CA Business Exodus Accelerates
April 14, 2011
By JOHN SEILER
As fast as was the business exodus from California last year, it’s even faster in 2011. The new Pharaoh, Jerry Brown, also is not relenting in his oppressions of business.
California is experiencing the fastest rate of of companies relocating to out-of-state or out-of-country locations since a specialized tracking system was put into place two years ago. The disturbing trend is reflected in a review of activity from Jan. 1 through April 12 of this year when 69 California company disinvestment events occurred, an average of 4.7 per week — greater than the 3.9 average per week last year….
Unfortunately, the stage is set for California to lose additional companies, capital and jobs in the future. That’s because the business environment worsened yesterday when Gov. Jerry Brown signed into law a requirement that utilities obtain one-third of the state’s electricity from renewable sources. California companies, which already pay 50% more for electricity than companies in other states, can expect costs to increase by another 20% or so.
Another factor is the continuing imposition of AB 32, the Global Warming Solutions Act of 2006. Backers, such as then-Gov. Arnold Schwarzenegger, said it would rejuvenate the state by creating new high-tech jobs. Critics said it would kill a million jobs. Looks like the critics are being proven right — assuming the critics haven’t left the state.
Such new burdens along with upcoming regulations stemming from the “California Global Warming Solutions Act” set potentially overwhelming obstacles to companies here as they try to meet competition based in other states and in foreign nations.
Top Ten Reasons for Leaving
Vranich also has updated his “Top Ten Reasons Why California Companies Are Calling the Moving Companies©.” Click on the link to see the full list. Here are a some of them:
The #10 Reason (New!) – Unprecedented Energy Costs: The California Manufacturers and Technology Association states that commercial electrical rates here already are 50% higher than in the rest of the country. However, a law enacted in April 12, 2011 requires utilities to get one-third of their power from renewable sources (e.g., solar panels, windmills) within nine years. Look for costs to increase by another 19% in many places to a whopping 74% in Los Angeles….
#9 – Severe Tax Treatment: The Tax Foundation in their 2011 State Business Tax Climate Index lists California at No. 49 for tax fairness. CFO Magazine ranked California the worst state for tax treatment. The Council on State Taxation ranks California as the only state to receive a D- grade (the lowest grade)….
#8 – Worst Regulatory Burden: The consulting firm Bain & Co. constructed a “regulatory hassle index” that found “California is far worse than any other state by a very significant margin.” The finding was echoed by Development Counselors International that found that 72% of surveyed corporate executives listed California as having the “worst business climate” in the entire United States. The newest survey, released in March 2011, found that 87.7% of California executives who also operate in several states say California is a harder place to do business than anywhere else….
#7 – Dreadful Legal Treatment: The Civil Justice Association of California said the state ranks 44th in legal fairness to business. Los Angeles was again named the least fair and reasonable litigation environment in the entire country.
#6 – Most Expensive Business Locations: The Rose Institute of State and Local Government reported in its 2010 survey that California cities continue to be some of the most expensive locations to do business in the United States….
#1 – The ‘Outpouring’ of Poor Rankings Continues: California ranked dead last in the latest Pollina Corporate Top 10 Pro-Business States for 2010 study. The finding was based on a composite of labor-related factors, business and personal taxes, the litigation environment, demographics, crime rates, school dropout rates, lifestyle and a multitude of other issues. There is little evidence that California’s business environment will improve considering that that the legislature in 2011 has voted down litigation reform, tax-increase plans are underway, and a host of new regulations are to be implemented that will increase costs for literally every business.
Unhappy California Campers
When I speak with business clients I see that the cumulative impact of all this results in unhappiness. I wasn’t surprised when I saw LiveScience.com in 2010 report that California ranks 46th on a national “Happiness” list. The political culture — impacted by a radicalized, powerful, anti-business interest groups — causes many problems for those in California who attempt to attract and retain businesses.
And writing today on Fox & Hounds, Vranich explained how employees are begging their companies to exit the California Egypt:
Some time ago a decision-maker told me he had evaluated the benefits of moving his department out of Los Angeles. He said: “When I discovered how substantial the savings would be, I quipped in front of my staff, ‘We should move to Texas.’ I was surprised by what happened next – people approached me one by one, came in my office, closed the door, and asked that we move to Texas. Once I saw the employee reactions, I’d like for the relocation to occur.”
Last business left in California, please turn out the windmill-powered lights.