A Boise lawmaker is calling for the state to set up a private fund that could make loans of up to $35,000 to startup companies and other growing businesses in Idaho, a move that he says could trigger some badly needed job growth.
Rep. Branden Durst, D-Boise, has been drawing up a bill that would create an independent corporation called the Micro Enterprise Development Association that would be authorized to make loans to companies with fewer than 50 full-time employees.
The association, modeled on similar government-initiated groups in other states, would raise all its money by issuing bonds and notes. It would receive no money from the state general fund.
For each job created at the state annual wage, companies receiving the loans would get a $2,500 break on the unpaid balance. That incentive would be available for up to 10 jobs, or $25,000, though the positions would have to be sustained for an entire calendar year. The association would be repaid from the state’s sales tax account.
The loans would not be dischargeable, which means that they could not even be removed as part of bankruptcy proceedings (similar to student loans).
A seven-member board of commissioners, appointed by the governor, would oversee the association.
Durst, who is the Legislature’s youngest member at 30 years old, answered a few questions about the proposal earlier this week. Here’s a slightly edited version of our conversation:
Q: Can you just explain briefly what this organization would do and how it would be formed?
A: It would essentially be a sister organization to the Idaho Housing and Finance Association, which, as you are probably aware, provides home loans to families. This would be similar in structure, but different in mission. It would provide small business loans to small businesses … loans of $35,000 or less.
Q: How would it be funded?
A: There’s no cost to the general fund. It would be created as what’s known as an independent corporate body politic … just like IHFA. The organization would have the ability to bond, and underwriting their bonds would be a guarantee from the state of Idaho (through) the state sales tax account. I do limit that to 2 percent of the sales tax account, which is like $1.2 billion. It’s limited to just 2 percent of that (or about $24 million) in terms of what it’s allowed to lend or bond against. It, of course, would have the full state sales tax behind it. … That was the same way the IHFA was created. They’ve been able to be successful, and they no longer have that authority.
Q: So I guess this raises the question: why is there the need to create what appears to be another quasi-government agency? Do we need another government bureaucracy?
A: Well, I would take issue with that. It’s not governmental. It’s completely not government, just like IHFA is not considered a branch of government. It’s being supported by the government, but it’s not part of the government. … I do think that it’s important to recognize that job creation occurs most readily at the small business level. The state of Idaho has a strategic interest in investing in those kinds of things as much as it can. That’s number one. Number two, it’s important to realize that when you get an organization that has a specific objective (of job creation), that helps it be more effective in what it’s tasked to do.
Q: So is this specifically modeled on any other organizations across the country, or would this really be breaking new ground?
A: It’s a little bit of both. The state of Nebraska was really the first state to pursue micro enterprise development. They provide general fund support to micro enterprise development. Obviously, that’s not available here in Idaho, and even if it were, I don’t think that would make it very far. This is the first example of doing what we’re talking about, on the scale we’re talking about, and that’s important. Much of the state’s economy is still quite rural, and you’ve got people in those rural communities that have skills that can create jobs. … That’s the advantage of doing it this way. It does give the state a really useful tool in its economic development toolbox to create jobs everywhere in the state.
Q: Let’s talk about the politics of this. Do you have any co-sponsors yet?
A: I’ve got the commitment of (the House) minority leader, Rep. John Rusche. It’s in front of the chairman of the (House) Business Committee, Max Black, who is still taking a look at it. I’ve been pretty willing to share it with anybody. … We’re talking about something that’s really different, taking a different approach to Idaho economic development. I suspect, before it’s all said and done, there will be some Republican co-sponsors that will be on board. It’s not just a Republican issue, a Democratic issue. This idea of job creation is something that everybody needs to get behind. … We’re still soliciting input. I’m trying to make this as collaborative and open a process as possible. Everyone I’ve spoken with about the idea has been curiously interested. It’s been good to hear that. … It’s good when you get people thinking. Maybe even if that’s not the answer, you can create something that’s closer.
Q: So, what’s the underlying need here? You’re saying that there’s a gap in the private sector that’s not meeting the needs of small businesses.
A: I think that’s indisputable. The banks would tell you the same thing, and so would the credit unions. And the reason is they can’t leverage capital at that small of an amount. There’s really no profit for them. They do much better when they’re loaning $250,000 to $300,000. These small loans are difficult. It’s hard to get behind someone that doesn’t have that much collateral. You talk to an entrepreneur and that’s what makes it hard to start a business. The only way to fund a small business startup right now is through credit cards, and that’s a pretty daunting task, unless you’re independently wealthy. You’re not going to be successful when you’re doing that with an interest rate of 30 percent. I’d rather give people a chance to be successful.
Q: So just getting back to the politics of this: do you think this has any chance of passing this year?
A: I’d like to think so. I think everybody recognizes that job creation is goal number one. Really we need to have jobs be goal number one. Budgets come and go, but jobs stay. I’ve done quite a bit of the back end work. I’m open to as much feedback as I get. It’s not about who gets credit on this. It’s about trying to find a solution.
Q: Again, just to sum up: why do you feel this is an important bill?
A: We’ve had double-digit unemployment. That’s not a good sign. Anything we can do to get rid of that. That’s why we’re in the budget crunch we’re in. We don’t have enough revenue because we don’t have enough people employed. I can’t think of anything more salient than job creation. Just walk down the street, and I’m sure you can find someone that would love to have a job.