CEOS rank California worst state for business

May 4, 2012

By Joseph Perkins 

“California is the worst! They are doing everything possible to drive business out of their state. If it were not for the climate, they would have lost half their population.” 

That was the damning comment of one of the 650 business leaders surveyed by CEO Magazine for its annual ranking of the best and worst states for business. Such sentiment explains why, for the eighth straight year, California ranked dead last among the 50 states in business climate. 

In compiling its ranking, CEO Magazine asked chief execs to grade states in which their companies do business by various measures, including taxes and regulation, quality of workforce and living environment. 

“Once the most attractive business environment, the Golden State appears,” the magazine lamented, to have slipped “deeper into the ninth circle of business hell,” a reference to Dante’s Inferno. “The economy, which used to outperform the rest of the country, now substantially underperforms.” 

The evidence abounds. 

California’s economy, the world’s sixth largest a decade ago, has fallen back to ninth place. Even its standing as America’s biggest state economy is in jeopardy. 

Indeed, from 2000 to 2010, California’s share of the national economy shrank faster than all but three states, according to the Bureau of Economic Analysis. 

Lone Star shines

Over the same span, Texas became the nation’s second-largest state economy, supplanting New York. The Lone Star State’s growth in economic output was one of the biggest any state has enjoyed in the past half-century, according to BEA. 

It so happens that Texas ranked at the very top CEO magazine’s list of the best states for business. It was given very high marks by chief execs for its business-friendly tax and regulatory environment, not to mention its workforce quality. 

California likes to believe that it has much more to offer than Texas. But that’s not the way CEOs see it. Otherwise, we wouldn’t have seen major California-based companies expand their operations in the Lone Star State. 

Indeed, EBay/PayPal expanded its support facilities in Austin. They were joined by Facebook, which opened its first domestic operation outside of Californiain the Texas state capital. Then there was Petco, which opened its first customer support center outside of California in San Antonio. 

And Texa sis not the only state luring away California companies, as CEO magazine noted. 

A report by Spectrum Locations Solutions indicated that some 254 Californiacompanies moved some or all of their business work (and jobs) out of state in 2011. That was a 26 percent increase over 2010 and a whopping 500 percent increase over 2009. 

Spectrum’s Joseph Vranich attributed the exodus to California’s high taxes, costly regulations and general hostility toward business by state and local public agencies.  

Meanwhile, the solons in Sacramento continue to propose and enact legislation that further raises the cost of doing business in the GoldenState; that ignores the reality that Californiais losing business to other states that boast lower taxes, less onerous regulations, fewer lawsuits and lower costs of living. 

“California regulations, taxes and costs will leave only tech, life sciences and entertainment as viable,” said one exasperated CEO. “If you aren’t an elitist, no room here for the middle or working classes.”