For the eighth straight year, CEO Magazine has ranked California the least friendly state to do business in. California constantly turns to the business community to fund the state’s shortcomings, while simultaneously making it harder and harder for new business ventures to open and put a dent in the staggering unemployment rate of 10.2 percent which is nearly three points higher than the national unemployment rate of 7.8% as of September 2012. Just last week, Long Beach’s unemployment rate came in at 12.4 percent, which shows regionally we have a problem.
I find it ironic that the regulators and legislators keep asking the questions “Why is California viewed as being so unfriendly to business?” The answer is simple: because it is! The perception is the reality and here are a few problem areas the state can begin fixing if we want to stop the leakage of California companies moving to the surrounding states and foster a climate much more conducive to job-creation.
First, we need reform to the California Environmental Quality Act (CEQA), and we need is ASAP. California needs a streamlined permitting process. Businesses need to know that when a project is proposed that they will be shovel ready with out the constant fear of frivolous litigation and constant protesting from the usual suspects looking to make a buck off of the job creators in their cities. Many states have instituted online portals to help track the permitting process. This way an applicant knows where a permit is, so they can inquire about the status and ensure timely processing. States have also limited the time frame in which the project can be challenged. Currently, a project can continuously be challenged, the issues then are mitigated, and the project is challenged all over again starting a viscous cycle of back and forth. If jobs are so important, why isn’t the process more efficient? What is wrong with a process where the Environmental Impact Report (EIR) is completed; the stakeholders raise concerns and the proponents of the project mitigate those concerns allowing the project to begin construction? The “NO GROWTH” sentiments need to stop if we want to put people back to work.
Second, we need more regulatory certainty. Finally this year, Senator Rod Wright passed a bill that only allows regulations to be instituted four times a year. Prior to this, regulators can impose mandates at any point in time throughout the year, making it impossible to plan for them. This state needs to be smarter and let the business community know that if you have a business plan, we are going to give you ample time to plan for new regulations before we turn it upside down and force you out of business. AB 32 could effectively kill the middle class by eliminating all of the oil refineries and a large portion of manufacturing in the state. However, the pleas of common sense for some of the states largest employers have fallen on deaf ears.
Third, we need to fix the tax structure. This state has routinely ranked among the highest rates for sales, income, and corporate taxes. If these taxes were set in stone, it wouldn’t discourage business as much because they could plan for it. Unfortunately, California continuously has local and statewide ballot measure that look to increase sales taxes and income taxes on business, which makes it very hard for companies to determine what their costs are going to be throughout a fiscal year. This goes back to the certainty aspect. I will say this though: It would not hurt California’s competitiveness to have a lower tax rate when some of our neighbors (Nevada) do not have a corporate income tax at all.
I could go on and on about why California is unfriendly to business. To steal a line from Senator Wright, “California needs to figure out what it wants to be when it grows up!” Constant regulation, a lengthy and costly process to start a business, and constant taxation is not the recipe for more jobs in California.
Einstein defined insanity as “doing the same thing over and over again and expecting different results!” I am not calling our legislators insane, but perhaps it wouldn’t hurt to entertain a new school of thought in regards to creating jobs and growing the California economy which has plummeted from the 5th in the world in 2002 to 9th in the world in 2012.