California’s Winning Prescription
Believe it or not, California could make a meaningful contribution to the national quest to bring down health care costs.
How so? California could point out that it has MICRA, and that has helped tether medical costs in the state.
MICRA stands for the Medical Injury Compensation Reform Act. It was passed in 1975 amid a crisis marked by 300 percent increases in medical malpractice insurance premiums. Some doctors were defecting to other states back then.
MICRA stabilized the situation and brought down costs, so much so that several other states have adopted their own version of MICRA. A few holiday seasons ago, a doctor wrote in a trade journal that of all things to be thankful for, “No. 1 on this list for California physicians is MICRA.”
Getting a Jump on Economic Impact
Now that we’ve lived with environmental impact reports for decades, isn’t it time the business community insists that state and local governments get economic impact reports before passing new laws, ordinances and regulations?
After all, new rules routinely get approved throughout California with nary a thought to how they may destroy jobs or otherwise rough up businesses.
One big example: AB 32. It was passed by the state in 2006 to reduce greenhouse gas emissions. The intent was laudable enough, but apparently the economic consequences were not seriously considered. Only two months ago, a couple of academics released a study that said when AB 32 is fully implemented, there will be a 10 percent loss in gross state output, 1.1 million jobs will vanish, California families will face increased costs of $3,850 a year and small businesses on average will see increased costs of almost $50,000.
Old 13 Props Up California
Proposition 13 is routinely reviled by those in the political class. But if they were fair, they should admit some gratitude for it now.
That’s because property-based tax revenues to governments in California haven’t dropped much at all, even though property values have plunged sharply. That’s thanks to Proposition 13’s stabilizing effect on property taxes.
Let’s stop for a moment and let this soak in. I mean, how amazing is this? We’ve seen property values in California plunge faster and further than anytime in our lives, further even than Manny Ramirez’s batting average, yet the tax revenue based on those properties has declined just a couple of percentage points this year statewide.
Considering that many businesses and households have seen their revenue or income swoon by 10 percent, 20 percent, 30 percent or more, and have chopped their budgets accordingly, a little trim of a couple points should feel like a complete and utter victory.
Losing Lunch
Those of us who work on the Miracle Mile in Los Angeles have enjoyed a lunchtime treat in recent months.
Dining trucks have been showing up. Some days, so many of them line up on Wilshire Boulevard that you can have your choice of barbecue, organic sandwiches, two or three kinds of Korean fare or Mexican food from a traditional taco truck. A dessert truck also shows up occasionally.
The trucks, most of them anyway, serve good food at a reasonable price. And it’s kind of fun to line up on the sidewalk and exchange a little banter with others who work in your office tower or in the building next door. I dare say, a little community gets formed in those lines.
But, alas, the trucks were scant last week. In fact, one day at noon I walked out to see which food trucks were at the curb, but nary a one was to be seen.
Competition Swamps L.A. Port
The ports of Los Angeles and Long Beach are the country’s two busiest. When you consider all the local businesses that depend on the ports – the warehouses and export companies and trucking firms, to name a few – the port complex is among L.A.’s most important economic assets. Maybe the most important.
But the situation is getting perilous.
Consider the long-term threat. The widened Panama Canal is to open in about five years, and suddenly all those container ships from Asia that are now more or less forced to go to the South Bay ports will be free to go elsewhere. Places like Jacksonville, Fla.; Mobile, Ala.; and Houston have built or are expanding their ports to accommodate a surge in traffic.
Consider the short-term threat. Shippers in this economic storm would love to find a port – any port – other than the South Bay complex.
Nevada Just Doesn’t Add Up
By now you’ve probably seen those business-stealing advertisements from Nevada. One ad says that if you don’t move to Nevada you can “kiss your assets goodbye” because California is so expensive. There’s another that shows a pig with wings that asks, “California will be more pro-business … when?” Cute.
Yeah, sure Nevada’s got a point. It has no personal or corporate income tax. That state can offer goodies to businesses that decide to locate there. But be honest: Do you really want to move to Nevada? Once you get past the tax advantages, Nevada is a whole lot of desert.
I mean, really. We’re talking about a state whose towering cultural figure is Wayne Newton. Among all states, Nevada is the biggest producer of what? Heat stroke?
L.A.’s Costly Grocery Bill
Originally published in the Los Angeles Business Journal
One of the dumbest things the Los Angeles City Council has done in recent years was to pass the grocery worker retention ordinance.
That was the gem enacted more than 3? years ago that said if a big grocery were sold in Los Angeles, the new owner would have to retain all the workers on the payroll for at least 90 days.
On the face of it, that’s dumb. For the city to presume to tell a private-sector company whom it must employ is not much different from a city cop instructing a home buyer that he couldn’t change the landscaping for 90 days after closing.
L.A. Has Work to Do on Jobs
A few weeks ago I had lunch with an acquaintance whose business is tied to the entertainment industry. He lamented that he knows of many companies that have left Los Angeles in recent years or were thinking of doing so now.
A look of disgust came over his face. “If I didn’t have to be here, I’d leave, too,” he said.
His complaints were the usual ones: high costs, high taxes, lots of rules and regulations, and what he viewed as feckless local political stewardship.
Those are the kinds of comments you hear but you kind of brush off. Like the weather, everyone complains about taxes and weak-kneed leaders, but no one really does anything. On net, not that many businesses leave. Do they?
Financing the Incompetence
If you wonder why many businesses feel abused and taken for granted by California, you don’t have to look any further than the IOUs that the state sent out this month.
Without so much as a thank you, California pushed its funding problem off on its creditors and the state’s banks by issuing the IOUs. The people and businesses that were paid with the IOUs but couldn’t find a bank to convert them into cash had been forced, in effect, to carry a piece of the state’s debt on their backs. And the banks that cashed the scrip for their customers ended up recording a part of the state’s debt on their balance sheets.
What’s more, banks that accepted the IOUs were engaging in unsound practices. A bank that cashes too many of those kinds of IOUs under normal circumstances could get rung up by regulators, including state regulators, because the bank was draining its liquidity. You can bet that little irony was lost on California legislators.
The message the state sent to banks: “Don’t do anything stupid or dangerous. Unless I make you.”
County Gets Something to Chew On
The old Law of Unintended Consequences pops up in a funny way, sometimes.
It was just last year when the Los Angeles County Board of Supervisors tried to crack down on local taco trucks. But that effort had the unintended consequence of – yes – helping to create even more dining trucks.
According to an article on the front page of this week’s Los Angeles Business Journal, some local folks last year read about the dust-up over the taco trucks and apparently rubbed their chins and said, “Hmmm.” Entrepreneurial types probably cared less about the crackdown (which basically fizzled), but read more intently about the low cost of entry for operators of truck diners. And it probably occurred to them that there are other advantages for truck owners. You can drive to where the crowds are right now, for example, and you can work when you want.