California ranked dead last in a poll of 556 CEOs asking which state is the best place to do business. While CEOs are certainly not an unbiased lot, they also have considerable say in where to open new facilities. And it appears they would rather be hung upside down than do business in California. This should be of concern to all Californians, especially in the current nasty recession.
The survey asked CEOs to grade states based on three criteria: taxes and regulation, workforce quality, and living environment. Each criteria had multiple questions, which were answered on a scale of 1 to 10, 1 being the worst. California ranked on the low end at 5.81 for workforce quality, in the middle for living environment with 6.50 – but dead last at an abysmal 1.60 for taxes and regulations. No other state had a ranking in the ones for this. California stands alone here, and this is why California cratered in the rankings.
Questions about taxes and regulation addressed the following:
State income tax and corporate tax rates
Perceived attitude of government to business
Degree of employment compliance regulations
Degree of environmental compliance regulations
Tax incentives for locating in this state
The report notes that the CEOs uniformly state that California regulators are hostile towards business. One California CEO even said, “No one in his right mind would start a new manufacturing concern here.” Ouch. Further, and perhaps controversially, they say California:
“seems uniquely oblivious to the effect its labor and other regulations are having on its innovative and growth-oriented Silicon Valley. Job growth in the Valley has flatlined. Firms keep their HQs there, but pursue growth in friendlier states.” (While there’s certainly a tech boom in Silicon Valley now, it’s mainly social networking companies, and while exciting, it will not create hundreds of thousands of new jobs)
Those friendlier states include nearby neighbors Utah (#9), Nevada (#10), and Arizona (#13) all of whom are actively and successfully encouraging California corporations to relocate.
Ok, so CEOs hate excessive regulation, think California’s landmark AB 32 carbon emissions law is onerous, and are probably leery of the 2020 mandate for 33% renewable energy because it will raise their costs. One role of the state is certainly to regulate business. Plus, California is leading the way on renewable energy and cleantech. Surely this is a good thing, right? Well, maybe.
Trail blazing is good if you are a tech company. You may be able to get cutting edge technologies to the marketplace first. But this doesn’t necessarily apply to states, especially when nearby states are eating your lunch economically. ’We don’t have to stay in or locate to California’ is what the CEOs are saying. Maybe they are wed solely to the bottom line, but perhaps Californians should listen anyway.