With the California economy contracting and the state budget deficit increasing, the Governor has appropriately called for swift and decisive action. Our policy leaders must carefully examine which program reductions and which revenue-raising proposals hurt our economic recovery, and what new measures will stimulate productivity, employment and the creation of wealth for all Californians.
The California Chamber of Commerce has recently commented on some of the proposed tax increases, but our state’s fiscal health will never improve without a strong economy.
While the recession is global in reach, state public policy can make material improvements for California and, importantly, have an impact on how swiftly and strongly we will recover from this slowdown.
Three-Point Plan
As an initial contribution to raising this issue, we suggest a three-point plan to stimulate productivity, employment and the creation of wealth for all Californians.
1) Create and seize economic development opportunities. During the last economic downturn, the Legislature eliminated California’s Trade and Commerce Agency, which was responsible for economic development. We can no longer take economic development for granted. The Governor should establish a focused economic development effort, led by his office, including:
- Assemble "Strike Forces" of key state, local, utility and private officials to streamline permits, identify financial incentives, and involve all decision makers on a project team. The focus would be facilitation, not regulation, and the goal would be a successful project, not reducing environmental standards. Nobody can help solve a local air quality issue like a regional air pollution regulator; nobody can overcome California Environmental Quality Act (CEQA) traffic mitigation issues like a team of Caltrans and local transit officials. These focused, collaborative efforts should become a regular feature of doing business in California.
- Identify and package statewide incentives, such as federal grants and special fee-supported revenues, which can be used to entice new business development. The Governor and Treasurer accomplished this as a one-off deal with Tesla Motors to help subsidize this alternative vehicle manufacturer’s costs of investment. This effort should become systemic with an identified source of funding.
- Prior to the budget crisis, the Governor successfully marketed California’s economic development to the rest of the world through trade missions. We encourage the Governor to reinitiate, both domestically and internationally, his successful sales pitch on the California economy.
2) Reduce the cost and risk of keeping and growing jobs. The biggest impediment to California’s short-term economic competitiveness is the high cost of doing business here. Reducing costs on California employers will result in more employment and free up money for capital expansion, which will in turn create more jobs.
To accomplish this, all government mandates should be examined with the aim of reducing employer costs without sacrificing important public policies. For example:
- California should conform our out-of-date overtime laws to the rest of the country. This would allow employers to offer four-day work weeks without incurring additional wages. It is also good for workers because they can reduce commutes and the costs that go with them by 20 percent. Governor Schwarzenegger proposed changing overtime rules for high-wage employees, but this reform should be made available to all California workers.
- California should clarify its rules regarding meal and rest periods to allow more flexibility for employers and employees. Again, the Governor took an initial, important step on this issue, but a comprehensive fix is necessary to reduce costs and save jobs.
- To combat the galloping increase in health care costs, the multitude of coverage and benefit mandates governing health care plans should be reduced.
Different industries will have a variety of other issues that keep their operating costs unnecessarily high; but it is clear in this time of economic crisis that only reduced costs will allow them to stay in business and maintain a payroll-and maintain tax revenues to state and local governments.
3) Jump-start public and private infrastructure and commercial projects. The Governor has proposed streamlining and expediting some environmental permits for transportation projects, an important first step in creating new economic investment. But what is good for public works projects is even better for private sector projects.
Public projects can be a catalyst, but we should not limit our vision only to public works; private construction projects can produce many more jobs and create the foundation for ongoing economic development. Investment in public and private infrastructure is imperative for California to take advantage of the eventual economic recovery.
In particular, the Legislature should provide a temporary safe harbor from CEQA private causes of action on climate change impacts until actual significance thresholds are adopted by lead agencies, such as the Air Resources Board. Until such standards are adopted, there should be even greater deference to a lead agency; otherwise, these cases will inevitably wind up in court.
The Governor should also direct his administration to quickly identify every short-term, appropriate public works project financed by general obligation bonds, lease-revenue bonds, federal funds or other dedicated funds and set aggressive goals for advancing those projects into construction phase within six months.
Minimize Harm/Promote Growth
As dire as the budget deficit is for public programs, employees and program beneficiaries, we must not lose sight of the economy-wide suffering of private sector workers and their employers. We recognize that the budget deficit cannot be solved solely with program reductions or revenue increases.
Ultimately, a common-sense approach that minimizes harm to the existing economy and aggressively promotes growth will spark and sustain recovery. A recovered economy is the only way to get our state budget back on track.
Allan Zaremberg is president and chief executive officer of the California Chamber of Commerce.