California encourages business flight

Dec. 21, 2012

By Joseph Perkins

Employees at Chevron’s San Ramon corporate headquarters received an unexpected email yesterday. It notified them that a quarter of their jobs are being moved from California to Texas.

The oil giant, the Golden State’s largest corporation, offered no detailed explanation for the mass transfer. But I suspect it had something to do with California’s decidedly unfriendly business climate.

Indeed, Forbes magazine this month ranked California one of the 10 worst states for business based on six factors: business costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life.

“California is littered with problems,” the magazine decries.

It ranks last, Forbes noted, in Pollina Corporate Real Estate’s study of the states with the best financial incentive programs and state economic development efforts. Moody’s rates California’s bonds A1, the second lowest of any state. And a study by the Mercatus Center, “Freedom in the 50 States,” ranked California’s regulatory climate the fourth worst among the states.

Meanwhile, California has the fourth-highest tax burden, according to a study by the Tax Foundation. And energy costs here in the Golden State are 33 percent above the national average.

What amazes is that lawmakers in Sacramento don’t think the state’s business climate so bad. They actually think that California is a great state for business.

Chevron obviously disagrees. That’s why it’s transferring 800 jobs from San Ramon to Houston. And the oil giant’s move is no aberration. Corporations are fleeing California for states that don’t view big business as a necessary evil.

Leaving

Indeed, Forbes noted that Comcast shut down its Northern California call centers this year, citing “the high cost of doing business in California.” Some 1,000 workers lost their jobs.

It also mentioned Campbell’s Soup, which padlocked its Sacramento factory, displacing some 700 workers. The company decided to move production to Texas, North Carolina and even Ohio of all places.

That’s not to say there are no benefits to doing business in the Golden State. Indeed, Forbes lists several.

The state has a $2 trillion economy, the world’s ninth largest, which is projected to expand 3.6 percent annually over the next five years (Lord willing and the creek don’t rise).

Some 10 percent of the nation’s 1,000 largest public and private companies are based in California. And they are staffed at the highest levels by very well educated workers, many of whom are products of the state’s first-rate universities.

Venture capital

California’s venture capital community continues to spur innovation, investing some $36 billion in promising home grown companies over the past three years, four times the total of any other state.

And, of course, California has the best weather in the country.

Those attributes keep many California corporations from following the examples of Chevron, Comcast, Campbell’s Soup and numerous others that have moved some or all their operations to more business-friendly states.

But even those California loyalists may eventually decide to flee if Sacramento continues to raise taxes, impose regulations and otherwise pursue policies that make it prohibitive to do business in the Golden State.