California could be on the brink of one of its biggest corporate defections yet with the signs that McKesson Corp. – the pharmaceutical giant that is

Apple is the only California company that’s bigger than McKesson, which has 75,000-plus employees and had $198 billion in annual revenue last fiscal year.

McKesson saw its profile increase greatly in 2017 after a joint investigation by the Washington Post and CBS “60 Minutes” alleged that the company had played a central role in the national opioid epidemic by failing to report “suspicious orders involving millions of highly addictive painkillers.” Yet it’s long been considered one of the 10 biggest companies “you’ve never heard of” by the InvestorPlace website and other business trackers.

Firm sold San Francisco headquarters

Now, according to a connect-the-dots report by the San Francisco Business Times, its days in the Golden State may be numbered. McKesson officially denied it was looking to move. But the newspaper noted a number of seemingly linked developments:

• The remarks of an official with Irving Economic Development Partnership that hinted McKesson was considering an expansion of its already “major commitment” to Irving. McKesson’s $157 million regional headquarters opened in 2016 in the business-friendly suburb of Dallas that already has the headquarters of such corporate giants as ExxonMobil, Fluor Corp and Kimberly-Clark. The state of Texas provided $9.75 million in subsidies to encourage McKesson’s decision.
• The announcement that CEO John Hammergren will retire on March 31, 2019, and be succeeded by McKesson executive Brian Tyler, who lives in Las Colinas, a posh Irving neighborhood. His possible relocation was not directly addressed.
• McKesson’s 2017 decision to sell its San Francisco headquarters for more than $300 million in favor of an arrangement in which it leased offices at the facility.

Given how much cheaper it usually is for a company to own rather than lease a large headquarters, the sale looks in retrospect like a warning sign to city leaders that their richest company was preparing to move.

McKesson would be hardest hit by new ‘homeless tax’

Nonetheless, besides Mayor London Breed, the city’s political establishment offered relatively little pushback to a successful tax measure on San Francisco’s Nov. 6 ballot that will take its single biggest toll on McKesson – at least if the company stays in the city.

To fund increased programs for the homeless, Measure C imposes a gross receipts tax on San Francisco-based companies which have $50 million or more in annual revenue. With $198 billion in fiscal 2017, McKesson is by far the highest-grossing San Francisco-based firm. Measure C is expected to generate $300 million a year, boosting the $380 million that City Hall now spends on homelessness.

If McKesson does leave, it will join the more than 1,700 companies whose decisions to abandon the Golden State have been documented since 2008. The traditional corporate complaints about California having high taxes and heavy regulations have been expanded in recent years to include concerns about the high cost of housing making it difficult to attract and retain workers.

Among the most prominent departures: Toyota moved its U.S. headquarters from Torrance to the Dallas suburb of Plano; energy giant Occidental Petroleum moved its headquarters from Los Angeles to Houston; and the Nestle USA food conglomerate moved its headquarters from Glendale to Rosslyn, Virginia, in the Washington suburbs.

The 2017 session of the California Legislature may be remembered as when the criminal justice reform movement in America’s largest state lost its momentum.

The movement entered the session with a head of steam after winning majority support from the Legislature and then the public for Proposition 47 in 2014 and for Proposition 57 in 2016. The former measure reclassified dozens of “nonviolent” and “nonserious” offenses from felonies to misdemeanors. The latter made it easier for nonviolent felons to win parole.

This year, the same rationale that civil liberties groups, progressive think tanks and minority organizations offered for Propositions 47 and 57 was invoked in seeking sweeping statewide bail reform and a pilot program allowing drug addicts to inject themselves in safe settings in several cities and counties. That rationale: California’s criminal justice system is not only far too punitive, it focuses too much on punishment and not enough on rehabilitation.

State Sen. Bob Hertzberg, D-Van Nuys, and Assemblyman Rob Bonta, D-Oakland, led the push for putting sharp limits on the state’s money bail system in favor of a system that largely trusted suspects without serious criminal histories to not go on the lam. They argued that California’s highest-in-the-nation bail requirements were unnecessary to get the accused to show up for trial and had the effect of destroying lives of suspects by forcing them to spend months in jail, unable to post 10 percent of their bail and secure a guarantee from a bail bondsman.

The fact that more than half the people in state jails are there not because they had been convicted of crimes but because they can’t post bail resonated not just with those who saw bail laws as unfair but with those who saw the system as wildly expensive.

This prompted optimism from Hertzberg in an interview with the Los Angeles Times before the 2017 session began: “Now you have a whole host of groups on both sides of the aisle looking at the cost and fairness of the system,” he said.

But the high point for the reform push came on May 31, when Hertzberg’s SB10 passed the Senate 26-11. A day later, the Assembly rejected AB42, Bonta’s identical bill, on a 35-37 vote.

Supporters of the measures expressed frustration that the governor waited until late August to offer support – and then only with the proviso that the bills be taken up in 2018, not in the closing days of the 2017 session. But it’s an open question whether Brown could have muscled the measures to passage. While other local and state governments have reported success with bail reform, Maryland’s adoption of no-cash bail reform last year has won wide attention for its troubled start. The Washington Post reported in July that the number of trial no-shows had more than doubled under the new system.

No to ‘government-sanctioned drug dens’

The other proposed reform made similar halting progress before being put aside for possible reconsideration in 2018. AB186 by Susan Talamantes Eggman, D-Stockton, would have established safe areas in a handful of cities and counties for drug users to inject themselves without fear of being charged with crimes, among several provisions. Drug law reformers argued that this would reduce the carnage from the opioid crisis by making it easier to treat overdoses and by getting addicts in touch with health care professionals. The program would lapse in 2022.

But law enforcement groups voiced sweeping objections to the law, saying it would create “government-sanctioned drug dens with no requirement that participants enter treatment,” in the words of a state Senate analysis, among many criticisms.

The bill passed the Assembly on June 1 with 21 votes – the bare minimum for approval – before being rejected by the Senate on Sept. 12 after gaining only 17 of the needed 21 votes.