COMPARING CALIFORNIA

The American Legislative Exchange Council (ALEC) has released its first economic
ranking of all 50 states entitled, RICH STATES, POOR STATES.

The authors identify 16 policy variables with a proven impact on the migration
of human and investment capital in and out of states. According to their findings,
a record eight million Americans moved from one state to another in 2006, revealing
which states have the most dynamic and desirable economies, and which are "has-been"
states. The winners in this contest are generally the states with the lowest tax,
spending and regulatory burdens. The biggest losers are California, the Northeast,
and the Midwest.

"States are in direct competition with each other for human capital and business
investment. State governments that think they can attract jobs and people, and grow
their economies, by taxing their citizens at a higher rate than their neighbors are
sadly mistaken. Legislators should take a close look at where their state ranks in
this book and use it as a tool to help them improve," said Arkansas State Senator
Steve Faris, ALEC's 2008 National Chairman.

The report, "Rich States, Poor States," was prepared by economist Arthur Laffer and
Stephen Moore of the Wall Street Journal.They cited California's high personal,
business and sales taxes, high minimum wage and workers compensation costs, poor
tort litigation system and noted more than 1.3 million people have left the state
since 1997. California was ranked 41 out of 50.

In addition they also added the following commentary in their Executive Summary- 
        It is telling that a state as beautiful as California has the 
        nation’s second-largest domestic population outflow. Despite 
        warm weather, sandy beaches and the Pacific Ocean, Californians 
        are leaving in droves to escape the state’s oppressive tax burden. 
        These former citizens are generally the “highest achievers and 
        those with the most wealth, capital, and entrepreneurial drive,” 
        leaving the state much less economically productive in their wake.

San Diego North County Times newspaper published the following editorial.
It is followed by a response to this survey and their editorial.

Strip-mining the economy

By: North County Times Opinion staff
Our view: California's business climate suffers from heavy-handed regulation

It's an interesting phenomenon that while California is among the global leaders
in trying to protect and conserve its natural environment, we are among the nation's
worst in maintaining a healthy climate for business.But a business environment is
just as prone to overuse as a natural environment, and California's economy ranked
41st out of the 50 states in a new report by the admittedly pro-business American
Legislative Exchange Council.

The state's tax rates and regulatory requirements were found to be among the highest
in the nation, making the cost of doing business in California more expensive than
elsewhere.

It's fair to disagree with the council's own political leanings and we admit it is
hardly news that a lobbying group with strong ties to the business community sees
California as a business-unfriendly environment.

But this report from the council backs up its pro-business views with real comparisons
of the cost of doing business in different states.

In short, California doesn't do very well when compared with the rest of the country.
In the council's report, California was in the bottom 10 states in measurements of
personal taxes, legal costs, workers' compensation and minimum wage.

Some of these are simply due to the law of supply and demand; with a limited area
and more people wanting to live in paradise than in the Snowbelt, the cost of living
goes up.

The others, from legal costs to taxation rates, are costs created by a Legislature
that seems to view profit as greed, and private employers as dairy cows to be milked
dry.

Given the current financial straits California finds itself in, promoting economic
growth should be one of the top priorities of our state's elected leaders. Attracting
new business to California is going to be difficult, as well as keeping businesses
already here.

STOP THE DIGGING!
Your thoughts on the Legislature are shared by millions but this study is not where
you should hang your argument. Given evidence to the contrary of California's economic
strength, specifically this study illustrating that California ranked 41st not 50th
doesn't bear stripping the economy. For example, if California suffers from such heavy
handed regulation why then did the results of a recent study on business out migration
from the state completed by the Public Policy Institute of California show little if
negligible impacts on job losses and businesses moving?

It’s because California is an icon unto itself.  It is a beacon for immigrants,
inventors, entrepreneurs and free spirits. Its people are trendsetters. California
represents the dedication of generations of visionaries that built not only a great
state, but a world renowned business culture.  California is constantly changing,
becoming more sophisticated by embracing the development and deployment of new
technologies, and business models that have grown a state economy larger than any
other.

• California is the 8th Largest Economy in the World (State Finance Dept.)
• California comprises 13 percent of U.S. GDP (Bureau of Economic Analysis)
• 12.5 percent of the nation’s population lives in California (Census Bureau)
• 10 percent of all U.S. housing stock is in California (Census Bureau)
• California adds 400,000 to 600,000 people a year, in 4 to 6 years it creates
   a population of the current size of at least 10 states (Census Bureau)
• California has the largest and most diverse agricultural crop production and
  dollar value in the nation. (US Dept of Agriculture) 
• Contrary to public opinion, California is not the most expensive state to do
   business, that title goes to Hawaii (Milken Institute)
• Contrary to public opinion, California is not the highest taxed state in the
   nation for business, that title goes to Rhode Island (Tax Foundation)
• California is ranked #1 in the Nation in Aerospace based on employees and
   dollars spent in production (Development Research Partners)
• California is one of ten states that has out produced the national average
   in job growth, average wages, total personal income, per-capita income and
   population growth over the last ten years (Business Council of New York)
• California possesses 25 percent of the Forbes 400 richest people in the
   nation, larger than any other state
• California possesses 10 percent of the Fortune 500 firms in the nation,
   just behind the states of New York and Texas
• California’s Rank in the nation
    o #1 in High Tech jobs in the nation with 919,300 (AEA)
    o #1 in employment for Computer Design and Related
            Services (AEA)
    o #1 in Telecommunications Services employment (AEA)
    o #1 in Semiconductor Manufacturing employment (AEA)
    o #1 in Computer and Peripheral Equipment Manufacturing employment (AEA)
    o #1 in health care employment with over 1,434,000 employees (Census Bureau)
    o #1 in Asian-Pacific, Black, Hispanic and Women Owned Businesses than any 
     other state (Census Bureau)
• California was ranked the ‘Best Place’ where Americans want to live
   (Harris Poll)

Maybe the answer is that we as Californians need to remain fiscally vigilant and
conscious about these economic benchmarks, rather than worrying about being compared
to states with the population of some of our counties.

Tim Johnson
www.CaliforniaBusinessMinute.com