California: North America's Venezuela


FEB. 11, 2011


The economic news for California is still looking bad, and businesses are still leaving the state in record numbers, according to one relocation specialist who has been keeping track of business migration for several years. Joe Vranich, a California Relocation Coach says that while no one is calling him for help with relocation into California, his business is booming for those planning moves out of state.

At a meeting this week hosted by Marysville Republican Assemblyman Dan Logue, business representatives, legislators and lobbyists, as well as some Capitol staff members attended to receive the annual update from Vranich who has been keeping track of the business flight out of California.

Vranich shared stories of business clients who left California for greener pastures… to Arizona, Utah, Colorado, Nevada, North Carolina and Texas. “I’ve never once persuaded anyone to leave California,” Vranich said. Clients call Vranich when they’ve already decided to leave California and need assistance making connections in other states.

In just the first five weeks of 2011, Vranich said that 30 California businesses have already moved out of the state – that’s six per week. And according to Vranich, that is the highest departure rate he has seen since he has been keeping score on his Web site.

But the newest trend Vranich is noticing is employees asking their employers to move. Vranich said that he has been talking to many business owners recently who say they were not sure about making the move until their employees convinced them to do it.

Citing some of the many reasons businesses leave California, Vranich explained that his clients only make the decision to leave California when their dealings with state government reaches levels of regulatory and taxation exasperation.

Some of the reasons Vranich’s clients have shared for relocating to other states include:

California’s high corporate tax rates — Colorado has only a 4.6 percent corporate tax as opposed to California’s 8.84 percent, and 10.84 percent on banks and financial institutions.

High personal income tax rates — California’s personal income tax is 9.55 percent (according to the Franchise Tax Board 2009 rates).

California’s Alternative minimum tax (ATM is 6.65 percent for business and 7.25 percent for individuals).

The burden of costly, business-killing regulatory measures. And with AB 32 implementation already taking place, regulatory costs will climb higher.

High cost of doing business within California’s cities, which are some of the highest in the nation.

Hostility from government agencies — local, county and state employees often view business owners as “the enemy,” according to Vranich’s clients.

Litigious environment in California — businesses can be sued for just about anything.;

Extravagant state spending with no end in sight.

Unfriendly business environment

Florida rolls out the red carpet, and provides incentives for small, medium and large businesses to move.

As for reasons employees gave for wanting to move out of California, Vranich said they were lifestyle decisions: Wanting to live with less traffic, the ability to buy a nicer house for less money, they like the company they work for and see more opportunity for advancement if the company moves to a more business-friendly state, and they said that other states have better schools than California’s school system.

Vranich operates his business in Southern California and said he has observed the loss of the entertainment business first hand, as well. “California used to celebrate the creative class, but we’re even losing our entertainment industry.” In the 1980’s, 82 percent of the film industry movies and television were made in California. “Today, it has fallen to 30 percent. We are losing film business to Canada, Nevada and Florida. Even Lucas Entertainment is moving to foreign countries,” said Vranich.

Vranich said that many people including policy makers are in denial about how many businesses are leaving the state. The Public Policy Institute of California, a more liberal think-tank, did its own study of migration out of California. The PPIC study found “interstate business relocation is rare, confirming that jobs leaving a state are not a bellwether of poor state economic performance.”

“That’s just not true,” said Vranich. “Even Chief Executive magazine calls California ‘the Venezuela of North America.’”

In the “Best and Worst States For Business 2010” issue, Chief Executive magazine reported, ‘“Texas is pro-business with reasonable regulations,” one CEO respondent remarked, “while California is anti-business with anti-business regulations.” Another CEO commented, “California is terrible. Even when we’ve paid their high taxes in full, they still treat every conversation as adversarial. It’s the most difficult state in the nation. We have actually walked away from business rather than deal with the government in Sacramento.”’

Vranich described what he calls “the unsung creative class” – the owners of manufacturing businesses. “They’ve had to be more creative to produce better products for lower prices. And still the California elitists disrespect them,” said Vranich.

Vranich relies on public domain information for his record keeping, and said most businesses that plan to move out of state keep the move quiet until it’s done. “I report only about one out of every five moves,” said Vranich.

But the PPIC study argues “that even statewide the claims of a hostile business climate were not borne out by any significant exodus of firms from the state,” but that was between 1992 and 2004. Data for 2005 through 2010 was not included in the study.

In contrast to the PPIC study, Forbes Magazine recently published an interactive map showing the migration of people leaving states, and where they are moving. According to the map, the migration out of California is heavier than any other state.

“Go east young man,” said Vranich, who migrated west to California from Pittsburgh years ago, as many others have before him. “Today’s gold rush is not in California.”

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