Brown should lead on regulatory reform

by Jack M. Stewart
Jan. 27, 2011


This week President Obama said he wants regulations on business to be more effective and less burdensome. He ordered federal agencies to make a plan to review regulations to see how they could be modified, streamlined, expanded or repealed. Senate leader Darrell Steinberg agrees that regulations need to be streamlined and duplication eliminated to help create a more friendly business climate for investment and hiring.


Gov. Brown should get on this bandwagon, too, but with a meaningful plan for real reform.


Attempting to solve the massive state budget gap only through a combination of spending limits and new taxes ignores the huge role to be played by the economy. We won’t have long term budget health until the economy grows millions of high wage jobs. State economists say we won’t replace jobs lost in the recession until the third quarter of 2016. That’s five years to get back to even. Is there anything we can do to accelerate that timeline?


California’s regulatory environment is renowned for being hostile to business, making companies reluctant to make new investments and hire more workers. Other states have stepped up marketing their friendlier tax, labor, and environmental climates to lure California employers to relocate or expand in those states. Complaints from California companies run the gamut – many can be seen at CMTA's casualties list and the relocation coach – with a common theme being the “California-only” regulations and laws that make operating more expensive, litigation more frivolous, and getting environmental permits more uncertain and time-consuming.


The next few years will define the trajectory of our recovery. Will it be fast and steep or will we lag behind other states? Will a global manufacturer choose California for their next product cycle, or will a similar facility in Georgia win the contest for limited capital dollars? Will a small company growing beyond their current footprint choose a California location or will they find a better alternative in Oregon? Will high compliance costs in California force many companies to save money by avoiding new hires?


It’s time for Gov. Brown to send a message that California is “open for business” and will welcome new investment and hiring. That means owning up to the difficult regulatory climate in the state and doing something about it to make our regulations smarter and more accountable to our economy. Let’s start with an approach that measures the economic impact of laws and regulations to “do no more harm” during the fragile recovery. We should also review the existing regulations to ensure they are achieving their goals at least cost to employers. Weeding out useless, low priority and duplicative regulations should be part of our ongoing oversight of regulatory agencies. We need to institutionalize periodic reviews with stakeholder participation to measure outcomes, modernize, and ensure that each regulation still serves a vital need.


Gov. Brown has an enormous challenge to bring California back from the brink. The economy can help him get there. He should take the lead and make permanent improvements to the California regulatory environment.

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