Commentary: California needs a business climate that supports everyone

[caption id="attachment_23937" align="alignright" width="114" caption="Jack Stewart"][/caption]

California is No. 1 at something: the worst place in America to do business, a ranking it’s held since CEO magazine began surveying CEOs in 2005. Not only does California’s business climate rank worse than every other state, but California ranks far below the national average in every category tested, from taxes to regulations, to workplace quality to living environment. In only one sub-category, Arts & Culture (ranked lowest in importance to CEOs), California surpasses the national average.

This is not new information. Every few weeks we see a new poll or survey ranking California’s business climate at or near the bottom. Texas, on the other hand, has consistently been ranked as the best place to do business by CEO magazine. One CEO’s comment was particularly revealing, “Texas is pro-business with reasonable regulations while California is anti-business with anti-business regulations.”  That’s quite a reputation for a state that desperately needs a surging economy to make up a $20 billion general fund budget deficit, close a $500 billion public pension fund deficit, reduce a 12-percent-plus unemployment rate and deal with a persistent $6 billion annual fund imbalance.

Well, if the state is doing badly, surely there must be positive signs of economic recovery in some of California’s world-class cities and counties. Not so fast. While much of the nation is beginning to show signs of recovery, California is still trying to find the bottom. Two reports shed light on the economic growth potential for California’s regional economies.

In March, the AP Stress Index ranked all 3,086 counties in the U.S. on the impact of the current recession and potential recovery. Not a single California county made the top 20 list of least-stressed counties, but 11 California counties were included in the 20 most-stressed ranking.

Even more disturbing is a ranking of the 2010 Best U.S. Cities for job growth by The study ranks the nation’s 397 SMSAs (Standard Metropolitan Statistical Areas) on current, mid-term and long-term employment growth rates. The only two California SMSAs to make the top 100 are Hanford-Corcoran and Medera-Chowchilla. The second rank of 100 SMSAs include El Centro and Bakersfield-Delano. The first large California city on the SMSA list is San Francisco-San Mateo-Redwood City ranked at 271. San Francisco (271) is followed by San Jose-Sunnyvale-Santa Clara-Carlsbad (297), San Diego-San Marcos (299), Sacramento-Roseville (322), Los Angeles-Long Beach (352), Santa Ana-Anaheim (353) and Riverside-San Bernardino (359).

Joel Kotkin opines on the findings in an article in Forbes Magazine titled "The Worst Cities for Jobs." Mr. Kotkin writes, "And then there is California, which by all rights should be leading, not lagging, the current recovery. Statewide unemployment, already at 12.6 percent, has been rising while most states have experienced a slight drop. Silicon Valley companies, Hollywood and the basic agricultural base of the state remain world-beaters. But the problem lies largely in an extremely complex regulatory regime that leads companies to shift much of their new production and staffing to other states, as well as foreign countries. The constant prospect of a state bankruptcy, in large part due to soaring public employee pension obligations, does not do much to inspire confidence among either local entrepreneurs or investors."

Mr. Kotkin concludes, “Hopefully, this will be the year when Californians decide that it needs an economy that provides opportunities to people other than software billionaires, movie moguls and their servants. It will have to include much more than the endlessly hyped, highly subsidized 'green jobs.’ More than anything, it will take rolling back some of the draconian regulations – particularly around climate change legislation – that force companies, and jobs, to go to places that, while not as intrinsically attractive, are far friendlier to job creating businesses.”


Jack M. Stewart is president of the California Manufacturers & Technology Association,

Show Comment