Analysis Item 33: Oregon Business Development Department State Trade Expansion Program Analyst: Steven Bender Request: Approve, retroactively, the submission of a federal grant application to the U.S. Small Business Administration (SBA) in the amount of $562,500, for funds available under the State Trade Expansion (STEP) program. Recommendation: Approve the request, and authorize the agency to submit future annual applications for STEP program grants, if those grants: 1) are used to expand the Oregon Trade Promotion Program; 2) do not require the state to maintain any funded program levels after expiration of the grant; and 3) do not include match requirements that require additional Lottery Funds support or a reduction in the agency s other program services. Analysis: The Oregon Business Development Department (OBDD) is asking the Emergency Board to retroactively approve its submission of a federal grant application for $562,500 under the State Trade Expansion (STEP) grant program. The U.S. Small Business Administration (SBA) is offering STEP grants to support state export programs that assist eligible small businesses. This is the fifth year the SBA has solicited applications for STEP grants. The agency applied for and received STEP grant awards in each of the previous four years. Since the awards were made last year, the STEP program, which had been funded annually as a pilot project, was made a permanent provision of the Small Business Act. The applications for the current round of grant awards were due on March 24, 2016. Because the Act that made STEP a permanent program was not signed until February 24, 2016, the agency did not request authority to apply for the fifth-year grant during the 2016 session, but subsequently did apply prior to the deadline. As required, the agency notified legislative leadership of its desire to apply for the grant more than 10 days prior to submitting the application. The agency will withdraw the application if the Emergency Board does not retroactively approve its submission. OBDD would use the STEP grant funds to expand the Oregon Trade Promotion Program (OTPP). The OTPP provides financial assistance to Oregon companies attending international trade shows or trade missions in order to enter new export markets or expand sales in existing markets. The financial assistance takes the form of grants to offset portions of the costs of attending the trade shows and missions. Financial grants of up to $5,000 are awarded to eligible small businesses under the OTPP program. The agency also offers companies Global Trade Specialists who provide counseling and technical assistance services. The STEP funds would expand the OTPP to serve more companies, and to fund other expanded services including trade show booth rentals and promotion and marketing materials. Funds would also be used for smaller training grants to companies. The STEP grant program includes a 25% state match requirement. OBDD would apply existing Lottery Funds in the Industry Competitiveness Fund and existing personal services dedicated to export programs to meet the full 25% state match requirement. This will not impact the ability of the Lottery Funds to provide program services. Legislative Fiscal Office Emergency Board May 2016
The Legislative Fiscal Office (LFO) recommends approval of the request. The agency will be able to meet the required match requirements without taking resources or personnel away from other programs. Furthermore, there are no continuing requirements for the agency to maintain any programs or expenditure levels after the expiration of the grant. Because the STEP program has transitioned to permanent status, the agency anticipates submitting a new grant application each year going forward. LFO recommends that the Emergency Board authorize future grant applications on the condition that future grants are used for the same purposes and do not impose additional costs on other agency programs or on the state budget. If the application is successful, the Legislature will need to increase the agency s current-biennium Federal Funds expenditure limitation by $421,875 during the 2017 session, and include $140,625 of additional Federal Funds expenditure limitation in the agency s 2017-19 biennium budget, to accommodate STEP grant expenditures in both biennia. Legislative Fiscal Office Emergency Board May 2016
33 Oregon Business Development Department Heath Request: Retroactive authorization to apply for a State Trade Expansion Program federal grant. Recommendation: Approve the request. Discussion: The Oregon Business Development Department is requesting retroactive authorization to apply for a $562,500 federal State Trade Expansion Program (STEP) grant from the US Small Business Administration. STEP provides funding to assist eligible small businesses to start exporting their products or services to other countries or to increase the value of their exports. The department uses the funds to provide grants to small businesses to attend trade shows and expos where they can promote their products or services. The grant requires a 25 percent state match. Half of the match will come from the department s appropriation for the Oregon Trade Promotion Program as part of the Industry Competitiveness Funds and the other half will come from staff budgeted in the Business, Innovation and Trade Division. The matched funds include funding for staff time for those administering the grant. Funding from the federal government for these services supplements existing state funding through the Oregon Trade Promotion Program. In February 2016, President Obama signed a law moving STEP from a pilot program to a permanent part of the Small Business Act, with permanent annual funding. Department of Administrative Services 33-i May 25, 2016
April 25, 2016 The Honorable Senator Peter Courtney, Co-Chair The Honorable Representative Tina Kotek, Co-Chair State Emergency Board 900 Court Street NE H-178 State Capitol Salem, OR 97301-4048 Dear Co-Chairpersons: Nature of the Request The Oregon Business Development Department (Business Oregon) applied for the fifth year of the State Trade Expansion Program (STEP) Grant from the U.S. Small Business Administration (U.S. SBA). Business Oregon submitted an application to U.S. SBA for a $562,500 STEP Grant by the deadline of March 24, 2016. Due to the timing of the grant, Business Oregon was not able to request legislative approval to apply prior to the application deadline. Business Oregon provided notification to the Emergency Board of its intent to apply for the grant on February 26, 2016, prior to submitting the application. On February 24, 2016, the President signed the Trade Facilitation and Trade Enforcement Act of 2015, which made the STEP program a permanent provision of the Small Business Act. Previously, the STEP had been funded on an annual basis as a pilot program entitled the State Trade and Export Promotion Grant. STEP provides funding for states to carry out export programs that assist eligible small business concerns. The aim of the STEP grant is twofold: 1) increase the number of small businesses that are exporting and 2) increase the value of exports for those small businesses that are currently exporting. Based on the U.S. SBA s Program Application Guidelines for Federal Fiscal Year 2016, the federal share of the $750,000 program will be 75% and a 25% state share is required. Business Oregon will use $93,750 of Industry Competitiveness Funds and $93,750 of existing personnel services dedicated to export promotion activities to meet the $187,500 match requirement on the $562,500 federal grant funds requested for a total STEP program of $750,000. Background The Oregon Business Development Department proposes a STEP Year 5 Project that will continue to build upon the successes of the previous STEP Years 1 through 4, and will measurably increase the value of exports from Oregon and increase the number of exporters in the state. Project funds will be
used to provide eligible small businesses with the financial incentive, export training and expertise to facilitate entry into new markets and to find new customers. Business Oregon promotes exporting because it strengthens our service and manufacturing companies and improves Oregon s competitiveness in a worldwide economy thus creating and retaining jobs right here in Oregon. Over the last several years, STEP has been an integral part of the Business Oregon s export promotion strategy. In Year One, 69 small and medium-sized Oregon businesses received STEP export promotion grants and reported back $47 million in immediate and expected export sales as a result of their STEP grants. In Year Two, 87 businesses participated reporting $76 million in immediate and expected export sales. In Year Three, 59 businesses participated reporting $96 million in immediate and expected export sales and in Year Four, currently 73 businesses have successfully applied for an export grant and have completed an export activity. Year four businesses who have already utilized an export grant have reported back $3.75 million in immediate and expected export sales to-date. (Business Oregon requires companies to report export sales numbers immediately following a grant-supported export event, and then again 6 months and 12 months later.) Business Oregon s STEP Year 5 project is designed on the model of the existing Oregon Trade Promotion Program (OTPP), which has demonstrated success and provided value for Oregon exporters since 2001. As with OTPP, STEP-eligible applicants receive financial assistance for trade promotion activities and training, and are also assigned a dedicated Global Trade Specialist for counseling and technical assistance services through Business Oregon. By boosting the level of both financial and technical assistance available to small businesses, Business Oregon s STEP Year 5 Project will help more Oregon exporters from more communities take advantage of the export promotion and training resources available to them and help them attain a new level of export success. Agency Action Should the grant be awarded, Business Oregon will require an increase in its 2015-17 Federal Funds expenditure limitation of $421,875 and an increase of $140,625 in its 2017-19 Federal Funds expenditure limitation as the last quarter of the grant activity will be executed during the 2017-19 biennium. No additional state funding is requested. The department will utilize the 2015-17 Legislatively Approved Budget and 2017-19 Current Service Level lottery fund allocation for the match. The $187,500 match will be met through a combination of $93,750 from the Industry Competiveness Fund and $93,750 existing personal services dedicated to export promotion activities. No additional staff positions are required. Action Requested Business Oregon requests retroactive approval for the submission of a fifth year State Trade Expansion Program grant application of $562,500 from the U.S. Small Business Administration.
Legislation Affected Submission of the grant application does not affect legislation. Thank you for your consideration of this request. Sincerely, Chris Harder Interim Director c: Steve Bender, LFO Analyst Patrick Heath, CFO Analyst