AN ACT Relating to the Washington state self-employment loan program; adding a new chapter to Title 43 RCW; and making an appropriation.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that:

(1) The existence of poverty within the state is of substantial public concern, posing a serious threat to the safety, health, and welfare of the state's residents, causing significant public expenditures, and jeopardizing sources of public revenue;

(2) Self-employment is a realistic means by which some low- income persons can escape poverty and the cycle of dependence that traditional welfare programs may perpetuate; and

(3) Insufficient opportunity currently exists for those in poverty to become self-employed, due primarily to their unique training and financial needs.

Therefore, the legislature declares that there is substantial public purpose in providing training and capital to promote the self-employment of low-income persons in Washington. To accomplish this purpose, the legislature creates the Washington state self-employment loan program.

NEW SECTION. Sec. 2. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Committee" means the Washington state self-employment loan program committee.

(2) "Department" means the department of community development.

(3) "Director" means the director of the department of community development.

(4) "Local development organization" means a nonprofit organization that operates within an area, demonstrates a commitment to long-term economic development efforts, and makes a demonstrable effort to assist in the employment of unemployed and underemployed residents in the area.

(5) "Low-income individual" means any person:

(a) Whose personal income is no greater than fifty percent of the median personal income for the county where the person resides or who is a member of a family whose income is no greater than fifty percent of the median family income for the county where the person resides; or

(b) Eligible to receive cash welfare payments under any federal, state, or local welfare program or is eligible to receive food stamps.

NEW SECTION. Sec. 3. The Washington state self-employment loan program committee is established within the department of community development.

(1) The committee shall have seven members. The director shall appoint the members, subject to the following requirements:

(a) Two members shall be experienced in community-based economic development and have skills in providing community services through a local development organization;

(b) Two members shall be from philanthropic entities with a history of service or funding to community-based economic development organizations;

(c) One member shall be from a financial institution and be experienced in small business finance and in providing technical assistance to new businesses;

(d) One member shall be from an educational institution with a history of providing education and training for new small business owners; and

(e) One member shall be from the department of social and health services and be appointed in consultation with the secretary of that department.

In making these appointments, the director shall give careful consideration to ensure that the various geographic regions of the state are represented and that members will be regularly available for meetings and will have a commitment to working with local government entities and local development organizations.

(2) Each member appointed by the director shall serve a term of two years. A person appointed to fill a vacancy of a member shall be appointed in a like manner and shall serve for only the unexpired term. A member is eligible for reappointment. A member may be removed by the director only for cause.

(3) The director shall designate a member of the board as its chairperson. The committee may elect other officers it deems appropriate. Four members of the committee constitute a quorum and four affirmative votes are necessary for the transaction of business or the exercise of any power or function of the committee.

(4) The members of the committee shall serve without compensation, but are entitled to reimbursement for actual and necessary expenses incurred in the performance of official duties in accordance with RCW 43.03.050 and 43.03.060.

(5) Members shall not be liable to the state, to the fund, or to any other person as a result of their activities, whether ministerial or discretionary, as members except for willful dishonesty or intentional violations of the law. The department may purchase liability insurance for members and may indemnify these persons against the claims of others.

NEW SECTION. Sec. 4. Subject to the restrictions contained in this chapter, the committee is authorized to solicit and approve applications of local development organizations for funds which the local organization will use within a self-employment program as a revolving loan fund to finance the small businesses of low-income individuals within their jurisdiction.

NEW SECTION. Sec. 5. The committee shall approve those applications for funds that meet the minimum standards set forth in this chapter and that will best serve the intent of this chapter to provide self- employment for low-income persons in Washington state.

(1) The committee shall not approve any application for more than sixty thousand dollars.

(2) In the first year of each biennium, the committee may approve distribution of up to one-half of the fund appropriated to carry out the purposes of this chapter, with the remaining funds distributed in the second year.

(3) The committee may approve up to two applications from a single organization, but only one each biennium.

NEW SECTION. Sec. 6. An application to the committee shall include, but is not limited to:

(1) A detailed description of the need for a self-employment program in the area served by the applicant organization, including economic conditions and other characteristics of the community which the program would address;

(2) A detailed description of the applicant organization and its capacity to administer a self-employment program that includes a revolving loan fund. Relevant information may include the organization's standing in the community, its experience with low-income persons and in business training and development, its fiscal record, its relationship with other community organizations and governmental entities, and its staff resources;

(3) A detailed description of the self-employment program into which the revolving loan fund will be incorporated, including, but not limited to, a description of:

(a) The criteria and procedure by which program participants will be selected, explaining any particular groups that will be targeted and why;

(b) The personal and business training that will be provided program participants, including curriculum, schedule, training providers, and how this training will meet the unique needs of the community's low-income individuals wishing to become self- employed;

(c) The loan process, including the criteria and procedure by which applicants will be screened, general terms of the loans, and the means by which the organization will facilitate timely repayment; and

(d) Any oversight, social support, and follow-up assistance to be provided program participants who have been trained or provided loans.

(4) Any other information the committee deems necessary to fully evaluate an organization's ability to carry out the purpose of this chapter.

NEW SECTION. Sec. 7. Any local development organization receiving funds under this chapter shall:

(1) Use the funds only in a revolving loan fund to finance the businesses of low-income individuals participating in the organization's self-employment program;

(2) Provide no loan out of these funds of more than five thousand dollars;

(3) Charge a reasonable rate of interest on loans provided out of these funds, using interest payments received for program administrative costs;

(4) Annually submit to the committee a detailed report on the progress and status of the self-employment program and loan fund including, but not limited to:

(a) A description and explanation of any changes in the program from the original application;

(b) The number and characteristics of participants in the program, including their training status;

(d) The number and size of loans provided, the terms of the loans, and their repayment status;

(e) A self-evaluation detailing the strengths and weaknesses of the program and what the local development organization will do to improve the program in the following year;

(f) Any other information the committee deems necessary to:

(i) Evaluate the effectiveness of the program in carrying out the intent of this chapter; and

(ii) Determine the program characteristics that have contributed to or detracted from such effectiveness.

NEW SECTION. Sec. 8. If the committee finds that an organization to whom funds were distributed under this chapter is unable to meet the intent of the chapter, the committee may require that such funds be returned to the department for redistribution by the committee.

NEW SECTION. Sec. 9. The department shall:

(1) Provide adequate and appropriate staff, technical assistance, and other support to the committee;

(2) Maintain a record of committee proceedings;

(3) Work with local development organizations to promote applications to the committee for funds; and

(4) Adopt rules appropriate for the committee to carry out its authority under this chapter.

NEW SECTION. Sec. 10. Community colleges, the office of the superintendent of public instruction, the employment security department, the department of trade and economic development, and the department of social and health services, when requested by local development organizations, shall provide appropriate support, cooperation, and training resources in the design and implementation of self-employment programs under this chapter.

NEW SECTION. Sec. 11. The committee shall biennially report to the appropriate standing committees of the legislature on the progress and status of the self-employment loan program. The report shall include sufficient data to evaluate program effectiveness, including, but not limited to, a compilation and summary of the annual reports submitted by local organizations pursuant to section 7(3) of this act.

NEW SECTION. Sec. 12. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 13. The sum of six hundred fifty thousand dollars, or as much thereof as may be necessary, is appropriated from the public facility construction loan revolving account authorized by RCW 43.160.080 to the department of community development for the biennium ending June 30, 1991, to carry out the purposes of this act. No more than fifty thousand dollars of this appropriation may be used by the department for administration of the program, with the balance of the appropriation distributed to local development organizations in accordance with this act.

NEW SECTION. Sec. 14. Sections 1 through 11 of this act shall constitute a new chapter in Title 43 RCW.