Arizona's Small Business Assistance Policies and Programs

Topic:
ECONOMIC ASSISTANCE; SMALL BUSINESSES;
Location:
SMALL BUSINESS;

OLR Research Report


August 20, 2004		2004-R-0570
ARIZONA’S SMALL BUSINESS ASSISTANCE POLICIES AND PROGRAMS


By: John Rappa, Principal Analyst

You asked us to compare Arizona’s and Connecticut’s small business assistance policies and programs.

SUMMARY

Arizona’s and Connecticut’s small business development policies and programs largely address the same issues and concerns, but do so differently. We compared them against the categories the federal Small Business Administration (SBA) developed to identify examples of successful state small business programs (Models for Success: State Small Business Programs and Policies, 1999 (http: //www. sba. gov/advo/success. pdf)). These categories address:

1. the role small businesses play in fashioning policies and programs,

2. how state regulations affect these businesses,

3. helping entrepreneurs start or expand a business,

4. making sure small businesses have access to capital, and

5. helping small businesses bid on state contracts.

Connecticut and Arizona provide on-line information about state licenses and permits, starting or expanding a business, and bidding on state contracts. Both rely on gubernatorial councils to identify small businesses concerns and recommend policy options. SBA-funded small business development centers in both states provide different types of technical assistance. And both states have adopted paperwork reduction and prompt payment policies.

But the states differ in the way they provide ombudsman services, require agencies to identify and address the way regulations affect small businesses, support microenterprises and small businesses in rural areas, and help minority- and women-owned businesses obtain state contracts. Connecticut’s economic development agencies run several programs providing different types of financing to small businesses. Arizona’s Commerce Department (DOC) does not provide business loans, and the SBA appears to be the major source of small business financing in that state.

POLICY MAKING

As Table 1 shows, the two states rely on gubernatorially created councils to identify and address small business concerns. But Arizona also created a small business advocate office that works with small business associations on crafting proposed state policies and programs. The advocate also advises agencies about how regulations affect small businesses and helps entrepreneurs seeking state licenses and approval.

Neither state has a legislative committee devoted exclusively to small business affairs. Nor does it appear that public and private small business organizations in these states jointly sponsor annual conferences on small business issues, concerns, and accomplishments.

Table 1: Policy Making

*Component*	*Arizona*	*Connecticut*
Governor’s Advisory Council	Gubernatorially appointed council advises governor and legislature about small business concerns, including how laws and regulations affect them.	Appointed by governor and Commerce Committee cochairmen, council advises governor about small business concerns and can request data and technical assistance from any executive branch agency or commission.
Small Business Affairs Committee	No	No

-Continued-

Component

Arizona

Connecticut

Advocacy Office /Ombudsman

DOC’s small business advocate:

• works with business groups on developing policy recommendations,

• advises regulatory agencies about how to be more responsive to small businesses, and

• helps entrepreneurs working with state agencies

Annual Small

Business Conferences

No, but public and private organizations may hold conference and seminars on specific issues and concerns.

Same

REGULATORY RELIEF

Arizona and Connecticut offer on-line resources to help small businesses obtain information about state laws, regulations, and taxes. They also look for ways to reduce the paperwork individuals and businesses must complete in order to obtain a license, file a report, or pay a tax. Both rely on ombudsmen to handle complaints from individuals and businesses about government actions. Arizona has a central ombudsman office for this purpose and a separate ombudsman strictly for environmental matters. Connecticut’s Department of Environmental Protection (DEP) has an ombudsman to help small businesses regarding environmental matters.

But, as Table 2 shows, the states differ in the way they address the impact regulations have on small businesses. Both require regulatory agencies to identify how proposed regulations affect small businesses. But Arizona extends this requirement to existing regulations and established a council to ensure that agencies comply with this requirement. Connecticut lets agencies decide if a proposed regulations adversely affects small businesses and, if they do, how to address those effects.

Neither state has enacted laws requiring state agencies to pay court costs if a judge finds that they acted without justification against a small business (i. e. , equal access to justice).

Table 2: Regulatory Relief

*Component*	*Arizona*	*Connecticut*
One-Stop Assistance	Arizona Business Connection provides on-line, step-by-step information needed to start, expand, or relocate a business. Topics include state and local licenses and permits.	State’s web page provides on-line information about taxes; jobs; licenses and regulations; contracting; financial aid; and starting, relocating, and expanding a business.
Agency Ombudsman	A central ombudsman’s office fields complaints from individuals and organizations while the Environmental Quality Department’s ombudsman fields complaints and answers questions about environmental laws and regulations.	DEP appears to be the only agency with a small business ombudsman.
Compliance Assistance	Governor’s Regulatory Review Council decides if rules are clear and concise and helps agencies determine if the benefits out weight the costs.	No comparable council, but the Regulations Review Committee checks proposed regulations for clarity and consistency with the authorizing statute.
Regulatory Flexibility	Agencies analyze how new and existing rules affect small businesses and other groups. They must identify those that should be changed and present their findings and recommendations to the council, which may require the agencies to revise them.	The law requires state agencies to determine if proposed regulations adversely affect small businesses and, if so, consider other ways to achieve the regulation’s purpose without burdening small businesses. Agencies must submit the findings and recommendations to the Regulations Review Committee.
Training for Regulators	The council trains agency representatives on how to write rules	No comparable practice.
Small Business Outreach and Participation	The Small Business Council and the Small Business Advocate work with chambers and other groups to identify and address small business concerns.	The Governor’s council does not appear to have a comparable outreach program. By executive order, it must meet at least twice a year, once before and once after the legislative session.
Paperwork Reductions	Agencies implement paperwork reduction policies.	Same as Arizona.
Equal Access to Justice	No	No

DEVELOPMENT ASSISTANCE

As Table 3 shows, Arizona and Connecticut provide many of the same services businesses need to develop and grow. Both provide on-line technical information entrepreneurs need to start or expand a business.

Their economic development agencies also provide links to agencies that issue business licenses and permits. The SBA funds regional centers in both states that offer courses, workshops, and technical assistance to new and established small businesses. And both states help businesses train and retrain their workers.

But they seem to differ in how they support rural development, micro enterprises, and minority- and women-owned businesses. Arizona provides funds and technical assistance to organizations serving small businesses in rural areas. Connecticut provides grants to small towns for infrastructure projects that conceivable benefit all businesses in these communities. The state’s nonprofit Rural Development Council helps the U. S. Agriculture Department develop strategies for addressing rural area needs, including small business financing and technical assistance.

The states differ in how they support microenterprises, which the Association for Enterprise Development defines as a business with five or fewer employees that needs relatively little start-up capital, but cannot obtain conventional bank loans. Arizona provides on-line technical assistance to people who want to start or expand a business while Connecticut provides, microloans and technical assistance to entrepreneurs through the Community Economic Development Fund (CEDF).

The states also differ in how they support minority- and women-owned businesses. Arizona maintains an on-line directory of these businesses and shows them how to bid on state contracts. Connecticut supports minority business development through its procurement practices.

Neither state trains and certifies economic development professionals, but such training and certification is available through other national organizations. It appears that the public and private small business assistance organizations in both states have not formed a consortium through which they can share information and resources.

Table 3: Small Business Development

*Component*	*Arizona*	*Connecticut*
Online Services	DOC provides web-based access to many small business development programs and organizations and publishes a guide covering regulations, financing, and other relevant topics.	The business related links on the state’s and DECD’s web pages do not distinguish between general and small business assistance.

-Continued-

*Component*	*Arizona*	*Connecticut*
Consortia	No consortium, but organizations collaborate in other ways (e. g. , the Arizona Small Business Development Center Network represents a partnership between the SBA and the community colleges).	Same as Arizona
One-Stop Shops	DOC’s small business page provides links to many organizations providing one-stop shop services (e. g. , “Arizona Business Connection” provides on-line, step-by-step help for obtaining licenses and accessing other information).	The state’s web page provides links to on-line, one-stop shops maintained by different public and private organizations (e. g. , the Business Center’s “Start Smart” provides on-line licensing information to entrepreneurs and established businesses that want to relocate or expand).
Training and Certification of	The Arizona Association for Economic Development sponsors seminars and workshops but doesn’t train and certify economic development professionals.	The nonprofit Connecticut Economic Development Association sponsors educational programs and seminars, does not train and certify economic development officials.
Providing Resources in the Community	SBA-funded small business development centers are located at most of state colleges and universities. Each center cooperates with the local SBA office to deliver its services.	The SBA funds similar centers throughout the state. Some are located in state colleges and universities and other in chamber of commerce offices.
Starting and Operating Microenterprises and Home-based Business	Arizona Business Connection’s one-stop service provides generic information about starting or expanding a business, but does not tailor assistance for microenterprises or home-based businesses.	The state-funded nonprofit Community Economic Development fund targets microenterprises, which may include home-based businesses.
Rural and Urban	DOC’s Rural Development Office provides technical and financial assistance to local governments and community organizations that support small businesses located in rural areas.	The Small Town Economic Assistance Program funds infrastructure projects in small towns and the nonprofit Rural Development Council works with the U. S. Agriculture Department on assessing rural area needs.
Minority- and Women-owned Businesses	DOC maintains a directory of the state’s minority- and women-owned businesses and helps them access state procurement programs.	The law requires state agencies to set aside contracts for exclusive bidding by small and minority owned businesses. (The latter includes women-owned businesses. )
Workforce Development	DOC provides grants covering up to 75% of a business’ training costs and helps businesses (1) find suitable job applicants and (2) access tax credits for creating new jobs going for specified groups.	The Labor Department provides funds to businesses for training their employees and provides on-line information about job-related tax credits. Its on-line services include helping individuals find jobs that match their skills.

ACCESS TO CAPITAL

As Table 4 shows, Connecticut appears to provide more small business funding than Arizona. SBA mircoloans are available in both states, but Connecticut also funds CEDF’s mircoloans. Connecticut’s small businesses can obtain seed and venture and loan guarantees from the state’s two quasi-public economic development agencies. The Arizona Venture Capital Conference helps entrepreneurs find private venture capital, and the SBA appears to be the only agency guaranteeing small business loans.

Table 4: Access to Capital

*Component*	*Arizona*	*Connecticut*
Microlending	Microloans available through SBA	Microloans are available through the SBA and the Community Economic Development Fund
Incubator	Nonprofit Northern Arizona Technology and Business Incubator provides technical assistance and information referral to start-up companies.	Connecticut has at least eight incubators operated by colleges and universities and nonprofit organizations.
Seed and Patient Capital	Arizona Venture Capital Conference offers seminars and workshops for entrepreneurs on how to obtain venture capital and holds annual conferences designed to match investors and entrepreneurs.	Connecticut Innovations, Inc. provides seed and venture capital mainly for small and large high technology businesses.
Small Business Loan Guarantees	Available through SBA	The Connecticut Development Authority, the SBA, and the CEDF guarantee small business loans.

PROCUREMENT

Both states use their procurement policies and practices to help small businesses grow. Both provide on-line information about procurement opportunities and require state agencies to promptly pay their vendors.

But, as Table 5 shows, Arizona’s penalty for failing to make prompt payments applies only to transportation contracts while Connecticut’s applies to all state contracts. Arizona’s bid provisions entitle the state agencies to make discounts for making prompt payments while Connecticut’s do not.

The states’ minority business procurement requirements differ. By law, Arizona agencies must solicit bids from minority- and women-owned businesses, but do not have to award a specified amount of contracts to these businesses. Connecticut, on the other hand, requires agencies to set goals and achieve them by setting aside contracts for exclusive bidding by small and minority (including women)-owned businesses.

Table 5: Procurement

*Component*	*Arizona*	*Connecticut*
Marketing Procurement Opportunities	State Procurement Office’s web page provides information about procurement requirements and forms. On-line DOC database allows buyers and sellers to search for companies meeting their respective needs.	DAS and DPW web pages provide access to bid requests and bid submission requirements.
Agency Small Business Procurement Goals	State agencies must solicit bids from women- and minority-owned businesses.	State agencies must set annual goals for awarding contracts to small and minority- (including women) owned firms and meet those goals by setting aside contracts for exclusive bidding by these firms.
Prompt Payment	State applies prompt payment discounts to bid amounts if it meets specified payment deadlines. DOT consultants and contractors must pay interest if they fail to pay their sub consultants and subcontractors on time.	State agencies must pay interest if they do not pay contractors on time. General contractors awarded state construction contracts must also pay interest to their subcontractors if they do not pay them on time.

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