2021 California Legislative Session

by Mark Herbert, Managing Director, and Bianca Blomquist, Senior Policy & Engagement Manager, California, Small Business Majority

California’s landmark 2021 legislative session produced a number of significant victories for the state’s small and microbusiness owners. The state continues to create, innovate, and deliver critical resources and programs designed to break down barriers to systems for small business owners.

Governor Newson’s Critical Investments in Small Businesses
In mid-July, Governor Gavin Newsom signed a bold $262 billion budget package -- the California Comeback Plan. This package included a historic $100 billion dedicated to stimulating the state’s recovery through several targeted investments such as $1.5 billion to renew the California small business grant relief program. Additionally, $50 million was allocated for I-Bank lending programs that will leverage federal dollars to help small businesses to expand their enterprises, including the California Rebuilding Fund (CARF), which will help business owners access capital for long-term recovery.

Although many of the programs included in the package were in response to the pandemic, programs such as the CARF will be instrumental in addressing systemic credit gaps and long-term capital needs that Small Business Majority will continue to support and advocate for in the long term. These direct investments will put critical money into the pockets of hundreds of thousands of small business owners who could then use these funds to recruit and retain a talented workforce.

Additionally, millions of dollars are being deployed to combat the digital divide for small business owners in under-resourced areas of the state. Necessary funding has been allocated to expand broadband access to entrepreneurs who are growing the online customer base they built during the pandemic. The California Comeback Plan deployed immediate relief to two-thirds of Californians with stimulus payments and provided unprecedented support for small businesses.

Leveling the Playing Field for Small Businesses, Increasing Access to Capital
Necessary policies and programs were funded months after our research found that California small business owners faced difficult decisions as the pandemic continued to ravage their potential revenues and disrupt their business operations. In late December 2020, more than 60% of small business owners reported not being able to restore their headcount to pre-pandemic levels. These numbers were more daunting for small business owners of color who already struggled to access capital before the pandemic. Our research found that before the pandemic, 28% of small business owners of color, compared to 19% of white business owners, did not have a relationship with a bank or credit union. And when seeking out capital during the pandemic, business owners of color were more likely to experience setbacks and discrimination than their white counterparts. As a result, 17% of entrepreneurs of color reported that they were likely to close their business permanently within the following months. Unfair policies and the lack of access to capital were underscored as the root cause of why so many business owners of color struggled with federal loan programs. This made the historic programs that were implemented and funded under the Comeback Plan even more integral to sustaining a thriving local and inclusive economy.

As the pandemic surged, California small business owners grappled with questions about how to retain their workforce while navigating the challenges associated with changing public health requirements and lockdowns. The bills signed into law and the programs funded during this legislative session will help mitigate additional business disruptions, level the playing field for small businesses, and spur entrepreneurship. For instance, the California Microbusiness COVID-19 Relief Grant Program (MBCRG) was created to assist qualified microbusinesses significantly impacted by the pandemic. Through a one-time grant, approximately $50 million will be dispersed to microbusinesses and entrepreneurs throughout the state. Small Business Majority works to empower America’s diverse entrepreneurs, so we know that creating robust opportunities for small business owners who have historically been left behind by traditional funding systems -- such as women, minorities, veterans, individuals without documentation, individuals with limited English proficiency, and business owners located in under-resourced and rural communities -- will be critical to building a thriving and equitable economy, within California and throughout the country.

Other Big Wins
Other significant points within this session included passing legislation that will help to increase fair competition for small businesses. Some of the significant bills passed include: “AB 286”- regulating fees charged by food delivery platforms, and “AB 1444” - prohibiting unscrupulous practices by food delivery platforms. Both bills were introduced to help small restaurants with limited resources push back on common tactics monopolists use to stifle small businesses.

Additional wins for small businesses advanced during the 2021 California legislation, in partnership with Governor Newsom, include the following:

• $150 million for the California Venues Grant Program
• $35 million for the California Dream Fund program to seed entrepreneurship and small business creation
• $10 million for the Social Entrepreneurs for Economic Development (SEED) grant programs - delivers grants to immigrant entrepreneurs, regardless of immigration status, to pursue workforce development
• 14% increase in funding to Women’s Business Centers through the Technical Assistance Expansion Program (TAEP)
• “AB 865” - reimburses child care providers based on the maximum number of certified hours of need, rather than actual hours of care provided
• “SB 4” - provides $150 million to promote projects that focus on bringing quality internet access to small businesses in under-resourced communities

A Look Ahead
While this year’s California legislative session produced fruitful opportunities for small business owners to thrive, we are disappointed that a few important bills were pushed to next year or did not pass during this session. For example, “AB 1132” allows for oversight over hospital consolidation, which will significantly contain rising health care costs and protect access to care. And “AB 1130” would have established the Office of Healthcare Affordability to help manage healthcare costs throughout the state. Across the country, small businesses have struggled to access health coverage, and 34% of small businesses reported that obtaining health insurance coverage during the pandemic was a challenge. Access to affordable and quality healthcare remains an essential component to the success of a long-term recovery for small businesses and must be included in future legislation efforts.

After such a busy legislative session, we hope Governor Newsom remains steadfast in his efforts to implement another historic budget in the 2022-23 session. Small businesses are counting on the Governor and the members of the California legislature to invest in robust policies and programs that ensure entrepreneurs have the resources they need to contribute equitably to the California economy. We look forward to passing a number of bills in the next legislative session.