data collection and research-related work, $100,000 for "development of a clearinghouse" for information related to the federal Department of Defense, and $100,000 for lobbying activities—"marketing, travel, congressional/legislative interface and Department of Defense networking."

Although the proposed research and clearinghouse activities are authorized by Chapter 425, the agency should have more definite plans for the proposed additional consultant funds to better inform the Legislature of planned retention-related activities. Consequently, we recommend approval of the funds requested for these purposes for the budget year only. In addition, it is not clear why the agency needs to spend consultant funds on lobbying activities, given the state's representation by the California congressional delegation and the presence of the Governor's Washington, D.C. office. Therefore, we recommend that the Legislature delete the $100,000 for lobbying efforts and approve the remaining $400,000 requested for one year only. Future funding requests should include more detailed plans as these retention programs authorized by statute get underway.

Augmentation Proposed for the California Technology Investment Partnership (CalTIP) Program Lacks Specifics

We recommend that the Legislature delete the $6.2 million request to augment the California Technology Investment Partnership program because the proposal lacks necessary specifics to keep the Legislature informed of proposed program activities. (Reduce Item 2920-001-0001 by $6.2 million.)

The budget proposes a $6.2 million increase in funding for the CalTIP program. The program is budgeted at $8 million in the current year—$6 million in ongoing funding, and a one-time additional $2 million allocation. The CalTIP program provides matching grants of about $200,000 on average to small- and medium-sized businesses receiving federal grant funds to assist in the development of marketable technologies. The $6.2 million requested includes:

This proposal lacks firm plans for the proposed funding. First, according to the agency, as much as $1.5 million of the $5 million for additional grants may be set aside for four existing university-affiliated institutes that provide small technology-related businesses access to research and development activities. (These institutes are located at the California Institute of Technology; University of Southern California; University of California, San Diego; and University of California, Berkeley.) It is not clear what specific activities this would entail or how the funds would be allocated. Similarly, the agency states that the RTA funding is for administrative costs and expanding the "geographical coverage of the RTA network" by establishing new centers. The agency mentions Sacramento, the San Joaquin Valley, and the Inland Empire as areas that are underserved by the existing RTAs. However, the agency has not made a specific RTA proposal to justify the requested funds.

With respect to the outreach and communications request, funding for these items should come from the program's or agency's existing allocations. In particular, we note that the agency received funding and positions in the current year for Web site development. With respect to the auditing request, the current auditing performed by DOF should be sufficient. Thus, the request for additional audit funds is not necessary.

Given the concerns discussed above, especially the lack of definite plans for the proposed funding, we recommend that the Legislature delete the $6.2 million request.

Return to General Government Table of Contents, 2001-02 Budget Analysis