California Economic Engine Continues to Sputter

By LCR Contributor Barrell Rider

As we enter the second half of 2011, somber news continues to pour out over the economic state of California. The latest unemployment figures have California at 11.7% unemployment, trailing only Nevada. California has seen less than a one percent decrease in unemployment over the past year (.7%). This decrease is also among the worst of the 50 states.

By contrast, disinvestment in California grew, setting a first quarter record in 2011 as seventy businesses moved or expanded out of state. Among the notables to expand out of state are Ebay/Paypal and Intel.

Ebay/Paypal has plans to create over 1,000 jobs in the Austin area in the next decade and will create 50 this year alone, with an average salary of 107,000. Intel has committed to invest 5 billion in a new manufacturing facility in Chandler, Arizona, which is set to begin construction late this summer adding a boost in employment in the construction industry, it will also create permanent manufacturing jobs.

Some companies are moving their operations out of the state completely and taking jobs with them. Among these companies are Dunn-Edwards, J.C. Penny and the N.H.R.A. (National Hot Rod Association).

As California commits more money to green energy and enacts more regulation on the energy industry, costs continue to soar for consumers and businesses. Included in the casualties of this are a number of green energy companies that are moving or expanding out of state. Among them are AQT Solar, Bing Energy, BP Solar, Cali Solar, Nordic Wind Power and Solar Millennium.

Late last year, a list was compiled from a number of surveys and data listing the top ten reasons businesses leave California.

Here is the list:

10. Unfair taxes (Tax Foundation ranks California as 48th for tax fairness.)

9. Most expensive business locations (Rose Institute for State and Local Government has many California cities as the most expensive U.S. places in which to do business.)

8. Worst performing labor (Pacific Research Institute rates California’s labor performance over a five-year period) as lowest in the nation.)

7. Dreadful legal treatment (Civil Justice Association of California ranks California as 44th in legal fairness to business.)

6. Worst regulatory burden (Consultant Bain & Co., in a 2004 report for the California Business Roundtable, said California is far worse than any other state on its “regulatory hassle index,” based on cost, uncertainty and complexity of government regulations.)

5. Harsh treatment motivates exits (Bain & Co. also said more than half of California’s business leaders said their companies had a policy to restrict job growth in this state.)

4. Unfriendliness (The Small Business and Entrepreneurship Council ranks California 48th — Vranich says 49th based on the council’s 2009 report — in business friendliness.)

3. High misery index (Associated Press publishes a monthly economic stress index that ranked California 3rd highest in December.)

2. Uncontrollable spending (Several pollsters say people are angrier about California government than at any other time in the polls’ history.)

1. Worst state to do business (Chief Executive magazine surveyed company executives to conclude that California is the worst place in which to do business.)

In recent months, Lt. Governor Gavin Newsome accompanied a group of California legislators deep in the heart of Texas to investigate how Texas had created nearly 200,000 jobs while California had shed over 1 million. Much of the feedback and evidence supported the above-referenced top ten list. Let’s hope the Lt. governor takes action to improve the state economic and jobs outlook and doesn’t rely on his ol’ “its gonna happen whether you like it or not” mantra.

It’s clear that California’s over taxation, over regulation and high energy costs are among the leading factors contributing to lack of job growth and loss of jobs. These same factors are stifling consumer spending and quality of life as well. After reviewing such data, along the state’s legislative and spending history, its clear that keeping taxes high is a losing proposition, so too is the state’s overspending and subsidies in the areas such as transportation, energy, social and welfare programs.

Let’s hope Jerry Brown changes his tune and begins to work for the people and the future of California.

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