In a recent post, the OC Register’s small-business columnist, Jan Norman, posted a blog entitled GM’s Seven Deadly Mistakes. These are seven classic management mistakes that took GM from a great symbol of American enterprise, to a bankrupt and nationalized failure. I thought it would be fruitful to apply these to California’s current budget crisis. Here is the list:
1. Failure to read the “tea leaves”. California’s budget crisis has been long in coming. The state’s anti-business policies in everything from taxation to environmental regulation have made California’s business environment toxic. Last year’s historic budget delay, and the $42 billion dollar budget gap the February budget was meant to close, was a “leading indicator” that further budget troubles loomed ahead.
2. Failure to manage cash flow. In analyzing GM, Ms. Norman attributes the auto maker’s cash flow problems to the high fixed costs of labor and other associated costs. ditto.
We can add to that, mandatory spending requirements, unnecessary commissions, and an ever growing list of entitlements that feed our expanding nanny-state.
3. Lack of and inability to communicate core mission. If California has any core mission, it is “provide everything to everyone at all times.” A popular line from Democrat legislators during the last budget fight was that Californians ask the government to provide a “high standard of living,” and it was the duty of the Legislature to tax us more to keep providing every entitlement under the sun, and more.
On this point, Legislators aren’t the only ones to blame. Many Californians have a bad habit of voting for every new spending proposal put to them without realizing it is they who will have to pay for it.
4. Over-analysis and slowness to act. “Paralysis by analysis” as Norman calls it, is rampant in Sacramento. Any proposal to solve structural budget issues dies a slow death by analysis, while our problems only get worse. All the while the Blueberry Commission gets rushed right through. I know blueberries are good, why do I need a commission to tell me so?
5. Lack of a viable plan B. This is what we see unfolding now in Sacramento. For that matter, this is the reason 29 of California’s last 33 budgets have been late. The Legislatures immediate response to a budget problem is “let’s raise taxes.” That just doesn’t work. Now our leaders are fumbling around in meeting after meeting trying to find a way to scrape by, by the skin of our teeth… again.
6. Playing defense instead of offense. You can’t get ahead only playing defense, and that’s what our state has been doing for years. We stitch together “budget patches” to hold us over until the next tear appears. This strategy is unsustainable. We will invariably reach a point like today where our budget is all patches and no whole cloth.
7. Not paying attention to competitor changes. While our tax burden continues to rise and our business environment becomes more and more toxic, we’ve ignored our next-door neighbors Nevada and Arizona. States across the country that are stealing away California businesses to their virtual tax havens. Assemblyman Dan Logue was recently quoted in the Wall Street Journal saying that Colorado is now advertizing its 5% business tax to get California businesses to relocate.
In the same Wall Street Journal Piece, Assemblyman Logue says “our tax system is killing our state." He’s right, and unless we take a closer look at these “seven deadly mistakes,” the state will continue to die this slow death by taxation, only it will keep speeding up everyday.