Senate Select Committee on Select Committee on Minority Economic Development

Testing, 1, 2.

Good afternoon, everyone. I feel so far away from all of you, but thank <inaudible> today. What an honor to have all of you joining us for this very important hearing. The Committee on Minority Economic Development will now come to order.

I want to thank once again all of those that are from the area, those that came from far. This is such an important conversation and I do <inaudible> The San Gabriel Valley and portions of San Bernardino County. I want to highlight that this committee's mission draws on compelling evidence we've heard. Investment in minority-owned businesses, especially Latino-owned businesses, generate greater returns for California.

The latest research shows U.S. Latino GDP reached 4.1 trillion in 2023, and it's growing faster than the overall national economy, with Latino consumers' spending alone topping $2.7 trillion. Such skill and momentum demonstrates that Latino entrepreneurship, labor, and purchasing power are not marginal. They are central to the economic vitality of our state and also of our nation.

In the face of rising cost, shrinking margins, and systematic inequalities, it is our responsibility, not only as leaders but community members, to ensure that policy, capital, and opportunity is aligned to support these businesses. By doing so, we do more than sustain individual businesses.

We strengthen local communities, support their families and reinforce the foundation of a stronger, more inclusive economy. We already had two hearings earlier this year. The first was held in Sacramento.

We heard directly from small businesses and policy experts about the barriers, and still some so many issues facing our small businesses, but also with a particular focus in increasing procurement opportunities for these small businesses, both in public and private sector. The second committee hearing was held in Los Angeles.

That committee was focused on bringing together creators and innovators to discuss how California can expand access to opportunity, in particular in the entertainment industry. Both hearings have already given us a much clearer understanding of the challenges that are shaping minority economic development in our state.

The insights we gain have already been instrumental in shaping and informing policy that we plan to bring forward and also strengthening the pathways to entrepreneurships. Today's hearing will add another layer, and that is as it pertains to access to capital.

Once again, I want to reiterate that myself, along with my colleagues, are committed to ensuring that the laws and policies reflect the reality that minority-owned businesses are among the most effective engines of growth and stability for this state.

Before I proceed with the first panel, I would like to invite Dr. Hayes-Bautista from UCLA to join us for a few words. He has been the leading force behind the research in Latino GDP, and we are very thankful for the information you've already provided. And when you're ready, you may proceed. Thank you for being here.

Thank you so much, Senator. <inaudible> insight into a report we'll be releasing next week on Latino-owned businesses <inaudible> literally just hot off the computer which points out <inaudible>

<inaudible> this is the growth of both the non-Hispanic White population in Los Angeles County. You notice how it started growing about 1920 for about 40 years, grew, hit about 8.8 million, has now fallen off. Then, 50 years later came the Latino growth curve, hit exactly the same spot, 4.8 million.

But Latino population growth meant something really important which was Latino business growth. Here we see the growth going back to 1972 of Latino-owned businesses in the United States. And in fact, as we look from 2007 to 2013--this is U.S. overall--Latino-owned businesses have grown a total of 157%, whereas non-Latino grew only 23%.

That is, Latino-owned businesses grew four times as fast as non-Latino businesses. Now, when you talk about business, particularly in the census world, you have the large businesses, 500 or more employees, you have small businesses that employ people, anywhere from 1 to 499, and then small businesses that don't yet <inaudible> body.

So let's look at where most Latino businesses are located, the 1 to 499 employees. From 2007 to 2023, Latino small-employer businesses had an average growth rate--average, that's over 15 years of 6.1% year over year <inaudible>

If you're going to make an investment, are you going to invest in something that grows only 1.3 <inaudible>. In fact, as we look more recently, year over year from 2018 to 2023, and this covers the Covid, as we see, Latino employer firms grew every single year, whereas in 2020 and 2022, actually non-Latino firms shrank.

<inaudible> weathering even Covid. Now, what's important and where the real opportunity is, overall, about 4 out of 5 businesses in the U.S. have zero employees. None. This includes Latino. Sometimes, it's just one person doing something, but Latino-owned businesses with zero employees tend to look a little bit different. As we look at the non-employee small business, that has significant growth in Latino. Non-Latino, ever since about 2021, tends to be Uber drivers, Lyft. So they're never going to employ another person.

They're always going to have zero employees. Whereas Latino employers without businesses without employees usually have family. Family pitches in, they help it grow, but they're not getting paid. And here's where the big growth curves in. Once a business grows large enough, it can actually hire that first employee. Then they start doing income tax.

They have to deal with benefits, HR. That's a big step to go from zero to one employee. <inaudible> really, really well-positioned to take that step. They're going to grow. They often have their volunteer employees or volunteers helping out. They just need to grow enough to get that first employee.

Then they really take off. So this is some of the new data we're going to be featuring when we get our dashboard up and running, but we want to make sure we understand this is where the growth, this is where investment really pays off is in Latino small businesses. Thank you very much.

Thank you so very much for that information. You always bring such wealth of knowledge, which we really appreciate. I was really taken aback by the information you just provided, and we hope to keep you around in case there's questions, so thank you so much.

At this point, unless anyone has any questions, he wasn't supposed to be in the agenda, but because I know that the information we got is really important, I will allow any questions from the audience if anybody's interested. Okay, we're going to move forward. Thank you so much, once again. Appreciate the information.

Now we're going to invite the first panel up that's going to discuss traditional access to capital. Once again, this committee hearing is focused on how do we expand that access. I would like to invite up, Jennifer Garcia, Raul Anaya, and Ash Patel.

I will start with sharing a little from Jennifer Garcia, a Latino Entrepreneur Institute from Stanford. Thank you so much for being here. Jennifer is the founder of Fluential Leadership, elevating small to medium-sized business <inaudible> performance strategies <inaudible>. We also have Raul Anaya from Bank of America.

Raul Anaya is president and co-head of Business Banking, one of Bank of America's eight lines of businesses. And with us as well is Ash Patel, Commercial Bank of California. Ash Patel serves as chairman of the board, and CEO, and president of Commercial Bank of California.

<inaudible> years of banking experience, from entrepreneurial orientation to banking with small businesses. Welcome to all three of you, and I would like to invite first, Jennifer Garcia, to share a few words. Thank you for being here today.

Thank you, Madam Chair and members of the committee. Pleasure and honor to be here with you today. I am representing Latino Business Action Network, where I am the COO. We are a nonprofit organization with a mission to grow the U.S. economy by empowering Latino entrepreneurship across the country.

What we do is we partner with Stanford University to really understand the operating environment for businesses nationwide. We conduct research, and I do want to point out the research that you will hear from me today is all employer-based firms. So Dr. Hayes-Bautista outlined different types of businesses.

These companies will be companies that have a minimum of one employee. We are in our eleventh year of conducting research. We have made public-- we have made reports available for the public good <inaudible>.

In addition, we run a couple different programs also at Stanford University for businesses all across the country that will help them grow and scale their company to the next level. And thirdly, our focus is <inaudible> to capital, access to procurement opportunities and <inaudible>.

I want to start by providing an overview of the Latino landscape. If we look, and some of this was already recently reported, we have over 65 million Latinos in the U.S. contributing to a 4.1 trillion GDP.

If I take that, and if I can draw your eyes to the upper left hand corner, we have over 5 million Latino-owned businesses. In conjunction, they are contributing 800 billion in revenue, again, across the country. Now we began to look at, where is that growth? How are businesses growing?

And we can see that over the period of the last five years, recent five years, Latinos have started new businesses at a rate of 44%, where again, affirming previous numbers, where White-owned businesses contracted in that same time period. So when we think about where new business formation is coming from, it is coming from the Latino segment.

We also look at how revenues are growing and <inaudible> percent, where White-owned businesses are growing at 5.6%. Now we went further, and we wanted to look at how is that impacting jobs across the country?

<inaudible> almost doubling the amount of job creation <inaudible>. One thing that you don't see on this screen, but we looked at within our research is the types of jobs that are being created, and so we created an index based on benefits, based on career mobility, insurance, and education, and we saw on average that jobs created by Latino business owners tend to be better jobs than White-owned businesses.

Of course, we might all know this, but why is entrepreneurship important and why are we focused on growing this segment of businesses? We have found that for Latinos who are business owners, they generate nine times more wealth than Latinos who are non-business owners.

And we look at the opportunity gap, which is if we can get Latino businesses to perform at the same level, not, you know, not surpassing, but just at the same level, we could add $1 trillion to the U.S. economy within 12 months. So that becomes a benefit that our entire country can-- that our entire country would value.

Here is a quick overview of some of the challenges that we have identified within our research, and I will go into all of these in more detail. The first one is access-- the first two actually are access to capital, where we found that Latinos are <inaudible> national bank.

We also see that Latinos, where they over-index in tech related companies, venture backable companies, they are receiving less than 2% of VC capital. And last challenge is <inaudible> contracts and found that for Latinos who are receiving government contracts, they tend to be 31 times smaller than the national average. So let me dive in a little bit to some of these numbers.

It's important to identify the types of funding that is being sought. All of this data that I'm presenting is survey-based data, which means we have surveyed over 10,000 business owners nationally to get an understanding of what their experience with capital is.

You can see both for Latino and White-owned businesses that the more expensive capital is often sought after at a higher rate, being credit cards. And if you draw your eyes to the right hand side of this graph, you can see CDFIs, or other lenders, which might offer more affordable capital, is much less sought after. We also looked at the approval rates, and this is important to know.

You know, as businesses apply for loans, are they getting approved and are they getting approved to the full extent? <inaudible> sizes less than $50,000 is the area where Latinos are actually experiencing a higher approval rate, less than $50,000. Anything above $50,000 <inaudible> have a lower approval rate than the White counterpart.

And you can see the biggest gap <inaudible>. We also then looked forward to, if they are not receiving funding-- if they are not receiving full funding or any type of funding from banks, are they being provided any <inaudible>.

You can see here that nearly half of Latinos reported that they do not receive an explanation or any feedback, and in comparison, White-owned businesses reported-- over 87% of White-owned businesses reported that they do indeed receive feedback.

This type of lack of transparency can certainly leave many business owners in the dark and limit their ability to secure funding in the future. Pivoting now to procurement opportunities, we can see here that proportion of businesses receiving new government contracts in the last year, so these are business owners who reported at least one government contract.

<inaudible> we can also see that within the states, Latinos are less likely to get a government contract than their White counterpart at 8% versus 13%. And finally, I mentioned <inaudible>. When we look at the size that White-owned businesses <inaudible> to Latinos, we find that they are 31 times smaller.

This is an opportunity, certainly a challenge that our business owners are experiencing, but an opportunity that we can all contribute to to create greater <inaudible>. I want to highlight LBAN, the model that LBAN, Latino Business Action Network, what we have found to be our approach in solving some of these challenges.

Certainly, as indicated here, we start with research because it's important to draw awareness, create awareness to the challenges, because once we have an understanding, we can then apply principles, policies, processes that can help create a better environment.

We produce a report every year and we also host a forum, a research forum every March. Additionally, I mentioned we run two different programs at Stanford. It's an educational-- executive educational program offered at Stanford, led by Stanford professors, and we run a startup accelerator for early stage venture-backable companies.

And the third area of our model is the ecosystem, and I would argue that this is probably the most important part. This is the area where we partner with national banks. <inaudible> and other field builders to create environments and create access that's going to <inaudible> create access to capital, procurement, and networks. I will leave you with a few recommendations <inaudible>.

<inaudible> greater awareness and funding to CDFIs and alternative lenders. You saw in one of those earlier slides, there is a low sought after rate for CDFI-- for capital from CDFI, so being able to increase the awareness of that type of institutions.

Also, policies that enhance transparency in the lending process, particularly on funding denials, policies that encourage public funds to invest in emerging and diverse fund <inaudible> effect which increases capital available to diverse founders, conduct and publish disparity reports for government and corporate procurement and encourage supply chain diversification.

And lastly, increase funding for ecosystem builders and network organizations; again, the likes of chambers, the likes of technical assistance programs, or organizations that are supporting the growth of businesses. Thank you very much.

Thank you for all this information. I really appreciate not only the information you're sharing, but clearly we have some ideas here that can be translated into policy, and that's been the goal since the beginning of this committee.

When we formed this committee, was not just to hear the information, but transfer that information into actionable items that are going to be better for small businesses. But thank you for that. I have to take a moment to apologize. We did have a committee panelist that dropped out last minute.

So I wanted to introduce Mr. Colella--am I saying it correctly? Okay; who has 15 years of banking experience in Southern California. He has extensive knowledge of credit origination and business banking. Additionally, he has over 10 years of banking regulatory oversight experience as well. And my apologies because, again, we had a different agenda. So I just want to take a moment to say, I'm so sorry. There's a lot of lights here, and clearly I didn't see see you, thinking you're Mr. Patel, so--

That's kind of you. Thank you very much. No apologies necessary. Thanks.

Thank you. And again, as we're moving through these panels, I really want to encourage a little bit of what we just heard, not only the discussion, but on the back end, I would love to hear some of your ideas on how we solve the problem.

You know, we're going to bring, you know, my ideas, your ideas together to the table. The last committee hearing that we had was very fruitful. We had conversations after we left, myself and the other Senators, and we were already strategizing on what we can do better ourselves to ensure that we bring awareness, as you mentioned.

A lot of the times is basically the awareness piece that that can go a long way. So again, thank you for that, and as we move forward, I encourage everyone to leave us with some thoughts and ideas. I'm going to now move forward to Raul Anaya from Bank of America. Raul, when you're ready.

Yeah. Thank you, Madam Chair--

--for the opportunity, and we've been longtime supporters of LBAN, the Latino Business Action Network, and so, they do amazing work and we're very proud of the work that they do and how we've actually introduced many of our clients from across the country, especially in California, to participate in some of these programs.

You may proceed. Thank you.

I've got two points that I wanted to make and then one suggestion to be considered in the spirit of providing more opportunities for access to capital available to small business owners.

So the two points that I want to make, you know, as a bank, as Bank of America, we're very, very proud of our track record here in California, being in California for more than 110 years. But two points: one, we are the largest lender to small businesses in the country for 17 consecutive quarters, and that's based on public information from the FDIC.

In California specifically, we are also the largest lender to small businesses in California with a portfolio of over $9 billion. There's many reasons behind that. One is we're big proponents of the SBA and making sure that we can provide as much capital as possible through the SBA program.

And in 2024 and in 2025, we were the largest provider of SBA 504 loans among the top four banks in California. In fact, we grew our SBA book production from 24 to 25 by 18%. So very, very proud of that. And so how do we do that? We are very intentional with our outreach.

We've got 13 market presidents in California. I'm the market president, as you know, in Los Angeles, and so, very, very involved with the community, with various business advocacy organizations, and we have 12 other market presidents throughout California that do the same thing.

We host business-owner summits, and some of these business-owner summits are actually with Latino Business Action Network, where they bring some of their clients, or their attendees, program participants. We invite our clients as well, and we host sessions around how to create a business plan, how to leverage technology, how to drive sales through digital channels, things like that around though leadership programs.

We'll host various CEO dinners, having 12 to 15 CEOs around a table, talking about the opportunities and challenges that they have, and then facilitating a conversation of how Bank of America can help them continue to grow and scale their business.

And then lastly, I would say that we're very intentional in how we invest our sponsorship dollars. We are the official bank of FIFA World Cup, and so as you can imagine, we're going to have a lot of small business owners there, both in Los Angeles and in San Francisco, as well as all the other sporting events that we have. So that's one area that we wanted to talk to you about is just being the largest lender to small businesses in California.

The second point that I wanted to make is-- and you're going to be hearing from two venture capital firms that Bank of America invested in after this panel, and that's the venture capital investments that we at Bank of America have made since 2020.

Nationally, they've totaled over almost $600 million, investing in over 160 venture capital funds that predominantly invest in technology based companies. They in turn have invested in 2,500 companies which have in turn employed over 40,000 employees.

That same data in California, we've invested in almost 40 funds, almost $150 million of our own capital, which have, in turn, been invested in 600 small business companies in California who in turn have employed over 10,000 employees. Why do we do this?

It's a way for us to invest our capital to help with economic mobility and to help communities that have historically not benefited from investments in venture capital. You saw the statistic that Jennifer provided earlier on the Latino Business Action Network.

So that's something that we've been trying to address, and it's a way for us to drive growth in small business and create jobs. So those are the two main points. One suggestion for your consideration, Senator, is, you know, when you think about small business owners and the capital that they need, most of them tap into credit cards.

You saw some of the different sources of funding that LBAN's presentation had. One that is widely used is the home equity line of credit. That's a very, very common way for any business owner to tap into the equity of their home to be able to start a new business.

AB 130 is a legislation that quite frankly makes it a little bit more riskier for banks to provide home equity lines of credit, and we can certainly go into the details if you talk to the California Bankers Association, but that might be one area of focus, is for you to look at some of the details within AB 130 to maybe minimize that level of risk that a bank--that all banks, not just Bank of America--can deploy in order to encourage more home equity lines of credit, which in turn is not only for them to help rebuild their home or to improve on their home, but it's also in many cases a source of capital for them to start their business or fund growth capital for their business. Thank you for the opportunity.

Thank you. And if you don't mind, can you go a little into AB 130? We have so many bills. As you're speaking right now, can you share a little bit of, you know, I have the general concept, but for those that are listening-- and I just want to remind our audience that we're also live streaming so we have people tuning in that couldn't make it today. Can you go a little deeper into AB 130 and why is it riskier? Give us a little more context to that?

Yeah. So AB 130, it specifically talks about second lien positions, right? If you think about what a home equity line of credit is, it is a second lien position behind the first mortgage, and some of the provisions in the bill make it.

There are more things that a bank has to take into consideration whenever they have to actually address the collateral. And so there's some suggested language that we would have. And again, talking to the California Bankers Association, because it's not just a Bank of America issue, it's, quite frankly, something for all the banks; having a separate meeting with you and your team or your staff would be ideal for us.

See, this is a kind of information that-- sometimes it's important, I know when we pass bills, the intention is always to support families and businesses, but we don't always get it right, and it's always important for us to hear on the back end how it's impacting the ability for someone to get a loan or for banks to really invest in these businesses. So I wrote my-- we're going to have a separate meeting about this. I really do want to hear a little bit more about it.

And it's important again that I bring it back to my colleagues. I want to just share with everyone that we've been trying talk about the awareness piece. We've been trying to have a committee hearing up and down the state just to ensure that we put a focus on minority-owned businesses.

So again, that's why we had one in Sacramento, Los Angeles. Now we're having it here just to make sure that everyone's aware that we do have this select committee. If anyone has ideas, that's where having these conversations. Please reach out to me, to my office, and we'll make sure that the next committee hearing we have, we'll put a fine-- a highlight on those issues. But thank you for that, and we'll definitely have a separate meeting about that issue. So now I would like to <inaudible> Commercial Bank of California. And when you're ready, you may proceed. Thank you.

Thank you, Madam Chair. I really appreciate being here, and I have no problem with the last-minute change. So as she said, my name is Christopher Colella.

I serve as the bank's EVP Chief Credit Officer of Commercial Bank of California that is proudly the largest Hispanic-American owned commercial bank in the State of California. The bank is actually the third largest Hispanic-American owned commercial bank in the continental U.S., which excludes the two Hispanic-owned banks headquartered in Puerto Rico.

So we're proud of our position in the banking community as Hispanic-American owned bank. We definitely have an interest, a genuine focus on serving the Latino business community. We have total assets of 3.7 billion and a loan portfolio of 2.7 billion, nine branches in Southern California-- excuse me, nine branches in some, five in Southern California, four in Northern California.

My research, I did some research and I could talk about banking specifically, but a lot of the information I came across dovetails very, very, very well with Jennifer Garcia, your information, so that was reassuring, even our recommendations that I have at the end.

But I'll start with the scale of California's Latino economy. It's absolutely tremendous. In 2023, California's Latino GDP surpassed $1 trillion, driving the state from the 8th to the 5th largest economy globally. Latinos now make up 40% of California's population, paying $83 billion in state taxes. Without the Latino contributions, California's GDP would fall behind Ohio and Pennsylvania.

I'll go to labor force. Labor force participation has soared, growing 15 times faster than the non-Latinos. Educational attainment is rising 3.4 times faster than non-Latinos, and Latinos are 5.6 points more likely to be working. They're making huge contributions, small business ownership, representation, and employment.

Latino-owned businesses in California, approximately 85,000 Latino-owned employer firms exist in California, supporting 670,000 jobs and over 25 billion in payroll. Latinas owned employers-- employer firms, excuse me-- increased 23% from 2018 to 2021, and generated 147,000 jobs and $5.9 billion payroll. Unfortunately, it still remains a share in a population disparity.

Only 11% of California's approximately 4 million small employers are Latino-owned, despite Latinos being 40% of the population. Nationally, Hispanic-owned businesses make up 14% of the firms, about 5 million businesses employing 3 million people. In California 932,500 Hispanic-owned business firms in 2023 supported 2.56 million jobs, 82 billion of income.

But again, the point to note is this disparity. Latinos make up 40% of the population and only 11% of the employer firms, and I will have recommendations that dovetail really well with yours by the way. So that was nice to see since we didn't compare notes. A big source of disparity is access to capital, historic and ongoing barriers, and I'll start with pre-pandemic disparities.

Approximately 20% of Latino-owned businesses receive national bank loans of greater than $100,000 versus 50% of White-owned businesses. Latino-owned businesses are 1.5 times more likely to report capital access challenges compared to White-owned businesses.

Pandemic and post-pandemic shocks, the PPP program failed to reach many Latina and minority-owned businesses in California. Less than 20% of Latino applicants received full funding. Banks approved 21% versus 40% of White applicants.

Some root causes and structural inequalities, 70% of Latino-owned startups rely on personal savings, whereas Latino wealth holds only about 14% of U.S. aggregate wealth. Personal wealth constraints and lack of collateral limits the segment's ability to obtain SBA loan credit facilities or qualify for banks' non-governmental supported loans. Another obstacle that Latino consumers and entrepreneurs encounter is being subject to higher cost for credit both in terms of interest and fees.

Which also leads to less building of wealth over time. So Latino entrepreneurs often receive and I think you mentioned this. There's also been studies that shown Latino entrepreneurs often receive less feedback on loan denials preventing future improvement. This all leads to a negative loop reinforcing existing societal disparities. As far as regulation is concerned.

Before I go into some ideas and recommendations, state regulations could be increasing compliance costs for small and Latino firms. So I will say this. Latino owned businesses have been resilient and they do show emergent strength. As mentioned earlier, Latinos outpaced national business growth. 62% growth in employer firms since 2012 versus 8% overall.

Production of goods and services reached 3.6 trillion in 2023, 2022 the fifth largest of the economy. And younger Latino entrepreneurs are increasingly highly educated, tech savvy. Prioritizing mission driven business models and social capital overcomes the barriers. So as far as recommendations, which I'm glad yours are still up there because there's a lot of similarities.

There's no question expanding access to capital includes support for CDFIs and SBA programs targeting Latino firms. I think that's probably the two most important. California needs to find ways to leverage and support CDFIs and SBA programs which originate loans that involve less owner's capital and require less collateral. CDFIs can be used to support from California.

Excuse me, CDFIs could use support from California and its municipalities with the issuance of patient lendable capital and grants to be invested in loans to Latino owned businesses. I know, I'm aware of the City of San Francisco that actually made funds available to CDFI for the same purpose for some other designated communities of color.

It could do the same thing for the Latino community. And lastly require transparency mandates on credit decisions. I think that would be helpful as well. Build wealth equity early. So looking at providing financial class and credit building support so Latinos can meet loan criteria and lower regulatory burden.

I think I mentioned that reduce regulatory burdens on smaller employers and avoid those unintended consequences as you mentioned earlier and promote coaching and banking relationships. Establish local community centers that can provide technical support for establishing and then growing Latino owned communities.

Sometimes there's a need for some common know how which can be shared at these communities and run of course reoccurring workshops within those Latino communities. Thank you very much for the opportunity to discuss these.

Thank you. That was also very helpful. And I mean all three of you have given me a lot of information. But you know, I represent 15 local communities and you know what I'm hearing from Dr. Hayes Bautista sounds very encouraging. Then I hear what you're sharing about the growth in Latino businesses.

But then I come to the local level, my 15 communities, a million people in those communities. And then I start hearing just what's happening on the ground level on a smaller scale.

So I know it's not a very popular topic right now to speak of, but I do want to get into what you said in terms of activity cooling down due to what's happening at the federal level. I certainly hear a lot of our community members not going to work, small businesses closing.

Some of them have been closed for a few months. They don't want to open due to the ICE raids. And can each one of you share what you know in trends? I know that we got some great information from Dr. Hayes, how well we're doing, but we haven't necessarily seeing the impact that's coming our way.

And I did hear a report earlier about how we may be on track to being California having the highest unemployment. And so these are all just things that I hear from different individuals and businesses and panelists. But what do you see? Can you give me an insight as to the activity? Is it cooling down?

Are people being less apt to show up and ask for that loan? Again, you don't have to go too in depth, but give me a sense of what you're seeing on the ground level. We'll start with you.

Yes, I would say there's a couple points that I would, I would highlight is one, as you noted, the fear that the federal policies have created primarily around ICE. Numerous business owners have mentioned that employees disappear primarily out of fear not showing up to work or have other personal impacts.

Secondly, they have been heavily impacted by the DBE certification and recertification process, putting a pause on their ability to access set aside contracts at the federal level or the burden of reapplying for certification.

And then thirdly, what I would mention is that on the positive side, there is such connectivity into international markets because of the networks that they might have through friends, family or their own personal connections.

So we see a lot of businesses expanding into Mexico and Latin America not only to access talent there, but to access new channels, new markets. Of course there is, you know, impacts of tariffs. But I think where we see a lot of collaboration happening is business owners who have connections or who have strategic partnerships internationally. Thank you.

So, Senator, what I would say we just. Bank of America produces every year a business owner report. It takes a survey. It is a national survey. But in analyzing the data, it's very similar to California, but I would actually say it's of rather optimistic.

So 74% of small and mid sized business owners expect revenues to increase in 2026. It's about the same as it was last year's survey. About 60% of them expect to expand technology and AI adoption is something that is very high on their list. About almost 80% are employing some form of technology or AI for that.

Again, this is a national survey. I had shared it with your office, but the data in California is very similar.

Having said that, when I have conversations with small business owners in Southern California, in LA, with the CEO, dinners, the business owner summits that we've talked about, the things that still concern them that they're watching carefully is interest rates. Good thing is they're coming down short term interest rates are coming down to tariff policy.

It just provides some level of uncertainty in terms of pricing power for them.

And then thirdly, particularly with small business owners looking for real estate, they're having to go more and more, particularly in LA, they're having to go more and more outside of the city or into San Bernardino county just because the availability of real estate, new real estate or those that's applicable for industrial warehouse is more limited within LA County, for example, compared to outside LA County.

Thank you.

How about yourself? Yeah, I'll add just a little bit to that. About 17% of our SBA loan portfolio is to Latino owned businesses. And in that portfolio we have the most interaction, we have the most discussions with them. And it is everything you said. There is some problems with maintaining employee levels, staffing levels.

There is some concern about actions taken at the Federal Government level in terms of what ICE is doing. So they have had those challenges, as you said. And then they're also faced with the items you're saying too. Tariffs causing cost to rise more quickly as well as you know, as well as interest rates biting into their budget.

So I'm just reiterating the same thing that's been said. All three of those areas has been a challenge. We work with our borrowers, sometimes we give payment release and deferrals to work through a period of time that they're having those challenges, but they're all happening.

Thank you. And again, because I'm really encouraged by the information that I hear here in this room and again, going back to our communities, it's constant. For example, we have some credit unions that are offering credit support to those that have either visas or not fully documented. And they've shared too that they haven't Seen their clients.

I was just wondering in your eyes what you see. But that was very helpful. I want to ask Jennifer Garcia. I'm going to change the conversation a little. You talked about these forums and discussions you have. Do you travel like your forums up and down the state or how do you pick your locations?

We do. So we have a national forum every year at Stanford. And this is where we produce and release the findings of our newest report. And that's we're going on our 11th year in March of 2026. We also take that presentation as the on the road. We do road shows.

We actually partner with Bank of America and we take it to different markets across the country. And what it allows us to do is not only again present the research findings, but it convenes.

And that's the most important part, is we bring together in the room, in the local market, business owners, local capital providers, local chambers of commerce. Because what we want that forum to produce is a strengthening of the local ecosystem and the local market.

So the more that we can convene the people, the right people in the room, the more access they generate for that community.

Thank you. I was in my thoughts, I was thinking of maybe inviting you to come to Sacramento where we can have a lot more participants. You know, as you know, we're on, currently on break, we're not in session, so it's very difficult to get people to come while they're taking care of their communities.

But I'd like to extend that invitation at a later time to see if we can get you to make that presentation at the Capitol. I think that the more we have our colleagues hearing the information, the more we can help our community. So I'm just going to say thank you to all three of you.

But before I move forward, I will take the time to ask any, I mean, I'm sorry, audience members, if anyone has any questions before we move on to our next panel, you may come up and do so. Okay.

Seeing no interest, I want to thank all three of you for, for all the information and, and really appreciate everything that you shared. I'd like to now invite our second group of panelists to come up. Thank you all three of you. And I will be in touch.

The next set of panelists I have that will be joining us is we have Miriam Rivera. It's ULU Ventures. Miriam Rivera is an inner city, Spanish speaking, first free lunch kid born out of wedlock to a mother who initially had less than an 8th grade education.

Domestic violence, crime, mental illness and trauma, punctuated life in her household, the work ethic and response to challenges could be the the theme song for her life. And we invite her to join us us here today and give us insight. Thank you so much for being here. We also have Roman Leal, Leap Global Partners.

Before founding Leap, Roman held various positions in financial services and including notable roles at PayPal and Goldman Sachs at PayPal services as well. And during his time at Goldman Sachs he specialized in financial technology and provided provided strategic guidance to startups worldwide through emerging technology research and payment processing platforms.

Thank you both of you for being here and I will start with you. Miriam, when you're ready, you may proceed.

Thank you. Hi so ULU Ventures is a seed stage IT focused venture capital Fund based in Palo Alto, California. We've been in business 18 years and we have had three public companies. One of those companies is Figure, which recently went public. Another one is SoFi and another one is Palantir.

These companies are outliers but they also all had diverse founders.

They've created a half $1.0 trillion worth of market cap, 10,000 jobs and at least two diverse billionaires including Alex Karp, who's the richest black man in America according to Forbes magazine, and June Au, who's an Asian woman who was the CTO of SoFi and a co founder of Figure, who is now has a net worth of over $2 billion.

The reason this is important is that access to wealth is very differential in our country and public companies are only 1% of US public companies. But the 53% of all IPOs and 70% of all tech companies going public had VC backing. So the and again part of that is wealth that is created through intellectual property.

VC backed companies created 81% of all the total packages patents in the US Patent and Trademark Office and they expended 92% of all US R&D spend in recent years. If we don't have diverse people in tech, we're really missing out on the ability to generate and create intergenerational wealth.

And I think that part of the problem is that most capital in this country is managed by only white men. 93% of the dollars invested by venture capital are invested by white male led firms. Diverse people, including Latinos represent fewer than 2% of firms that are $100 million in assets under management or more.

You know there's maybe 70 some 80 partners in venture capital that are Latino. So we're a pretty significant percentage of all the partners in the country. My own Fir2Latina partners, so we're about 11% of the United States population of latinas in venture, we also have a Latina associate.

So, you know, that also means that in firms up to $100 million, we're about 1011% of that. This disparity starts really early, and it starts in part through education.

One of the reasons that I'm in venture capital is because I had early education access to computer science education for three years in high school between 1978 and 1981, I went to private schools on a scholarship, and I had computer science as part of my math curriculum all three of the four years that I was in high school.

Also, I believe that access to entrepreneurship education is really important for my own children. For example, both of them have had access to programs in the public schools in our community in Silicon Valley that exposed them to entrepreneurship. One of my daughters went to a private school that taught entrepreneurship in the seventh grade.

They had computer science all three years of middle school for those girls. And my sense is that, you know, here we are, 1978-81 was a long time ago. We don't have required computer science in schools for children, and that is really particularly impactful for Latino kids, since we represent about a quarter of youth in this country.

We represent about 20% of college students in the United States. So one of the things that I would really emphasize is the need for required computer science education as early as middle school and through high school.

In addition, I believe that the HBCUs and HSIs actually produce the most computer science graduates of all schools in the nation in the black and Latino communities, and they should be supported in that endeavor. In addition, this is going in a wrong direction in terms of access to capital.

With the environment that we've been in with anti DEI and fearless fund, Reverse discrimination claims are making people afraid to invest in diverse managers. I've had people tell me that they have to run it by their counsel, Whether they can invest in a firm that invests in diverse people, including all people.

Which is really funny, because, like, 80% of our teams have a white person. 80% of them have a woman, person of color, underrepresented, minority, or immigrant founder. And yet only about 2% of dollars in assets under management are invested in managers that look like us.

The fact is that the majority of capital in some states is coming from people that look like us. Women, people of color, immigrant founders. New York state, for example, about 60% of their pension dollars come from women, people of color and underrepresented minorities and immigrant Americans.

But about 2% of their capital goes into managers that look like them. This is the only field where you could have 98% of dollars going to white men but have reverse discrimination claims against people who invest in people of color or women and immigrant founders and be found to be reverse discriminating.

The law is really the problem here. I'm an attorney as well as an MBA.

The ability to have so much evidence of how skewed the system is and yet to have no recourse and in fact to be made to have to defend any programs that affect diverse people in this country when so much the capital is coming from diverse people and is literally crazy in terms of the the impact of venture capital is about outliers.

So you know again we're a small firm but we did invest in these companies that created all this market cap these jobs. And you know of our founders, we've had a Latinx founder who is grandchildren of an undocumented Mexican worker. He had $1.0 billion exit to Salesforce.

Another Peruvian founder had a $300 million exit to John Deere in our portfolio. This is not about talent. That young Latino he was first generation college. I'm first generation college. My family were migrant farm workers and the eastern seaboard coming from Puerto Rico. The this is about getting access to talent, education and entrepreneurship.

I was a startup founder in the late 90s and when I had my first child I was told that the next VCs did not want to invest in our firm unless I left the firm.

And I was told by my board that as a grandfather he would prefer that if if it were his grandchild the mother would stay home. I did not stay home obviously. And I would say that one of the important things about investing in diverse managers is that we invest in diverse entrepreneurs.

About According to Somos VC, people who are Latinos invest in about 48% of their founders increase include underrepresented minorities. That is true of ULU. Across three funds we have made 99 out of 250 diverse investments in those funds. They are achieving multiples that exceed any of the market standards that you typically have.

It's like a 4.4 MOIC for those companies. 80% of our companies as I mentioned have a diversity founder. 55% of them include at least one woman or Black or Latinx founder and 48% include an Asian American or Mena founder.

So these kinds of results are possible when you actually use processes that don't allow bias to enter the decision making process. All of our investments and all of our founders are treated exactly the same. We use a process called decision analysis, which looks at the same kinds of.

Data for all of our companies, and we make investments on an apples to apples basis based on financial return.

So, the last thing I'll say is that if you look at a state like New York and they had $200 billion worth of assets that came from people of color, women, immigrant Americans, that created, and they put six to $7 billion to work in diverse people.

But with the IPOs in our portfolio, we put $16 billion into the hands of diverse people through the equity that they had in the companies. So, even a small firm like ours can make a tremendous difference at a national level in terms of who has access to wealth building. Thank you.

Thank you. You know, I have a lot of opinions on the educational piece. It's been, I think, one of my biggest fights. I think most of you know, I've been an educator for 20 years. I continue to have a teaching job.

And yesterday, I actually joined our Superintendent of Instruction for an educational forum in the Capitol. And it was just simply getting students to read by age 3. And since I was in the classroom, that was my biggest battle that not only do we not teach computer science, but we don't even provide the technology that students need.

You know, I would say not even wait till middle school. They need to have technology in first grade, second grade, because the disparity starts there.

We see children that have had access to computers in their home already know how to go from page to page and create little programs where we have the students that come from very low income families or household not have access at all.

And yet in third grade, we expect them to take a test, a computerized test for the first time in their lives, and they've never seen a computer. It happened while I was teaching.

That's when the transition happened from pencil to paper to now requiring them to take a test, computerized test, and we don't even teach them how to type. And I know, I know this personally because it's been my grievance that I would say middle school is a little too late.

We need to start children earlier, considering the fact that, you know, we are falling behind. Yesterday, when we had the discussion about education, really, even computer science, computers in the classroom was not even part of the discussion because we're still struggling to get children to just know how to read the very basics. So, I think that's right.

We need to go and that's really focus ourselves on allowing these young individuals from low income communities or families that don't have the means to have access. And I think that's critical, just access to simple typing apparatus. We used to have these early on.

We didn't have computers, but we have the little keyboards at least to practice how to type. And again, the access continues to be personally one of my biggest grievances in the elementary schools and trying to push to incorporate computer science earlier in elementary in the curriculum.

So, another area where I might just call you and get your thoughts a little further, you know, what you share is it's really, again, it adds value because we're trying to find that layer today which is access not only to capital but just access, access to education.

When you said '79, I think, or '80, '81, I kept thinking, I'm not even sure we had computers back then. I remember even in high school I was still typing an old typewriter. But you know, I'm really just encouraged by your story. Thank you for sharing and I'm glad that you had that access that you needed.

So, we're going to move on to you, sir. And then I'm going to allow the audience to ask questions, if anybody has questions. You may proceed when you're ready. Thank you.

Thank you, Madam Chair, members of the Committee. Thank you very much for having me here. My name is Roman Leal, and I am the Managing Partner of Leap Global Partners. Leap Global is an early stage venture capital fund very similar to ULU Ventures. We invest in companies that are transforming financial services and the new data economy.

And we're based here in California. Most of our companies are in California as well. We often represent the first institutional check that our portfolio companies receive. As venture capitalists, our goal is is to invest in the best founders and companies across our pipeline.

Due to the makeup largely in part of our team and our network, over 80% of our portfolio companies have at least one diverse founder and that has been fantastic for our returns and for our business. So, they're similar to... ventures as well.

I want to pause on this point because now you heard two panelists that said they highlight a fundamental concept of the venture capital industry. We call it the network effect. In VC, capital and connections flow through relationships.

It is how we receive and send referrals, how we vet risk, and how we form syndicates to co-invest alongside other VCs. A recent report found that over 52% of venture capital funds source their investment deals primarily through the personal networks of their employees. Because our network at Leap is diverse, our pipeline is diverse.

But for the broader ecosystem where networks are relatively homogenous, the data is daunting. The diversity gap in VC is alarming. According to McKinsey, only 1.5% of total venture capital funding goes to Latino founders. Black founders receive 1%, women founders receive 2%. Let me stress that point.

Less than 5% of all venture capital funding goes to Latino, black, or women founders combined. This diversity gap in funding is largely correlated to who is writing the checks. According to the Harvard Business Review, VC investors, to no surprise, are more likely to back those who mirror their own backgrounds.

Well, that's a problem when 1.4% of all assets under management is managed by diverse investors. Why is this important to Californians and Americans? This is not just an issue of fairness or social equity. Closing this gap is crucial to California's economic growth and as a result, our nation's economic growth.

For all its shortfalls and imperfections, the venture capital industry still backs some of the most innovative founders on their journey to build transformational companies. In 2021, we published a report, what we call, "Diversity, the Trillion Dollar Opportunity Hiding in Plain Sight," and the data supports this.

McKinsey calculates that just by achieving revenue parity for Latino and black- owned businesses, we can generate an additional $4 trillion of revenue and 10 million net new jobs. Bottom line, when we deny capital to diverse founders, we aren't just impacting or hurting the individual entrepreneurs. We are leaving considerable innovation, GDP growth, and job creation on the table.

So, how do we address this gap? It's something we, we have a lot of ideas on—and I'm just going to share a few for the sake of time here. Love to dive deeper in the Q and A section and to survive any legal challenges for any of these recommendations or options, with respect to Prop 2 or 9, we focus our recommendations on emerging managers rather than diverse managers, emerging managers largely being VC funds that are in funds one, two, or three or raising $300 million or less per fund.

Policy idea number one. We can expand the State Treasurer's Time Deposit Program which currently encourages community lending to prioritize state-chartered banks that invest equity in emerging managers. This can provide a state level layer of regulatory relief and economic benefit for state-chartered banks that prioritize emerging managers.

Policy idea number two. Similar to how the SBA offers a two to one leverage to venture capital funds that qualify for an SBIC license, or a Small Business Investment Company License, the California iBank could offer a 2 to 1 non-recourse debt to emerging managers.

Doing so will make these funds appear more attractive to pension funds, endowments, and foundations—the same institutional investors we want to unlock. Policy idea number three. For pension funds, we can create some fiduciary relief through the SSBCI funds or other similar initiatives.

California can allocate some of the State Small Business Credit Initiative, or SSBCI, funds to provide a partial first loss guarantee to pension funds that commit to emerging managers. This can create a fiduciary relief incentive as pension fund managers can justify backing a smaller emerging manager.

That state guarantee lowers the risk profile of an emerging manager relative to larger established funds. Policy recommendation number four. We can expand Senate Bill SB 54 on venture capital reporting to include university endowments. Endowments are largely unregulated regarding investment choices, but they depend heavily on land grants, tax exempt status, and states goodwill.

While we cannot set quotas on specific demographics, perhaps we can apply a Rooney Rule requirement for university endowments, mandating that the interview pool for new allocation includes at least one emerging manager. So, what is the upside of all of this? I want to close with a note of optimism, very similar to ULU.

Leap Global is a small VC fund with just $200 million of assets under management, and yet, the founders that we have partnered with have created over 15,000 jobs of the future, most of which are here in California, generate $2 billion of annual revenue, and are on a path to create over $20 billion of wealth to their stakeholders, including founders, employees, investors, and local communities.

And there are a handful of like-minded VC firms that are leveraging a differentiated network to build a diverse pipeline that then generates outsized returns. Imagine the economic impact of having dozens or hundreds of likeminded VCs at scale. We believe that California has a unique role to play in catalyzing better access to capital for emerging managers.

We have companies working on some of the most transformational technologies of our lifetimes, right here in our own backyard. It's still the bedrock of global innovation. It is still a magnet of VC and tech talent, and it just so happens to be blessed with a highly diverse population. Thank you for inviting us to this conversation.

Thank you. You know, I wanted to make sure that as we move forward, I also state our goals. I know that we couldn't have all committee members here today, so the goal is not only to synthesize and create a report for our members that are not here, but I really appreciate that each one of you has really done a great job in outlining some of the recommendations because I think that's important.

So, we're also going to make sure that they have a list of the recommendations that each panelist has brought here today. And it's, again, really eye opening, everything that I've heard so far. And we want to make sure that we've done so well as Latinos in this country and California, but we want to continue the momentum.

So, thank you for the information. I'm going to pause just to see if there's anyone that wishes to ask any questions in the audience. Seeing no interest. I want to thank you both for, for the information, and now, I would like to invite our last panel to, to join us. Thank you both.

We had our treasurer, Fiona Ma, scheduled to be here, but was not able to due to a personal family matter. So, we will invite Julian Canete, California Hispanic Chamber, to also add to the conversation. And today, it's gonna be all you. So, thank you. Good seeing you again. Really appreciate you coming.

And at the end, once again, we'll leave opportunity for questions for anyone wishing to ask any questions. You may proceed when you're ready. Thank you.

I'll try not to say anything that gets either one of us in trouble.

But thank you, Senator, and thank you for your work with the Select Committee and your staff's work and the other panelists, I think all hit it right on the button from the Access to Capital Panel with the bankers and with L Band and with—just the previous panel.

But you know, this panel was supposed to be about government investment and I think when we think about government investment in regards to access to capital, there's three areas. We—at least have the chamber that we see. Number one is direct lending. Right? The second one that the state provides is loan guarantees.

And then thirdly, and I think this is one of the most important things, and Jennifer hit on it, it's about technical assistance and putting the dollars as well behind administrative and technical assistance services for these businesses and make sure that they're capital ready. Some of our experience has been is that many businesses are not capital ready.

They don't have the knowledge, they don't have the skill sets or the tools put in place so that they can get all this capital that's out there. You know, we have these conversations all the time and people say, my counterparts sit there said, well, the biggest barrier is access to capital. Well, you just heard about bankers.

They want to lend money. We have loan guarantees. We have venture capital; we have equity capital. I mean, the dollars are out there. And the biggest question is, are minority businesses, are Latino businesses, prepared to take advantage of those dollars that are out there?

I kind of modified when I heard that Treasurer Ma wasn't going to be here. So, just let me go over a list of some of the government investments that you all make. The State Small Business Credit Initiative, the California Pollution Control Financing Authority, CalCap, the California Capital Access Program for Small Business.

This is part of the SSBCI. The CalCap Seismic Safety Financing Program, CalCap Energy Retrofit Financing, Go Green Business Energy Financing, Zero Emission Truck Loan programs, and then even within the infrastructure bank, you have the Jumpstart Microloan Program, which provides loans between $500 to $10,000 for our small businesses here in California.

So, and then including on that, we have the Small Business Loan Guarantee Program, which guarantees up to $5 million, which oftentimes is administrated by financial development corporations here in California. And of course, we have the Venture Capital Program.

So, as you can see, there's a lot of investment from the state, from state government, in making sure that capital is available. I think one of the problems, like I said, is, number one, knowledge and our businesses being able to be capital ready.

Secondly is some of the bureaucratic stuff that goes on that we all know about and we always discuss. And oftentimes for our small business owners, especially our diverse business owners, it can be difficult for them to comprehend and be able to apply for these programs or through these programs.

I think that an interesting area where we need to focus a little bit more on is, you know, the State Legislature has always been very progressive in regards to climate change. And we're going to, we're going to be seeing more and more funds, capital being needed to transform our small businesses to be green.

When you talk about truck drivers, you know, many truck drivers, they own one truck. A new electric green truck is about $0.5 million. But of course, we're phasing out their trucks, so they've got no collateral to buy the new truck. How are we going to meet that need? Right?

Are we going to develop programs that help finance these small businesses that are important to, you know, California's logistics movement and transportation movement across our highways?

I think that a lot of some of our investments we have to look at and be careful because of what's going on with the current Administration and be careful that those dollars aren't viewed as being federalized as we're seeing with some of our matches that we do on our technical assistance programs and you know, our business groups having to comply with federal mandates and directives.

So, I think again, that's another area we have to start looking at as we see how is government investing in capital and developing our small businesses.

I think more importantly, what we saw and why the state—and I have to command you, Madam Chair, and your colleagues that after the pandemic, during the pandemic, really, I think, made California Legislature realize how important small business is to the state and how important these investments are in regards to technical assistance and to access to capital to continue to grow our economy.

And Dr. Hayes Batista started this off by just mentioning the growth of Latino business here in California. And I think that is all predicated upon the investment that this state has made in our small business community. But there's still more that needs to be done.

There's still a big need for more investment, government investment, in these capital programs. So, often, one of the programs, and I can't remember what they call it when they're doing the technical assistance work in our shop, but the program always runs out of money at the end of the year, right?

And so, they limit how much money we can do just to be able to provide technical assistance from a capital access perspective, but more importantly, us to continue those investments into the technical assistance program. When we talk about the state's loan guarantee program that's administered through the federal, sorry, not the federal, the financial development corporations, you know, they do the loan guarantees.

The problem is in the amount of money that is budgeted for their administrative costs and their technical assistance costs. You know, they're doing loan guarantees up to 5 million, but yet, I don't know what the total amount is.

But the administrative cost that the state allows is only probably around $800,000 for the whole program. And this is through, there's, I think there's about five or six financial development corporations here in the state that we work with.

Another sick thing is that the state invested, I believe, 100,000 into the small business credit initiative, along with 1.8 billion, I believe, from the feds, but we're able to leverage that into approximately $18 billion in capital that's accessible to our small businesses. So, again, I think it's continued investment.

I truly believe we need to increase our investment in these lending programs, in these technical assistance programs, to make sure that our small businesses are able, and our minority businesses, are able to access the capital that is available out there.

You saw earlier on the slide, we find a lot of times that even our small businesses, when you talk about access to capital, don't know what a CDFI is. If I filled up this room with small businesses, minority businesses, and ask them, do you know what a CDFI is?

And I would say probably about maybe about what, Jennifer, 20%, would say, yes, we know what a CDFI is. And so, you know, the state chamber has, you know, initiated programs that start educating them on these lending programs.

I think when you talk about venture capital and Roman and Mariam hit on it, right, and investment in these emerging fund managers, I think we really start have to look at other agencies. Oftentimes, you put it on the Treasurer's Office or Office of Small Business Advocate, but we have to start looking is.

And I think the Legislature ought to hold both CalPERS and CalSTRS accountable, saying, are you investing in our state, in our small, in these venture, emerging venture fund managers? Are we making the investment in California?

But I think, I truly believe, that the Legislature has to call them on the mark and say, answer us because, you know, we approve this and we want to know, are we making these investments? I believe it's also true across the board on everything we do.

I think when you're talking about as we do loan programs for climate change initiatives, et cetera, you know, we really have to start focusing on the California Energy Commission, CARB, and the PUC and saying, okay, are you guys investing in these programs? Right? I mean, I forget what we call it, but you know, I'm an old timer.

So, we call it cap and trade, right? I mean, I see hundreds of thousands, if not millions, of dollars being given to the Farm Bureau, other organizations, and oftentimes it sits there, right, until they figure out what they want to do. I'm being honest. I mean, that's what we've seen. But are these—is CEC and CARB being held accountable?

When you look at them, you know, a question I put out there is, are you educating our businesses on what they need to do? You know, how they have to transform for the green economy and are you educating them on the programs that are available?

So, again, they're not putting any money up. They're just saying, okay, we'll give a few dollars here.

And the State Treasurer is doing a wonderful job in trying to get outreach, but I really think that those agencies, all these agencies, need to do much more outreach and education and allocate those dollars out of some of these special funds that they have there that they're sitting on.

So, with that, I don't want to get in any more trouble than I probably already am. I'll leave it, if you have any questions or if anybody has any questions.

If I can, I have a couple of questions, but can I ask Roman and Mariam to join us? We have two seats up here. Because I have a couple of questions for you as well. Julian, you and I run into each other in a lot of circles, small businesses all over Los Angeles, and, you know, we have a history because we're always supporting small businesses everywhere we go.

But, you know, there's a theme that keeps recurring here, and that is the lack of education, lack of awareness. And on one hand, we have, you know, capital is just how do we make people aware of certain capital and opportunities?

And it's interesting because, you know, as I sit here, I have to share with you, sometimes, you know, I'm smart enough to know what I know and smart enough to know what I don't know. And I always come and learn so much from all of you.

And again, I'm not a business owner here. Right? And everything that I heard here is so compelling in terms of how we support our business. And so, I want to just start with—let's start with Miriam. I know that you talked about everything you've seen and all three of you have experience traveling all over the United States.

And you know, Julian, I think you've been to so many chambers all over the US, as well as both of you. So, let me start with Miriam. Is there, you know, other states that you have experience with that are doing better than we are?

I mean, I know we like to pride ourselves in being the lead on pretty much everything, but, you know, we sometimes have blind spots. Have you seen something better from other states that maybe we can be borrowing from?

Well, I don't know if other states have some of the same regulations as California, but our treasury does not allow the state to invest in equity in funds like ours.

That is done through the iBank, but it is done in a form of debt that involves a lot of costly administrative work and compliance with debt financing type of qualifications.

Our own pensions, CalPERS, CalSTRS, also have some issues in that they've outsourced investments in smaller managers like venture capital firms to large private equity firms that then put those venture capital firms in risk in that they invest as a limited partner, but then they lend money to the company and take interest against that, and they have a perpetual interest in the general partnership of the venture capital firms.

So, there's a lot of things that our state is doing that I don't know other states are doing that I think are absolutely harmful to especially diverse managers, because the program that CalPERS has, for example, is oriented at supposedly helping diverse led funds.

But then, it really ties an anchor to their feet because there are many institutional investors who will not invest in in a firm that has sold part of its GP.

And I've seen this happen even to the most successful Latino led firm in the United States where his own business school university will not invest in his fund because he sold part of his general partnership early.

Thank you. You know, maybe it's worth exploring if we have another committee hearing, you know, can we get someone from CalSTRS and CalPERS Ted, to join us and go a little deeper.

You see, these are the kind of conversations that spark ideas and it just dawned on me that I don't think I've ever had a conversation and I'm actually, you know, as a teacher, I also have a pension or retirement and we should be going deeper and asking the tough questions and encouraging exactly what you just shared right now.

So, thank you for that information, but let me go to Julian. Have you seen other ways that other states have done a better job in bringing in smaller businesses, educating them, maybe perhaps programs that we're not looking into that perhaps we could implement as the State of California?

Yeah, you know, Senator, I haven't.

I mean, you know, as I talk to my counterparts, you know, they're amazed at me about, you know, during COVID when we did the grant programs, right, the billions and billions of dollars we did there to help small business, the amount of money we committed to lending to get that, you know, going.

I mean, many of them have the SSBCI because they got investments from the Fed as well, but the State of California put up quite a bit of, you know, money to make that happen. You know, yeah, we have a lot of regulation, regulatory environment is heavier in California.

But at the same time, you know, we put requirements and regulations on some of these companies, now hospitals, on reporting what the diverse spends are, what they're basically what is their investment in small and diverse businesses. We've done it, we do it with the utilities all the time.

And so, I really think that, you know, we can do it with CalPERS and CalSTRS in regards to their investment into venture capital for emerging markets and for diverse businesses. I always tell people, I said, you know, of course, the first thing they scream is Prop 209. Right? First thing, right?

And we were with some, a group of business owners, and I said, you know what, Prop 187, Prop 209 were direct attacks upon our immigrant communities and our diverse communities, and we have circumvented it and overcame it legally and been able to still do what we do today here in California.

So, that's a long answer to a very short question. No, I have not seen any other state doing what California does. You know, it's why we're the fourth largest economy in the world, you know, and everybody else is somewhere on the chart. I don't know where, but, you know, way down below. So, I think that's that, and that is, is, you know, really a testament to California's forward thinking and the Legislature's forward thinking and saying we need to help small businesses

And as you know, this has only happened in the last decade. A lot of this investment that is now being made in small business.

Thank you. And I'm going to ask the same question to Mr. Leal.

What do you think we, as a state, and I know that all of you gave us recommendations, but a particular program or policy that we may not be thinking about in California, that you've seen throughout the United States, is there something that we should be looking at?

So, I'm not sure if I would say there are other states that do it better, but there are certain initiatives that states have, have employed, that are really interesting because they codify what an emerging manager is.

And that's why largely, you know, states follow the definition of emerging manager, being here in funds 1, 2, or 3 and, you know, $300 million or less. And they also do it in a way that encourages investment in the state.

So, the State of Illinois, New York State, they have different initiatives that make sure that at least 50%, if not more, of the investment they receive from the state is reinvested in that state. So, I think that those are, you know, kind of interesting frameworks that California can think about.

I also feel that California has enough regulatory frameworks that, that, that are very friendly to CDFIs that could be extended to emerging managers. So, CDFIs, they benefit from the coin tax credits, right? The California organized investment network where they can receive up to 20% tax credits on the dollar they invest in the CDFI, with the idea that the CDFI would then lend that money to a small business in an underserved area.

Then, you can adopt a very similar structure and just extend that out to say we will give that coin tax credit to insurers or state-chartered banks that then invest in emerging managers which have a high propensity of investing in diverse founders. So, I think that's, you know, the, the COIN sort of structure is very interesting.

The SBA structure is very interesting. I talked about the treasurer's state deposit, you know, program that is already working with state chartered banks for lending. I think that can easily be extended. I say easily, but, you know, it could be extended to include equity investment in emerging managers.

So, there's a, there's, there's—California has enough already in place that could be expanded to include VC. I'm not sure that other states have the same kind of frameworks.

And see, this is the kind of engagement that I love having because like I said, you know, we're not experts in your field. You're experts in your own field. And you know, what I see here is lack of awareness, lack of access to capital.

But you know, if I can be frank, sometimes even as legislators, we need the very basic presentation, you know, one on one on equity funds, access to capital, and how to break down those barriers because we don't, you know, operate in your world every single day.

And that is why putting the information at our fingertips is so critically important. You know, what I, like I shared earlier today, I plan to really put together a report for not just the panelists who are in this Committee with me.

Again, they couldn't make it today, but I think it's a report that should go out to every single colleague. Not only, you know, what is necessary, what we need, some of the barriers, but again, just the data is really impressive, how much Latino business owners contribute to the economy.

And we hear the narrative very loudly, you know, most recently from the Federal Government and just, you know, people believing what they hear on, or reading the Internet, rather. And we really need to highlight some of those successes because we are the fourth largest economy in the world.

Not by accident, it's the people of the State of California that make it a great state. And so, I want to continue to have these conversations.

But, you know, know, as I'm wrapping up here, my thought is having, again, another Committee hearing, but at the Capitol and inviting some of the panelists here today to come and educate us in a much broader way when we have a lot more legislators at the table present and making sure that we put, like I said, the information at their fingertips.

It's not easy. Again, we don't function in your world. But even today, I've learned so much and you know, and I plan to take it back.

As I shared when I opened the Committee, the last two Committee hearings we had, we had a list of recommendations and policy ideas that we are already working on, trying to flush out with our colleagues to see what works, what we can improve.

And so, today, all of you gave us so many ideas in terms of what we can do to help minority-owned businesses, so I do plan to, again, put a report together for my colleagues.

But I may need you to come to the Capitol and share the presentation and maybe get deeper into the weeds and make sure that we have more engagement and invite more businesses. I personally, you know, I think I heard it earlier today.

I mean, just having that local connectivity to make sure that we, you know, we bring that information to our local small businesses. I, you know, I deal with a lot of small chambers of commerce. I've always been a strong supporter of small businesses. And you know, and I'm very fearful from, you know, what I'm hearing right now.

They're calling me in a state of panic in terms of what's happening nationally. And so, you guys are really those on the ground level protecting what we have, what we've accomplished as minority groups. And so, I want to thank you. I want to turn it over.

Anybody else wishing to ask any questions from the audience, now is your opportunity. Anybody wishing to come up and ask any questions? Let me just do it twofold. We can open it up for public comments so you can come up, and you don't have to ask a question. You have two minutes each for comments or questions.

You may proceed. There you go. Yes.

How are you? Good afternoon, everybody. My name is Elizabeth Martinez. I am the Senior Vice President of Strategic Partnership for the Meruelo Group. And I'm here, first of all, to thank you, Senator, for really, you know, putting some small businesses and minorities in the forefront, and just hearing today how the Latinos are really contributing to the economy. Definitely explains why you're so passionate. So, thank you.

But I'm here, first of all, again, to thank you for this and especially the procurement ones. You know that the owner Luis Armona is very passionate about that, just helping the economy just like them. But I want to address some negative impact on some proposed laws, and I know you have had mentioned in regards to what examples, right.

So, there is one, specifically AB 801. It doesn't make sense to add additional constraints to minority banks, and as you know, as being one of the largest minority banks Latino owned, this is something that we're keeping track of.

So, just wanted just to make sure that you keep an eye on that, as you mentioned. But again, thank you for doing this. We will continue to support you. And of course, since we're on so many diverse industries, I'm sure we're probably going to be joining you in the next one. So, I appreciate you. Thank you.

Thank you so much. Next guest.

Thank you, Senator Rubio. My name is Ezra Garrett. I'm with Opportune. We are CDFI for profit fintech organization based here in Silicon Valley. And I want to thank you, as the Chair, for your leadership in leading this important committee, but also in bringing it to our sort of home city as a company.

We're only a few miles up the 101 based in Redwood City. Also want to acknowledge and thank the amazing panelists that you brought into today's proceedings and offer our support. As a CDFI serving Californians and people across the US, we've helped in California alone, over a million Latinos achieve their first positive credit score in our state.

And again, while we offer consumer loans primarily, we also serve many entrepreneurs who are not yet qualifying for a commercial loan from a bank but are using capital to launch a small business of their own. So, again, thank you. We look forward to following this closely in Sacramento and beyond and appreciate your presence here in our state.

Thank you. Anybody else wishing to speak or ask a question, you may do so at this time. Okay. Well, again, I want to thank you. I know that we've come to the end of our time. I want to say thank you. And, you know, we hope that this is, of course, not the last of a conversation.

There's so much that I heard today that I want to go deeper into. But again, we are on break, so it's very difficult to get some of our colleagues to join us. I just wanted to make sure that, again, that we travel this Committee up and down the state.

So, number one, awareness is key, as I've heard from all of you, awareness and information. The next one I hope to have is at the Capitol when we get back in session to ensure that our colleagues join us. But I certainly want to thank all the panelists for your insight, your expertise.

And again, once we put this report together, I'm going to invite my colleagues to join me next time in Sacramento to engage. When we come together as a body, we do better, and I already have a list of recommendations personally I plan to pursue.

But the other side of the coin is, I shared earlier, I know we have some blind spots as a Legislature. I would say the one thing we don't do well is going back to reflect on bills and policies that have already been implemented.

It moves really fast, meaning, you know, legislators come in during their term, they push policies forward, and then they leave. And we never really put all those bills—let's just say we don't analyze whether or not they're effective or how effective or what do we need to do to revamp that policy.

And I think I heard several examples today of policies that are not helpful. And that's the go to, to go back and see we can strengthen some of those bills or, or get rid of them altogether. Right? If it's not working, it's not working.

And I think that we have to self reflect in many ways because sometimes our goal is to support small businesses and we end up doing the opposite.

So, with that, I just want to say thank you to everyone listening remotely, all our panelists, and our partners, Jose Hernandez, who also was in instrumental in finding us the venue, and, of course, the supervisors here because you know, they're not here but they're allowing us to use their space and to our sergeants who come from Sacramento to make sure that we have access, again, up and down the state.

So, Dr. Hayes Bautista, thank you for your presence and I hope that you continue to show us that data because it's very meaningful.

And perhaps later, you know, I want to talk to Mr. Hayes Bautista about, you know, focusing some research on CalPERS if you have any ideas. Let's go deeper, let's really find the line items and where the money is going.

And lastly, I will say it's very sad that I've had several friends, and I think I heard this from some of the panelists, I have a few friends who depend on grants for educational programs. They've been doing it for 5, 6 years but because the other women, women owned businesses or teachers per se, their funding has disappeared.

Just the fact that they're women and they normally write their grants as women owned businesses, they're losing out on grants right now and I anticipate that it'll continue.

They're coming to me for funding because funding has been diminished from either the Federal Government or companies here in California that are afraid to help because of what we're hearing.

So, we are going to continue to push back as much as we, we can, because we are a state of diverse, you know, residents and I hope that we acknowledge why we're the fourth largest economy in the world.

And on a side note, most of you know I'm not only an immigrant, I was born in Mexico but also formerly undocumented and formally deported. So, I know very pretty personally the impacts what's happening around our state is having not only our families but our small businesses and that's why they come to me.

And so, once again, thank you, everyone. Thank you, sergeants. And with that, this meeting is adjourned. Thank you so much.