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Sweetening the Pot In the last four months, Mickelson has noticed a major change in attitude about moving or expanding elsewhere among California business executives "Before Christmas, they were still sitting on their hands saying they didn't know where the economy was going," he said. "Now people are ready to make the decision to move." The UCI survey indicates that California officials aren't doing much to stop the exodus. About half the manufacturing firms surveyed had been contacted by other states about relocating but only 2 percent had any contact with their home city or the county. "It's a war of attrition, and we have lost," said survey author Dennis Aigner. Santa Ana has more tools to keep companies than perhaps any other Orange County city. It has both a state enterprise zone and federal empowerment zone that provide tax incentives, employment training programs and bond financing. But the city doesn't even try to recruit new companies to town because it has virtually no vacant land, said Economic Development Director Patti Nunn. However, she feels powerless against some of the out-of-state appeals. "The electricity situation, workers comp, new taxes and fees are problems," she said. "In the early '90s we had a coordinated effort under Fred Mickelson. Today we don't have leadership or an environment for leadership to develop." The state's lead agency for economic development – Technology, Trade and Commerce – has been decimated by budget cuts. Staffing already has been cut 25 percent from a peak of 383 jobs and the proposed state budget for 2003-04 cuts another 41 percent. The cutbacks are a reflection on the agency's inability to demonstrate that it has had an impact, said Todd Clark, who oversees the Technology, Trade and Commerce Agency for the Legislative Analyst's office. The agency is so short-staffed that it hasn't updated parts of its Web site that lists benefits of locating a business in California. It still cites electricity deregulation as a benefit even though the program was so flawed it led to rolling blackouts and increased rather than decreased rates. While acknowledging that the agency's reduced staff can't do everything it once did, spokesman Jason Kimbrough said, "If we find out a company is leaving, we pull together a team of state agencies and local entities to address the company's issues." Yet the state's incentive package is not competitive. Kimbrough mentioned tax benefits and employee training through enterprise zones and small-business loan guarantees, which other states also offer; the manufacturers investment credit, which some legislators want to ax to ease the state deficit; and deductions of operating losses in future years, something the state has suspended for two years, also to close the revenue gap. "Our economy is in transition," Kimbrough said. "Manufacturing is on the decline, but with our diversity we're still in a strong position to rebound."
WHY IS CALIFORNIA SO COSTLY?
California business executives complain about a host of state laws and regulations approved in the past few years that make it increasingly difficult for them to compete:
High-cost workers' compensation insurance: Double-digit premium increases and lack of availability for some industries have prompted more than 50 bills to be introduced in the state Legislature to fix the problem.
High electricity costs: Rate hikes that followed the state's failed deregulation effort have particularly hurt manufacturers.
Added government regulation: Stiffer state laws on issues ranging from environment to worker safety raise costs and often require duplicate paperwork.
High taxes: Income, capital-gains and sales taxes drive up business costs.
Costly employee benefits: Minimum wage -
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