HOUSE BILL REPORT

3SSB 5203

BYSenate Committee on Economic Development & Labor (originally sponsored by Senators Anderson and Lee)

Establishing the Washington state self-employment loan program.

House Committe on Trade & Economic Development

Majority Report:  Do pass as amended.  (13)

      Signed by Representatives Cantwell, Chair; Wineberry, Vice Chair; Doty, Ranking Republican Member; G. Fisher, Kirby, Kremen, Moyer, Raiter, Rasmussen, Rector, Schoon, Tate and Youngsman.

House Staff:Charlie Gavigan (786-7340)

AS REPORTED BY COMMITTEE ON TRADE & ECONOMIC DEVELOPMENT

FEBRUARY 23, 1990

BACKGROUND:

Beginning in the early 1980's, a number of programs were developed in this country based on the assumption that some low income persons, many dependent on traditional welfare programs, have the potential for self-sufficiency through self-employment.  These programs suggest that appropriate training and minimal financial assistance can help those possessing such potential.  The Washington Department of Employment Security is involved in a federal Department of Labor demonstration project to assist unemployed persons in establishing their own business.  No program exists to build this capacity on the local level.

The state or local governments are precluded from providing direct support to businesses and individuals by lending of credit prohibitions in the state constitution.  These provisions do not allow the public to make gifts or loans to private persons or businesses.  An exception to this is providing aid to the poor "or" infirm.

SUMMARY:

BILL AS AMENDED:  The self-employment loan program committee is established in the Department of Community Development.  The committee will solicit and approve applications for funds from local development organizations to use as a revolving loan fund to finance the small businesses of low income persons.

The committee will award funds to local organizations on a competitive basis.  Applications to the committee must include: 1) a detailed description of the need for a self-employment program in the particular community; 2) a detailed description of the applicant organization and its capacity to administer a program; and 3) a detailed description of the loan procedure and the self-employment training and support program into which the loan fund will be incorporated.

The committee may not approve any application for greater than $60,000.  The committee may grant up to two awards to a single organization, but only one per biennium.  The committee may withdraw an award if an organization fails to meet the purposes of the act.  It must report biannually to the Legislature on the progress and status of the overall program.

An organization may provide loans from awarded funds of no greater than $5,000.  It must report annually to the committee on the progress and status of its program.

The act is null and void unless funded in the supplemental budget.

AMENDED BILL COMPARED TO THIRD SUBSTITUTE:  The amendments:  (1) limit the Department of Community Development's administrative expenses to 10 percent of appropriated funds; and (2) specify that the local organization must describe the procedures for verifying that individual applicants are low income and are likely to repay the loan.

Fiscal Note:      Requested February 20, 1990.

House Committee ‑ Testified For:    Senator Ann Anderson, prime sponsor of original bill; and Carol Bergin, Puget Sound Cooperative Federation.

House Committee - Testified Against:      No one.

House Committee - Testimony For:    Similar programs have been very successful in Snohomish County and in other states.  Many low income persons can often become self-sufficient as self-employed persons with a small amount of up-front assistance.

House Committee - Testimony Against:      None.