Is California headed down the same road as Detroit?

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Sounding much like a gubernatorial candidate who wants to fix the way California government works, Insurance Commissioner Steve Poizner addressed an audience of a few hundred small business owners at the California Small Business Day in Sacramento.

California is headed down the same road as Detroit, and that’s not a good thing, Poizner said. Pointing out that, in 1950, Detroit was one of the richest areas in the country and led the world in automobile manufacturing, he said that people have fled Detroit in droves, the car industry has fallen behind Japan and Europe and Detroit registers on the bottom of nearly every measurable category of civic life.

Poizner sees California traveling down the same road. While population has increased because of immigration and births, he said 1.2 million California entrepreneurs and workers have left the state over the last eight years. He said California has dropped from the sixth largest economy in the world in 1999 to seventh in 2003 to eighth today.

And there’s probably more bad business news to come. Poizner said states like Nevada have created teams to raid California of its businesses. He cited ads run by Nevada that point out they has no income tax and no corporate tax, and a 30% smaller worker’s comp bill for businesses than California.

While the Insurance Commissioner noted that, due to the workers comp reform signed by the governor in 2004, workers comp dropped from 6% of payroll on average to 3% of payroll, California’s business workers comp bill is still above the national average of 2.5% of payroll.

Even the Silicon Valley economic engine shows signs of hedging its bet on California, he said. For the first time, sixty percent of the Valley’s research investment dollars are being placed outside of California.

Arguing that California must change to fight off stiff international competition Poizner said it was time to overhaul a dysfunctional state government.

Sounding a little like an early version of Governor Schwarzenegger who suggested ‘blowing up the boxes,’ Poizner said the state’s organizational chart follows a scheme established in the 1850s. It was time to bring it up to date.

To strengthen education, he argued that schools must be controlled locally, not from Sacramento. To improve the budget, he told the small business audience that the state must be more business-like and not budget from year to year, but instead use a multi-year budget and incorporate a rainy-day provision to set aside money during good times.

A number of people in the room commented after the speech that Poizner sounded like a candidate for governor.

Poizner did not talk politics or political ambitions during his speech, but there is no question that he has been given some thought to the way California government is faltering and what might be done to turn it around.

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