House panel endorses venture capital bill

[private]

Legislation authorizing state government to create a $200 million venture capital fund to invest in small businesses picked up unanimous support in a House subcommittee Tuesday.

Lawmakers voted without dissent to move HB 718 to the House Insurance Committee, which is expected to give it a “do pass” recommendation next week and send it to the House floor for a vote.

Rep. Allen Peake (R-Macon) is proposing in HB 718 to raise $200 million over a four-year period for the venture capital fund through the sale of insurance premium tax credits to insurance companies.

The money would be handled by a Georgia Capital Acceleration Authority, which is modeled after a similar program in Maryland. The authority would hire an investment professional to make the decisions on where to put the money.

The authority’s funds would be invested in small companies based in Georgia. The bill prohibits investments in businesses involving retail sales; real estate development or construction; entertainment, amusement, or recreation; insurance, banking, lending, financial, brokerage, or investment activities; natural resource extraction, and the provision of professional services by accountants, attorneys, or physicians.

“Government shouldn’t be in the business of creating jobs,” Peake said. “It should create an environment conducive to job creation by providing a source of capital.”

There were some concerns in the committee meeting about the use of $200 million in state money for business investments.

“Why do we need another authority?” asked Rep. Carl Rogers (R-Gainesville). “The state already has, what, about 500 of them?”

Alan Essig, director of the Georgia Budget & Policy Institute, noted that Gov. Nathan Deal’s own budget projections show a $320 million revenue shortfall in fiscal year 2014, when the first $50 million in state funds would be raised for the venture capital authority.

“What are we going to have to cut?” Essig asked. “I think the concept is solid – it’s the immediate cost. We’ll get the immediate budget hit on it.”

Peake acknowledged that it would take several years for the initial investments from the venture capital fund to earn any significant payback.

“The reality is, an investment made today is not going to pay off in jobs tomorrow,” Peake said.

The subcommittee overlooked the concerns about the bill and voted to keep it moving.

“Jobs legislation would be a top priority,” said Rep. Richard Smith (R-Columbus). “This is a good jobs bill.”

© 2012 by The Georgia Report

[/private]

Tags: Alan Essig , Allen Peake , Carl Rogers , Richard Smith , venture capital fund