RIP Golden State?

The Golden State of California is in serious trouble. It no longer represents the land of opportunity that once made it the fastest growing state in the union. Companies, and the people they employ, are fleeing the state in droves. We have high tax rates, an oppressive regulatory environment, uncompetitive energy costs and constant government budget uncertainty. 

Examples of the looming crisis abound for those willing to connect the dots. To wit:

• The May 1, 2012 edition of the San Jose Mercury News carried the headline “San Mateo’s CaféPress moving headquarters to Louisville, Ky.” According to the article, “the freshly public internet retailer” (its IPO was on March 29) was spending millions of its own funds to move its headquarters to Kentucky, adding 185,000 square feet and 592 jobs to its facility there. “CaféPress will keep its San Mateo office open” the article closes. No doubt with significantly fewer employees.

• I recently had lunch with an executive at a very well known Silicon Valley company. During our conversation he pointed out that his company recently opened a data center employing a significant number of people in another state. “We are unlikely to ever move our campus,” he opined, “but I can’t imagine any significant expansion in California.” He observed that our state’s extremely low ranking for its business environment, along with relatively high tax rates was driving businesses, and as a result, jobs, out of the state. He also noted that when he brought this to the attention of a senior official in Governor Brown’s organization he was told he had his facts wrong.

• I also had lunch with the former CFO of another Silicon Valley high tech company. “It’s getting harder and harder to retain good, young engineers here,” she stated. “They want to start families, but it’s so expensive in the Bay Area. We ended up opening an R&D facility in another state so that we could attract and retain good, young talent.” It is not just middle class manufacturing jobs that are disappearing. We are losing the brains that have driven Silicon Valley’s innovation and growth.

• The Wall Street Journal published an interview with Joel Kotkin, whom they characterized as “one of the nation’s premier demographers.” He states that “nearly four million more people have left the Golden State in the last two decades than have come from other states.” He believes that our state is driving out middle class citizens to states with more affordable real estate and a better tax climate. The article observes that “increasingly the only ones fit to survive in California are the very rich and those who rely on government spending. In a nutshell, ‘the state is run for the very rich, the very poor, and the public employees.’” But our tax policies threaten even the very rich.

Add to these recent developments the following:

• Intel is spending billions of dollars to expand operations in Oregon and Arizona.

• Carl’s Jr. contemplated moving its headquarters to Texas, and is opening 300 new restaurants in Texas while “maintaining” its 700 California restaurants, pointing out that “it costs us $250,000 more to build one California restaurant than in Texas.”

•  The California State Automobile Association relocated its call centers from California to Glendale, AZ and Oklahoma City, OK. I once broke down on Highway 50 east of Placerville. When the call center employee asked for my location and I said Highway 50 west of Lake Tahoe, they did not know where Lake Tahoe was!

This is the sorry state of our state. Years of doing things like soaking the rich (remember the millionaire’s mental health tax surcharge, passed in 2004?), demonizing corporations and protecting fish rather than our agriculture industry have created the largest welfare state in our nation. Kotkin is correct, and without significant change, our state will only be populated by “the very rich, the very poor, and the public employees.”

You and I are the only people standing between our Golden State and that fate. It is up to us to act. Let's use this platform to help us discover ways to help return our state to its past glory.