1994 Legislative Session
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Golden Gate University School of Law GGU Law Digital Commons California Senate California Documents 4-1994 Treading Water in a Sea of Recovery: If California is Ready for Economic Rebound, How Do We Restore Our Competitive Edge? Senate Select Committee on Business Development Follow this and additional works at: http://digitalcommons.law.ggu.edu/caldocs_senate Part of the Legislation Commons Recommended Citation Senate Select Committee on Business Development, "Treading Water in a Sea of Recovery: If California is Ready for Economic Rebound, How Do We Restore Our Competitive Edge?" (1994). California Senate. Paper 190. http://digitalcommons.law.ggu.edu/caldocs_senate/190 This Article is brought to you for free and open access by the California Documents at GGU Law Digital Commons. It has been accepted for inclusion in California Senate by an authorized administrator of GGU Law Digital Commons. For more information, please contact [email protected]. Treading Water in a S Recovery If California is Ready for Economic Rebound, How Do We Restore Our Competitive Edge? The Senate Republican Caucus rhe Senate Select Committee on Business Development Senator Bill Leonard, Chairman April1994 762-S Treading Water in a Sea of Recovery If California is Ready for Economic Rebound, How Do We Restore Our Competitive Edge? The Senate Republican Caucus The Senate Select Committee on Business Development Senator Bill Leonard, Chairman April1994 • 1 12, 1994 Friends and Interested Parties: I recommend to your attention the enclosed report: TREADING WATER IN A SEA OF RECOVERY If California is Ready for Economic Rebound, How Do We Restore OUr Competitive Edge? In 1992, the Senate Republican Caucus and Senate Select Committee on Business Development released the first study of California's business environment. All of the reports and studies released in 1992 agreed: California's economy was broke, and something needed to be done. The Republican Caucus study provided the legislature with a blueprint for economic reform. During 1993, some progress was made. Modest reform of the state's workers' compensation system was adopted and some changes to environmental permitting laws were made. These changes provided the Governor with some of the tools he needs to market California worldwide as a good place to do business. Recent reports indicate California's recession has bottomed out and may be primed for recovery. But even the optimistic forecasters clarify their remarks by stating that recent positive signals in no way indicate California will return to pre-recession levels of employment and economic growth. The state lost another 150,000 jobs in 1993. And the UCLA Business Forecasting Project notes in its most recent report that even by 1996, California's employment will still be several million jobs below pre-recession trends. California is in stiff competition with its Western neighbors for high-paying, skilled jobs. It is a fight we are losing. While the other Western states are enjoying strong economic activity and solid job growth, California continues to wait for a modest recovery. The reasons are clear. Taxes are too high in California -- higher than any of our key competitors. It still takes businesses years and tens- or even hundreds-of-thousands of dollars to get necessary permits. Governor Wilson has made great strides in streamlining state permitting operations, but absent further legislative action, his hands are tied. Permitting in competing states can take only a few days or weeks and cost far less than in California. It is clear that much work remains to be done if we are to break free from the economic stagnation which besets our state. The good news is we have the formula to finish the job started last year. The bad news is we are fighting a legislative majority known for its propensity to become complacent. We need your help. This report examines the progress made toward business climate improvement during the 1993 legislative session and presents the measures and issues that must be addressed in 1994. I hope you will join me in supporting these measures and reform ideas. Returning the economic luster to our once-Golden State must remain our top priority. If you have any questions about this report or would like additional information, please contact me at (916) 445-6617 BILL LEONARD Publisher Senator Bill Leonard Executive Editor Robert J. McKenzie Jr., C.P.A Senate Republican Caucus Coordinator Managing Editor and Anthony J. Stanley Project Coordinator Consultant, Senate Republican Caucus Asst. Managing Editor Jeff Sauls and Project Coordinator Consultant, Senate Republican Caucus Contributors (in alphabetical order) Mary J. Bellamy Consultant, Senate Republican Caucus Rosalie Bertrand Research Assistant, Senate Republican Caucus Jennifer Halverson Legislative Aide, Senator Bill Leonard Audra Hartmann Legislative Aide, Senator Bill Leonard Jed Hazeltine Research Assistant, Senate Republican Caucus Allan Jose Consultant, Senate Republican Caucus Mary Leer Legal Issues Intern, Senator Bill Leonard Donald W. Levin Consultant, Senate Republican Caucus Brian Marquez Intern, Senate Republican Caucus Robert J. McKenzie Jr. Coordinator, Senate Republican Caucus Janice Molnar Administrative Assistant, Senator Bill Leonard Patty Quate Legislative Aide, Senator Bill Leonard Jeff Sauls Consultant, Senate Republican Caucus Anthony Stanley Consultant, Senate Republican Caucus Mami Weber Legislative Director, Senator Bill Leonard Christine Wight Senate Fellow, Senator Bill Leonard Table of Contents Page 1. Introduction: California's Economic Condition........................................... I Chapter I: Regulations .............................................................................. 9 3. Chapter II: Taxes ........................................................................................ 27 Chapter III: Tort Reform ............................................................................. 34 5. Chapter IV: Crime ....................................................................................... 42 6. Chapter V: Workers' Compensation .......................................................... 51 7. Chapter VI: Prevailing Wages ................................................................... 59 8. Chapter VII: Business Retention ................................................................. 68 9. Chapter VIII: Education ................................................................................ 76 10. Chapter IX: Defense Conversion ............................................................... 83 11. Chapter X: Health Care ............................................................................ 90 Chapter XI: Transportation and Infrastructure ......................................... 95 ] 3. Chapter XII: Affordable Housing .............................................................. 102 14. Chapter XIII: Water ..................................................................................... 107 INTRODUCTION: California's Economic Condition INTRODUCTION California's Economic Condition Between June 1990 and November 1993, California lost approximately 600,000 to 800,000 jobs. According to a recent report on California's economic outlook prepared by Pacific Gas & Electric (PG&E), approximately 60 percent of the state's job losses are the result of structural changes (as opposed to cyclical) and are, therefore, permanent losses. The study concluded that corporate downsizing is likely to continue in California for the next several years. The driving force behind these and other cutbacks is the need to lower costs and increase -- two things for which California is ill-suited. Their findings were more recently confirmed by the March 1994 release of the Federal Reserve's "Beige Book" report on Current Economic Conditions. The Federal Reserve study found that while much of the Twelfth District is showing signs of solid economic growth, California continues to lag behind. A graphic illustration of this is presented when one considers how California's share United States unemployment has posted steady increases since 1990. Though California represents 12 percent of the nation's population, it accounts for about 30 percent of the nation's job losses. In contrast to the California economy, Oregon and Arizona, chief competitors for U.S. vs. California Unemployment Rates 1989-1994 California jobs, are experiencing solid growth 10,--------------------------, across several sectors. 9 California had early warning signs. 8 An absolute decline in manufacturing 7 employment began in 1989, prior to the onset 6 of the recession and defense related 5 downsizing. The state suffered the biggest 4L----------------------------~ decrease in new business start-ups in the 111811 19110 19111 19112 19113 19114. I-U.S. Rate -California Rate I nation in 1990. Just two years prior, in 1988, • Dlllllar 1811411 _.. d,......,. and F«<ruaay -· Source: U.S.~dl.tobarll!ldlatll» California had ranked third in the country as the home of new manufacturing plants, but by 1990, the "Golden" state did not even make the top I 0. 1 Despite these and other signals, some analysts and even state leaders refused to see the writing on the wall. As recently as 1990, the Commission on State Finance, headed by state Treasurer Kathleen Brown, claimed California would experience losses of only 30,000 to 40,000 -' Steve Hayward, "West of Eden, California's Economic Fall," Policy Review, Summer 1993, No. 65. 1 jobs in the next year. Their predictions were incredibly