One of the main reasons Governor Arnold Schwarzenegger vetoed the Democratic budget bills yesterday was that the bills did not create the economic stimulus the governor was seeking. He is right in taking a hard line position on creating jobs and stimulating the economy. Economic history is clear that the greatest revenue boosts for the state government have come with economic growth not from tax increases.
One way to create jobs and get pubic infrastructure projects rolling is to expedite the environmental review process and the permitting process for projects already in the pipeline. The legislature balked at this request from the governor. But, if legislators are concerned about job creation, expediting the process is an important step to take. Not only will it get money flowing through the system, it will get important projects completed faster.
After the 1994 Northridge earthquake, Governor Pete Wilson led the effort to expedite the rebuilding of the freeways by waiving standard operating procedures. California got back to business in record time. That is a model that should be implemented to a degree now.
The governor also sought approval of public-private partnerships on construction projects, as well as authority to proceed with the design-build contracting method on transportation projects. The legislator held back on both provisions that would include the private sector in improving California’s infrastructure. Design-build has proven to complete jobs faster.
While the Democratic majority stands in the way of many of these economic stimulus packages to defend constituencies like public employee unions, they are shooting themselves in the foot. There is plenty of work for the public sector on these building projects, and the state will benefit from the economic growth that will enrich state coffers.
The governor also sought changes in work rules in the private sector to create a more business friendly environment. This is essential to help not only the companies, but also the workers to enjoy a more flexible schedule. Beyond that, improving the business climate will, in turn, approve the economy and increase revenue to government.
A top economist I spoke with recently told me many CEOs are telling him they are considering leaving California because of the heavy taxes and the excessive burdens placed on business. There is no question that one way to end the budget soap opera is to embrace the goal of economic growth and pass the bills needed to achieve that growth.
Without improving the business economy in California all the taxes in the world will not get the state out of its financial mess. In fact, the taxes will serve as excessive ballast, slowing and eventually sinking the ship of state.