How do state legislators nurture Californians' entrepreneurial spirit? Where do political principles come into play? PT asked Assemblyman Juan Arambula, Chair of the California State Assembly Committee on Jobs, Economic Development, and the Economy.
PT: How do policies governing small business startup/growth reflect our traditional commitment to entrepreneurial freedom and innovation?
Arambula: Small businesses are a very significant part of the California economy. Ninety percent of all California businesses are small businesses, and they employ almost half of all the workers in California.
A lot of these small businesses have inadequate financing, and this lack of capital has been one of the reasons for their inability to grow. The lack of financial capacity makes it more difficult to compete against larger firms; particularly when it comes to getting lucrative procurement contracts. An example of that is the inability to obtain assurety bonds.
PT: What can government do?
Arambula: Our state government can and does try to compensate for these challenges…one is to directly funnel capital to these businesses, private equity in particular. We try to provide incentives for others to invest in them, and provide some sort of preferences in government procurement for these types of businesses.
This year I've authored AB1431, which establishes the early stage investment guarantee program, so that these small businesses may more easily attract angel investors, who invest in small start-up businesses, particularly in emerging and domestic markets.
I'm also authoring AB1418, which will encourage state-chartered credit unions, to follow best practices in providing financial assistance services and products to start-up businesses, especially in those communities that have been historically under-served by private investment capitol.
PT: In which areas are we overly restrictive to the detriment of our small business community?
Arambula: I think that we have a better understanding of the regulatory burdens and the costs on small business now. We've seen over the last 10 years, at the federal level, a study that analyzes the cost of federal regulation on businesses—what they've shown at the federal level is that small businesses bear a disproportionate share of the cost of regulation.
Last year, I introduced bill AB2330, which requires the state to do a comparable study to the federal one, and to look at the impact of regulation on small businesses and how we can change what the state does to accomplish the same purposes, but with less of a burden or impact on small businesses.
PT: Explain the legislative balance between encouraging small business growth and providing protections for labor, environment and competition, for example.
Arambula: I always try to find a win/win, and small businesses have to meet the same requirements as other businesses when it comes to public health, working conditions, unfair competition, accommodations for the disabled and so on. I do think that we should be looking for ways to make sure that all businesses, regardless of their size, abide by and respect these laws.
I also think that the state government can try to use its power to turn these requirements for health and safety into economic development opportunities for small businesses. For example, I'm authoring AB1455, which would authorize incentives for small business owners who address the mobile and stationary sources of air pollution.
PT: Can you describe some of the challenges and/or advantages entrepreneurs and small businesses may experience in California that they may not experience elsewhere?
Arambula: We do have a strategic west coast location that provides us direct access to many growing markets in Asia and other parts of the world. We are also a state with very diverse regional economies.
Historically, we've also had access to venture capital and other private capital as witnessed through Silicon Valley and start-ups that started in someone's garage. We have this great willingness to invest in cutting-edge technologies.
PT: How does helping small businesses fit into a greater legislative objective?
Arambula: Well, small businesses are owned by small business owners who are constituents; to the extent that they are successful, the state's economy is successful.
Being a legislator is about trying to help people. Trying to help people is making sure that they have a way to provide for themselves, put a roof over their heads and food on their table. We have a large number of entrepreneurial, risk-taking individuals in California who want to be their own bosses, who want to start their own companies. Looking over the last couple of years, we see that small businesses represent the vast majority of the jobs that have been created.
PT: Assemblyman, thank you for your time.
Juan Arambula represents California's 31st Assembly District. He is the chair of the Jobs, Economic Development and the Economy Committee, and a member of Budget Subcommittee No. 4.