Regulatory uncertainty is the bane of investment

Posted by Jack Stewart, President on Feb. 5, 2010

Uncertainty is the bane of investment, innovation and economic growth. California's economy will not recover so long as our state consistently implements regulations without regard for negative economic consequences. I penned the following piece in today's Sacramento Bee as part of CMTA's effort to grow jobs and revenue by understanding regulatory impacts. Our goal is to create 2 million new jobs by 2020 by reviving California's golden era of economic growth and prosperity.

Viewpoints: Thicket of regulation strangles jobs
By Jack Stewart
Special to The Sacramento Bee
Published: Friday, Feb. 5, 2010 - Page 15A

For all the rosy talk, California's new "green" jobs now account for less than 1 percent of the state's work force. Certainly we need these jobs and should be doing everything we can to nurture them. But pretending that they alone will pull California out of our current economic bog is naive. Growing thousands of green jobs while driving away hundreds of thousands of manufacturing jobs won't recapture our state's economic glory. We need both to reignite our economy.

California's manufacturing sector provides high-wage jobs for millions of middle-class families while generating billions of dollars in tax revenue for schools, infrastructure and other public services. But these jobs are disappearing. We aren't talking about old "smokestack" industry jobs, but aerospace, high-tech, biotech and other skilled positions that pay on average $20,000 a year more than service-sector jobs. This month, our last auto manufacturing plant is closing.

Manufacturing and other companies are leaving California or failing to expand, in large part, because of the state's notoriously expensive and uncertain regulatory environment. Businesses are afraid to invest here because the rules keep changing while the cost of compliance spirals ever higher.

"It's difficult for most employers to make a solid case for starting up or expanding a business in California," observed Trends Magazine recently. "Government regulations seem perversely aligned to discourage people from doing business there." Last year, one California company told the Legislature it had been inspected by regulators 165 times in 2008, nearly every two days, and that inspections had increased another 26 percent in 2009. Reports like this scare other companies away.

Since 2001, California has lost nearly a third of its manufacturing base, a 32 percent decline in just eight years.

The impact has been devastating: 600,000 lost jobs, $75 billion a year in lost wages and $5 billion annually in lost tax revenue, money that once helped balance the state's budget.

If we're serious about reversing California's reputation as a lousy place to do business, we need to get serious about regulatory reform. We don't need to dismantle environmental, worker or consumer protections to improve California's regulatory climate.

But we do need to remake the system so it's lean, efficient, predictable and accountable, with common-sense rules that are fairly applied. It's a smart way to begin repairing our image (and our economy) because it can be accomplished quickly and without cost. Moreover, the benefits will be felt almost immediately, as it will send a powerful message to the business world that we genuinely want their jobs and the revenue they provide. Very quickly, we'll once again be competitive with other states.

To achieve this, three things need to happen.

First, the Legislature needs to restore its authority over the state's regulatory bureaucracy. Unelected officials now have sweeping powers to impose new regulations, with no requirement that these regulations be reviewed or approved by the Legislature. This creates an uncertain and unpredictable regulatory climate that can easily be fixed by requiring legislative approval for each new regulation proposed by the bureaucracy.

Second, there needs to be a system that accurately measures the potential impact of proposed regulations on jobs and the state's economy, so informed decisions can be made about whether the benefit of a new regulation is worth the cost.

Requiring the Legislative Analyst's Office to complete an unbiased, independent economic impact report for every major regulation that's proposed will achieve this.

Third, to begin trimming California's regulatory thicket, the Legislature should review every regulation already on the books, and require periodic review for all new regulations adopted in the future. Doing so will ensure that regulations are working as intended, and rid the state of regulations that are outdated, ineffective and redundant.

Clearly, other steps must be taken to fully revive California's economy and stop the exodus of jobs and tax revenue. But regulatory reform is a good place to start because it provides tangible and immediate proof to wary investors and company decision-makers around the world that California is back in business.

Article link: http://www.sacbee.com/opinion/story/2514710.html#mi_rss=Opinion

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Why not California #11 & #12 -- MiaSole and Facebook

Posted by Gino DiCaro, Vice President, Communications on Jan. 28, 2010

California took more employment and innovation bruises this month with two announcements from companies producing the state's favorite products - web technology and solar power.

Palo Alto based Facebook will build new facility in Oregon
Employing 200 people during construction and 35 full time employees upon completion

"The social media powerhouse confirmed Thursday that it has picked the economically depressed Central Oregon town for Facebook's first company-owned data center, drawn to the region by reliable and affordable power, a favorable climate and tax breaks."

Article link

Silicon Valley based MiaSole solar company will build manufacturing facility in Georgia
Employing potentially 1,000 workers

"A Silicon Valley-based company that makes low-cost, high-efficiency solar modules is planning a manufacturing plant in metro Atlanta that could employ up to 1,000. While California remains a hub for solar startups, Oregon, Texas, Colorado and Arizona are becoming destinations as solar firms chase skilled labor and low operating costs, said Terry Peterson, a San Carlos, Calif.-based solar power consultant. While Georgia’s cheap fossil-fueled electricity lowers manufacturing costs, it squelches local demand for solar power."

Article link

These announcements bring more pain to the state's economy and workers after California lost another 5,900 manufacturing jobs in December, bringing the total since 2001 to more than 607,000.

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Poll: AB 32's glaring weakness -- CA-only costs

Posted by Gino DiCaro, Vice President, Communications on Jan. 21, 2010

EMC Research released a follow-up poll today to the one they did a year ago on Californian's attitudes toward AB 32 and the state's desire to go it alone.

There were two major take-aways from the poll. Overall, the public is more sensitive than ever to cost issues (with strong support for AB 32 dropping from 31% to 15% since EMC's 2008 poll), and a large majority (66%) of the public says California should not go it alone on greenhouse gas reductions regulations. A month before a long awaited second economic analysis by the California Air Resources Board, it is clear that costs must drive AB 32 policies and regulations.

The state's greenhouse reduction program is not a freebie. Large costs foisted on an unemployment-riddled state economy and increased industry electricity rates already 95 percent higher than western competitor states are not affordable at this time, if ever. The above poll numbers, 600,000 lost manufacturing jobs since 2001, 12.3% unemployment, and the electricity rates below provide some of the most rational context for the AB 32 policy debate. In other words, how can we implement the program so it doesn't hurt the state's economy and jobs, and in a manner that gets the whole country to help reduce global warming emissions?

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Optimism (and employment) wanes for California's future

Posted by Gino DiCaro, Vice President, Communications on Jan. 7, 2010

California plunged again last month in high wage manufacturing employment by 2,300 jobs. The national media continues to single out California, using it as a narrative blueprint for how to overwhelm a once-thriving state economy, and almost dares anyone to bet on California's recovery.

For these and many other reasons this legislative session could be the most important year of decisions in the state's 160-year history. Policymakers are no doubt giving lip service to ground zero -- growing jobs and the economy -- but there is little precedent in California for climbing out of such a monumental hole.

The following chart and media excerpts should inform the discussions when decision (and vote) time comes. Gov. Arnold Schwarzenegger made job creation a priority in his State of the State address but as CMTA president Jack Stewart said, "The Governor was right that job creation should be our number one priority and we applaud his commitment. However, we don't share his optimism that the worst is over for the California economy and that we are well positioned to take advantage of the future." (full statement)

Employment Chart

Some recent national and other media coverage on California:

»Investor's Daily
California Should Copy Texas
"While Gov. Arnold Schwarzenegger worries about rising seas, his state sinks below the waves. Don't mess with Texas, they say. But California and the nation could follow its lead.
Full article

»Washington Examiner
California is overregulated, overtaxed, and just plain over
"Today, California is a by-the-numbers state tragedy. Unemployment is higher than 12.2 percent as of September. Business costs are almost 23 percent higher than other states on average. Migration out of the state is at an all time high. A map by United Van Lines shows a strong demand for moving trucks as residents leave California for other destinations, particularly Texas."
Full article

»New Geography
A Milestone on the Road to Becoming a Third-World Economy
"Southern California is starting to look a lot like a third-world economy, service based, inequitable, serving a wealthy, mostly aging few, with little opportunity for younger workers and a large underclass. Changing the region’s prospects will be very difficult. Nothing short of a major generational change in leadership is likely to change the current sad trajectory."
Full article

»New Geography
How California Went From Top of the Class to the Bottom
Today, California’s economy is not vibrant and growing. Housing is not affordable. There is little opportunity. Inequality is increasing. The state’s schools, including the once-mighty University of California, are declining. The agricultural sector is threatened by water shortages and regulation. Its aging, cracking, highways are unable to handle today’s demands. California’s power system is archaic and expensive. The entire state infrastructure is out of date, in decline, and unable to meet the demands of a 21st century economy. Indications of California’s decline are everywhere. California’s share of United States jobs peaked at 11.4 percent in 1990. Today, it is down to 10.9 percent. In this recession, California has been losing jobs at a faster pace than most of the United States. Domestic migration has been negative in 10 of the past 15 years. People are leaving California for places like Texas, places with opportunity and affordable family housing. California’s economy is declining. Those of us who live here can all see it. Yet, Californians don’t have the will to make the necessary changes. Like a punch-drunk fighter, sitting helpless in the corner, California is unable to answer the bell for a new round.
Full article

»Las Vegas Business Press
Some of the city's best-known business leaders sound off about the coming year
"Once California companies can afford to move, they will move in droves due to the even worse business climate in that state."
Full article

»New York Times
Schwarzenegger Presses U.S. for More Aid for Needy California
"Administration officials, in preliminary discussions with state lawmakers and other Sacramento officials on how to close a projected $20.7 billion deficit, were pledging to push hard for as much as $8 billion from the federal government."
Full article

»Rasmussen Report
55% Say Better for California To Go Bankrupt Than Be Bailed Out
Full article

»Americans for Prosperity's Common Sense video
12 policies where common sense was missing in California
You tube video

»Bakersfield Press
Talk won't undo years of bad decisions
"Bad decisions made in Sacramento in recent years help explain why California's prospects for a timely economic recovery are looking considerably worse than that of other states. Those decisions also help explain why California is the most expensive place in the nation to do business."
Full article

»San Bernardino Sun - opinion by business owner, Joseph Brady
State regulations choking businesses
"I believe that the state of California is at a major crossroads. I believe that we have members of the Legislature who have never operated a business, made a payroll or taken a risk."
Full article

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Fox News and Valero explain California's potential cap and trade costs

Posted by Gino DiCaro, Vice President, Communications on Dec. 10, 2009

This week, Fox News tried to explain what California cap-and-trade costs might look like in an attempt to predict what a national program would cost. Valero energy indicated that California's program would force them to pay $7 billion annually -- an amount they simply can't absorb and must pass on to consumers.

CARB Chairwoman is also on record in the Fox News piece saying that "we expect there will either be a modest cost or a savings". This just weeks after CARB's own cap and trade proposal conservatively predicted $143 billion in costs by 2020.

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