Viewing blog posts written by Gino DiCaro

Economic stimulus gaining the Big Mo'

Posted by Gino DiCaro, VP, Communications on Dec. 19, 2008

A Christmas gift that just might make it under the tree?   A New Year's resolution that conceivably could be met in early '09?  It just might happen.  Economic stimulus in California is gaining the big mo' after a week of tireless negotiating, legislative votes and a vetoed budget package that included only small plans for job recovery.

Signals to employers that California will be cost-competitive appear to be of utmost importance to Gov. Schwarzenegger and the general public that he governs.  Fears that companies truly are shying away from California's unwieldy tax, wage and regulatory structures are setting in with average voters.  Household Christmas discussions across the state lead with comments such as "Just be happy you have a job, Jimmie" ... or "I'm so worried about my job, bro" .... or "I am so angry my company had to lay off employees" ... or "I got layed off so I had to take a lesser paying job so I could get through Christmas."

Depressing, I know, but reality has set in.  California's excess without comprehensive plans to attract high wage jobs that drive an entire economy has come home.  In the minds of the California Governor and citizenry it is not only obvious but mandatory that California devise comprehensive economic recovery in the overall budget plan, as opposed to just some quick cash.  Families now want economic development for themselves and their government.

An employer contacted me this week and said this:  "Listen, Gino.  California is becoming an analogy for the auto industry predicament.  The state's public sector has driven up an unsustainable environment and now we can't pay for it.  This has to be fixed now."  I told that employer to keep the pressure on to do the right thing ... that the tide is turning for California to send a huge signal that its lawmakers understand what it takes to compete in this marketplace and attract high-wage jobs.  I hope I'm right and that next Christmas, I'm blogging about California household discussions that lead with a merrier tone, like "Merry Christmas" or "Happy Holidays."

Here's a few tide turning indicators along with the millions of household Christmas discussions:
  • Governor's comment today on unemployment :
    "California’s unemployment rate reinforces the need for the state legislature to pass a real budget solution that includes aggressive economic stimulus – because we must do everything in our power to help Californians affected by the economic downturn get back to work.  I've said countless times that any budget plan sent to my desk must include real stimulus that creates jobs, keeps Californians in their homes and provides strong, long-term recovery solutions for our state’s diverse economy."
  • Governor's veto comments at press conference
  • Senator Lou Correa's "no" vote on budget package indicating there is some growing understanding within the democratic caucus
  • National Fox News piece on California's budget and cost structures
  • CMTA President Jack Stewart interview on stimulus (ok we've always been there but it's a good synopsis of why and what needs to be done)

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California & Nevada: Financial crisis and sleep aids

Posted by Gino DiCaro, VP, Communications on Oct. 8, 2008

This week, Californians have heard that the leading economic indicator -- the national stock market -- has slid to under 10,000 for the first time since 2004 ... that a national $700 billion rescue package paid for by U.S. taxpayers might or might not work to bring the nation's heavily depended upon credit market back to something better than it is now (I digress for an anecdote: my colleague told me yesterday that his friend with an 800 credit score and $15,000 down on a $35,000 car couldn't even get an auto loan last week) ... that national manufacturing employment took the hardest hit last month -- 51,000 jobs -- in across-the-board overall employment losses (stay tuned for California's September employment numbers here) ... that the State's own Unemployment Insurance Fund will be out of cash in February .... that California's overall Budget deficit is now much worse than previously admitted ... that California might have no where else to turn for money after October 29 ... and that our only refuge from real life -- sports institutions -- will also feel the economic pinch.  OK, now I'm worried.

During this national and state economic crisis, and perpetual 2:00 am 401K retirement angst, I suspect sales are still increasing for at least one product -- sleep aids.  But one little item I saw this week brought comfort and firmly bolstered my trust in free market capitalism.  That morsel was the announcement that the Nevada Secretary of State is getting ready to launch an economic development package and website titled "Why Nevada".  I know, run to the presses.   It's never been done before!  This is just crazy!   It IS important however, because of the litany of low tax climate incentives being used to recruit manufacturing and other industries when everyone else is looking to find immediate State and Federal revenues with taxes, rescue packages, loans, etc.  Nevada understands they need to build an attractive and competitive market for the biggest revenue augmenter in the world -- a well paid job base -- and they know that competitive accommodations matter more, now.  The "Low Tax Climate" items listed on the new site include:

    * No Business Income Tax
    * Income Tax is Prohibited
    * No Estate Tax
    * No Franchise Tax
    * No Gift Tax
    * No Inventory Tax
    * No Tax on Corporate Shares
    * Property Tax Increases are Limited

Cost implications always matter for manufacturing and other employers, but as entire consumer markets seek less product for less money and governments covet more money from fewer sources, most employers will absolutely require less expensive zip codes for the genesis and production of their products.  My bet is that relief from the economic depression will come quicker to Nevada and perhaps other state's that foster large campaigns to dynamically improve their job base and, as a result, increase economic activity and gain more private and public revenue ... even if it means foregoing a few immediate revenues.

As California's own legislature and Governor contemplate Constitutional Conventions, special Legislative sessions, a possible budget re-do, unconventional loans, etc. they should look to Nevada for ideas for their very own "sleep aid" and discuss very seriously and quickly a major campaign with real cost reduction policies to retain and recruit what we need most.

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AB 32 costs before AB 32 costs

Posted by Gino DiCaro, VP, Communications on Sept. 10, 2008

Unless Governor Schwarzenegger vetoes SB 1762 (Sen. Don Perata), there's a good chance that the state's residential and industrial energy consumers will see the first chunk of increased global warming costs before the California Air Resources Board (CARB) has even finalized a scoping plan that will inevitably put the country's highest premium on all products that start or end in a greenhouse gas in California.

SB 1762 creates a "Climate Change Institute" that among many things would become California's greenhouse gas research and development center.  The life of the institute will use close to $500 million, in which $370 million will be collected from electricity and natural gas consumers.   Until the state reforms AB1X and un-exempts the majority of residential users, only the largest residential and industrial users will pay the cost.  With or without an AB1X fix, SB 1762 is just a taste of what's to come under California's massive global warming regulation.  And here, we come to one of the biggest rubs of all -- it's a "taste" that completely ignores and circumvents CARB's authority to guide AB 32's implementation, regulations, costs, and research and development.

The Governor went through more than a year of deliberations and legislative rigor to get AB 32 passed.  In the end, the bill delivered the entire plan's authority to CARB's greenhouse gas 200-man team.  After months and months of intense work, CARB continues to struggle with the broadest and most cost effective manner in which to implement this California-only policy.  This bill and new agency would make that challenge harder.  There is definitive value in a research and development arm for the state's massive global warming undertaking, but a half-baked plan that burdens only a select few with the costs of a program that benefits everyone will only hurt consumers and the economy.  It undermines the bill's ultimate goal to reduce global greenhouse gas emissions and grow the economy in a state that already has the highest electricity rates in the west.

See CMTA veto letter
See AB 32 Implementation Group press release

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Algebra earlier policy not proven anywhere

Posted by Gino DiCaro, VP, Communications on Aug. 29, 2008

The Sacramento Bee editorialized this morning that moving the Algebra I standard to the 8th grade was a proper use of the State's resources because it would force our schools to teach basic math skills earlier,  ensure that every 13 year old is ready to tackle algebra, and "increase the richness of the experience in the fifth, sixth and seventh grades."

The problem with the 8th grade Algebra I mandate isn't that every high school student shouldn't be competent in Algebra I skills, it's that an arbitrary decision to move Algebra I coursework from 9th to 8th grade has an enormous cost to a public education system that is already misprioritizing funds .  Improving California's current 8th grade math scores should be our first priority before raising the bar to include Algebra I standards.

California ranks 5th worst (45th overall) in terms of 8th grade math achievement according to the National Assessment of Educational Progress.  All 44 states that have higher scores do NOT require algebra in the 8th grade.  That's worth repeating -- not a single state that ranks higher in math achievement has done what California is about to do, let alone spent $3 billion to implement the change.

There might be some good arguments for starting algebra enlightenment earlier for some students, but, as a State that has become one of the worst in math learning and as a State Government that currently needs to leverage every single educational dollar, we should be looking at the successes around the country and emulating those before we test broad new theories.

High school and middle school dropouts continue to increase at an alarming rate in our state.    Millions of  remediation dollars are spent in our schools while we remove students from other relevant, and sometimes educational-awakening, applied learning courses (sometimes even non-math courses that teach math in other ways).  California manufacturers -- who pay some of the state's highest salaries -- can't find skilled workers for highly technical careers.  Increased spending on Career Technical Education (CTE) seems to be a much wiser expenditure of scarce education dollars.  The California Department of Education's (CDE) own education statistics show that for students who take three sequential CTE course, the dropout rate is cut in half.

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180,000 reasons to thank a small manufacturer

Posted by Gino DiCaro, VP, Communications on Aug. 15, 2008

See this:

Bishop-Wisecarver Corp. purchased it for $180,000 more than they would have paid in other states because of California's lack of a sales tax exemption on the purchase of manufacturing equipment.

I was in Bishop-Wisecarver's Pittsburg, California facility this week on a plant tour, where this $3 million, 50-ton "grinder" was bought and placed to process extremely precise linear steel guides that help other manufacturers move product from one place to another.   Think of an automobile manufacturer that has to move a large suspended transmission through its facility acreage.  There's a good chance that those engines are guided through the air by Bishop-Wisecarver's products and this grinder helps them produce those materials faster and better.

Competitive pressures are increasing for Bishop-Wisecarver and its 56 employees in California.  According to company President Pamela Kan,  it was those pressures that made them purchase this $3 million miracle machine that makes them more productive.  Shouldn't they be rewarded for making the sacrifice to compete in California's costly business climate?  Instead they are faced with cost pressures that force them to buy more efficient equipment, then the State collects 6 percent on top while other states allow these highly coveted companies to keep the tax because of the larger economic benefits they produce for the region.

This decision would have been easier to make before the State's manufacturers investment credit expired in 2003.   I can't speak for Bishop-Wisecarver, but the additional $180,000 could have gone into more employees, more salary, more benefits, more research and development, more electricity efficiencies, or price reductions to help make Bishop-Wisecarver more competitive in the marketplace.

I don't know which line item this money would have bolstered, but a $15 billion State budget deficit tells me that, wherever it went, it would have had better economic impacts supporting the hard working employees of Bishop-Wisecarver, its 466 California suppliers and even BWC's consumers than it would have had buffering the State's checking account.  180,000 "thank you's" go out to Bishop-Wisecarver and it's owner Bud Wisecarver (Bud's story) and President Pamela Kan for making the sacrifice!   On another but similar note, buying equipment will be much easier for the much ballyhooed Tesla Motors who received the 6 percent credit through an end-around detailed in the Governor Schwarzenegger's press release.  Why only them?  Who knows.

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