Small business program could fall victim to California budget deficit

Lina Mills recalls how she came to this country from Colombia at age 16 having never worked a day in her life. 

Once she arrived, she found work in restaurants. “I had to provide for myself,” Mills told CalMatters recently. “I basically ran from home.”

She knew some English, learned more, and worked her way up to catering manager. Now, 36 years later, she owns two businesses in San Francisco.

She employed a dozen workers at Creative Ideas Catering and Creative Ideas Cafe but “had to send everybody home” during COVID lockdowns and the subsequent slowdown. She has since been able to rehire some — she is now back up to 10 workers and hopes to hire more. “I want to not just offer jobs to people who used to work for me — I’m trying to create more jobs.”

Mills has relied on programs that help small business owners with financing, marketing, accounting and social media skills, which enabled her to participate in pop-ups for food takeout during the pandemic’s height. Acknowledging the free aid she received from a Small Business Development Center and the Renaissance Entrepreneurship Center, she said “I have no idea what I’d do without them.”

But such aid to small businesses is now in jeopardy across California. The Renaissance center, which receives some state funds through the Small Business Technical Assistance Program, could see a drop in funding because of the state’s massive budget deficit. Since 2018, the program has supported centers that help under-resourced small businesses in low-wealth, rural and disaster-affected communities, and those owned by women, people of color and veterans. Now Gov. Gavin Newsom is proposing to slash the program’s budget by 56%, or $13 million.

Mills recently testified urging state lawmakers not to cut funding for the program. Small business leaders and advocates traveled to the Capitol last week and among other things lobbied against the cuts. Last weekend, state legislators released their proposed budget, which rejects the governor’s cuts to the program and restores its full annual $23 million funding. 

The Legislature passed a placeholder budget Thursday.The governor and legislators are likely to wrestle over their budget priorities until the end of the month.

Alex Stack, spokesperson for the governor, told CalMatters that budget negotiations are ongoing and noted: “Gov. Newsom has invested billions of dollars in small business grants, tax relief, and other incentives over the past few years.”

When Newsom presented his revised budget proposal in early May, the governor said “these are programs that I’ve long advanced, many of them. None of this is work you enjoy doing, but you have to do it. We have to balance the budget.”

The staff of Assemblymember Jesse Gabriel, the Encino Democrat who’s chair of that chamber’s budget committee, did not reply to questions about this specific program. The California Office of the Small Business Advocate, which administers it, said it had no comment.

If the program’s funding is cut by more than half, it could “affect 75,000 small businesses per year that contribute to the state’s tax base,” said Catalina Martinez, chief executive of CAMEO Network, a small business advocacy group. 

More than 90% of California businesses employ fewer than 10 employees, and 7% of the state’s businesses have 20 to 100 employees, according to the Public Policy Institute of California.

“Capital alone is not enough,” Martinez said, adding that small business owners need “clear business plans and a clear idea of their value proposition — things that are going to allow them to succeed and grow.” Small business development centers and other organizations can help owners with that, which Martinez said is important for first-generation entrepreneurs and immigrants “who may not have the networks and expertise” they need.

Ernesto Delgado is among the entrepreneurs singing the praises of the state’s technical assistance program and other small business programs.

“I was able to speak directly to accountants, legal, HR,” Delgado said. “I didn’t have to pay for them. I couldn’t afford them.” Those professionals helped him see the importance of creating an “evolving business plan,” he said.

He started off with one restaurant and now owns six in the Sacramento area, which during peak times employ about 150 workers, he said. Delgado said attending a Small Business Administration course for emerging leaders set him on a path to management and entrepreneurship classes, then culinary school. 

“I wouldn’t be where I am today without some of these programs and connections through my relationship-building,” said Delgado, whose restaurants include Mayahuel, his first, and Octopus Peru, one of his newest. “I don’t think I would’ve made it through COVID.”

Farther down the state is a different type of example of the impact of that technical assistance. A San Diego restaurant owner, Rodnia Attiq, is counting on the help she received from APEX Accelerators, a small business accelerator that focuses on government contracts, to land a big client: the U.S. Coast Guard, which is seeking a small business to serve food seven days a week at its station in San Diego.

For El Borrego, which specializes in lamb tacos and is a family-owned business with nine people on the payroll, applying for a government contract was no joke, Attiq said. 

“You have no idea how hard it was,” she said, adding that even with the help of APEX, which gets some funding from the state technical assistance program, completing the 140-page proposal took “10 days, nonstop, till 11 p.m. or midnight.” 

But she felt all the hard work was necessary. “Everything is changing for the restaurant business,” she said. “It’s not easy. You have to look for all ways to keep in business.”

Now, Attiq is waiting to hear whether she won the contract. She’s optimistic: “I already have my route worked out, and what time I’m going to wake up.”