Viewing blog posts written by Gino DiCaro

How can CA win the Lottery?: Become a powerful magnet for the next wave of innovative products

Posted by Gino DiCaro, VP, Communications on May 20, 2009

This week the Assembly Revenue and Taxation Committee passed -- with 6 voting yes and 3 not voting -- a bill that brings California in line with 47 other states by exempting the sales tax on manufacturing equipment and giving working families a fighting chance for higher paying careers.  The bill is AB 829 by Assemblymember Anna Caballero.  Unfortunately, the bill was amended to include offsetting revenue sources, a difficult circumstance during tough budget times.  But the vote on the bill shows that legislators want to put out the welcome mat for high wage employers.

Many in both the capitol and media circles have argued that companies aren't leaving the state and they often use that as carte blanche to oppose the removal of any barriers to conducting business in California -- including reinstatement of the sales tax exemption that our employers lost back in 2003.

I don't even care anymore about proving the decisions of current and potential California companies.    It's like arguing whether a last place basketball team is really the worst in the league - no offense to the Sacramento Kings.  It's not even an interesting question anymore, and a last place team needs to do only one thing - improve.   Yes California is beautiful ... no, California doesn't lose thousands of jobs daily to other states ... yes, we don't know the reasons for all of the decisions being made all over the country that don't include California ... no, the state won't crumble into the ocean ... yes we've lost more than 30 percent of our industrial base -- most of those 530,000 job losses coming before the recent economic recession.

Let's just fix the problem.  Everything starts with signals to manufacturers that this state wants these types of operations.

CMTA's president, Jack Stewart, issued a formal media statement today that summed it up perfectly:

"California has a chance to lead the world out of recession and into a prosperous future if we make economic recovery the front and center goal in the debate on how to solve the budget crisis. Only through private sector investment and new middle-class jobs, such as manufacturing jobs paying an average $65,000 per year, can California enjoy sustainable tax revenue growth to pay for important government services.  To do this we must capitalize on emerging and innovative sectors in new and traditional technologies and products."

The Sac Bee's Dan Walters wrote an entire piece this weekend on understanding California's woes and then called out "silly Republicans" for trying to understand certain reasons for migrations to Nevada.  That trip was meant simply to gather information going forward and the facts still proved a 2 percent growth in industrial jobs in Nevada during the same time California's sector plummeted by 28 percent.  No one ever said Nevada stole all our manufacturing jobs.  Eight legislators just wanted to ask some questions about what Nevada was doing right.  What everyone in that room found was that Nevada was actively hunting down business as a lifeblood of the state's success.

Even Gov. Schwarzenegger's administration has gotten in on the act.  Two weeks ago, Brian McGowan, the Deputy Secretary for Economic Development and Commerce at the state's Business, Transportation and Housing Agency wrote in the Capitol Weekly that California "remains a powerful magnet for business."  I challenge anyone to find two companies that are exploring growth options that agree with that statement.

If we were a powerful magnet for employers, a $21 billion deficit wouldn't be sitting on every Californians doorstep today.  This brings me to a formula that we should all understand going forward after yesterday's iniative failures:
    Take the state’s annual budget and divide that by the state population.  That gives you the per capita number for running the state:  Basically divide $132 billion by 27 million working age people and you get $4,888 per person.

    Then look at the per employee tax revenue of a manufacturer. This is all the taxes the company pays in the state (divided by the number of employees) plus the taxes an employee pays.   I asked one of our member companies for their sample numbers.  Basically their per employee tax revenue amounted to $19,255 per year, which does not include the taxes their employees pay on an average $60,000 salary.  Compare that to the revenue the state generates from the service sector that pays far less tax revenue overall and a wage that is, on average, $20,000 less.
At that point, removing barriers for manufacturing growth becomes an obvious step in the right direction for the state.

Like Walters said in the end of his piece, we should solely pay attention to our future.  Agreed completely.  Then one must ask what we want to look like in 2 years?  For many reasons, we want Californians making more money, the state producing and selling innovative products, employment numbers growing and a budget balanced to pay for bold government programs.   Making us a "powerful magnet" for the next wave of innovative products will get us there.  Global recession or not, California will be in a better place.

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Why Not California # 9 - Gregg Industries

Posted by Gino DiCaro, VP, Communications on April 28, 2009

Last week a single phrase shrewdly captured the state's job woes: "California is catering to so many special interests, it has lost its focus on the common interest."

The comment was made in Reno, Nevada, during one of the many company testimonials before Assm. Dan Logue and other California Legislators seeking information on why certain employers left California for Nevada.  For the first time ever we have a consortium of companies that moved operations out of California, speaking very publicly on our state’s detachment from retaining employers and the resulting economic benefits. 

The most pervasive theme throughout the 2 hour exercise?: Nevada’s assiduous commitment to recruitment.  Almost all companies were asked by Assembly minority leader Mike Villines about correspondence from the state of California leading up to their departure.  They each stated that there were zero attempts by the state to keep them here while most referenced the man in charge of economic development in Nevada, Kris Holt.  Holt is responsible for relocating 210 companies (or moving certain portions) to Nevada - most from California.

I suppose we could overlook the state’s lack of phone calls and interest in retaining these companies (and the extinction of California's Trade, Commerce and Technology Agency a few years back) if it weren’t for the regulatory burdens that so obviously made these manufacturers look elsewhere, which brings me to the first video I’d like to share.  It’s not about a company that moved to Nevada, it’s the sole company present that shuttered a California facility, leaving 400 employees without jobs (employees who earned between $40,000 and $100,000) and the source of the lead quote in this blog.

The video speaks for itself (below) and is a compelling testimonial about California’s regulatory environment and the benefits of a manufacturer.  Stay tuned for more testimonial video in the future.

View Neenah Enterprises / Gregg Industries' Bob Ostendorf’s Video

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Dan Walters misses what's important in California Economy

Posted by Gino DiCaro, VP, Communications on April 21, 2009

The Sacramento Bee's Dan Walters opined on Monday that there is no evidence of job-migration out of California and generally that any concern over our business climate is unfounded.  He focused on the following two points:
  1. A 2008 PPIC report that found limited amount of job migration out of California. 
  2. The notion that California's business climate is unchanged from many years ago when the state experienced an economic boom.  I assume he meant the 90's.
At this blog, we focus on the massive opportunities that come from high paying manufacturing jobs for workers, the economy and the state budget -- and how manufacturing employers can succeed in California.  It should always be noted that a manufacturing wage pays approximately $20,000 more than a service job and provides the needed tax base for bold state government programs.  Here are three facts that should be considered in response to Walters' piece:
  1. The PPIC report did not account for decisions being made NOT to come to California (only decisions from companies already existing here).  A key component to backfilling the 528,000 lost manufacturing jobs since 2001 is the myriad of siting decisions being made across the country, where we don't even know if and when we dropped off a company's list in the first place.  Anecdotal information says too many companies decide to forgo the risks of costs and uncertainty in California and the trend does not look good.
  2. Data indicates that California manufacturing job changes since 2001 are worse than all of its western competitor states:

  3. Among many, there are two very significant policy shifts that do not reflect Walters' argument that the business climate remains unchanged since the 90's boom, at least for high wage manufacturing:
    • The expiration of the Manufacturers Investment Credit in 2003 made California one of only three states (with Wyoming and South Dakota) that tax capital manufacturing equipment purchases, yielding an even higher tax burden than the rest of the country.
    • The passage of AB 32 and the ongoing regulatory efforts have created prodigious amounts of uncertainty for any manufacturer looking to grow or site in California.

Policymakers and the media need to divert themselves away from disproving job migration and start zeroing in on what helps the private sector -- especially the high wage portion -- flourish in California.  That's what Nevada is doing ... and Assemblyman Dan Logue -- who Walters admonished for creating a "media stunt" -- is taking a few hours to understand their policies and their success.  That can't be a bad thing.

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Hurry-up, California: Fix all of our problems with green directives

Posted by Gino DiCaro, VP, Communications on April 14, 2009

I recently watched an employer focus group unfold.  An executive was asked, "Is there anything positive about conducting business in California?"  The employer replied, "Yeah, investment barriers to new competitors in California."  Another respondent replied without hesitating, "There is no way we would invest anything more in California."

These realities play out in so many ways -- notwithstanding California's tremendous quality of life advantages -- while so many unfounded and rushed policy directions tip economy-altering board room decisions against our working families.

We live in a state that is pressing greenhouse gas emissions standards with no understanding of costs to business and consumers.  We are constantly barraged with messages about hurrying our state's clean tech efforts, as if our existing efficiencies count for nothing and our competitive position is irrelevant.  We ignore studies like a Berkeley report on biofuel carbon footprints that argues a larger carbon leave-behind than fossil fuels -- an example that underscores the spectrum of the unknown in these arenas.   There is so much to learn about how new alternative fuels, energy and processes affect our costs and the environment.

We get it though, California, we get it.  Hurry up, right?

Many policymakers and issues leaders at the forefront of green policies don't understand that manufacturers and other employers want the state, along with their own businesses, to succeed.   But we also live in the realities of competition.  We don't just set up markets and watch them run.  As an example, and on a much grander scale, take Russia and China after ending communism.  Did they become 3 billion new customers or competitors?  This brilliant Reuters article explains why it was more of the latter.  Basically competitive position counts more than anything and these positions are tighter than ever .... everywhere.
Countless California Capitol discussions these days include a virtual fly-by of emerging green products and technologies as the primary savior for the state's still-growing budget and jobs calamity as well as our reportedly short environmental time curve.  Both of which perpetuate a hurry-up attitude, much like the one seen in this SF Chronicle article on a recent global warming conference.   Ugh, this is so dangerous and far too easy to pass the buck to policymakers and regulators - who in turn will get re-elected and praised in the short term because they have done their job by simply passing stringent and unaccountable mandates.  We need to start with what we know -- all of us.  And unfortunately there is far too much of that to argue even a hint of economic salvation from most of these blind green mandates.

Put plainly, reality must measure up with our state’s green expediency.

Yesterday, Assembly Republicans announced a fact finding mission led by Assm. Dan Logue to interview companies that chose to operate in Nevada over California (California lost 28 percent of its manufacturing sector since 2001 while Nevada actually gained a small percentage).  They are doing this to understand what our legislature could do to grow not only jobs but high wage jobs in California.  An important move no doubt.

On our end here at CMTA we are working hard with the Milken Institute on a follow-up study to a 2002 Manufacturing Matters report.  Likely titled "Manufacturing STILL Matters", we will release the study in mid-2009 as our collective offering of "What we know" about how a manufacturer survives and succeeds in this great state.    This and our bolstered efforts on our "Why Not California" campaign should be two pieces of many in the state's economic and environmental puzzle.

Another piece is CMTA's July Energy conference which will turn toward growing California's economy with affordable and technologically feasible green products.   Experts will speak to what is working and what isn't.  What we can afford and what we can't.

These and other centerpieces will be important chunks of knowledge for policymakers and the media in California's self-imposed race to the top. 


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