by Lance T. Izumi, Fellow in California Studies
Pacific Research Institute
October 16, 2002

Announcer lead: Time for Perspectives. Lance Izumi says that lawmakers have made it harder for businesses to prosper in California.

With California’s economy sputtering and tax revenues drying up, state lawmakers should be working overtime to improve the state’s business climate. Unfortunately, a slew of new laws will do exactly the opposite.

For example, earlier this year Gov. Davis signed legislation that increased benefits for workers injured on the job, but which failed to include reforms to reduce fraud and increase efficiency. The new law’s estimated total cost to employers is a whopping two-and-a-half billion dollars. This increase comes on top of years of rising workers comp insurance premiums. Since 1999, employers have seen premium costs rise, on average, by nearly 80 percent. The new law, therefore, could push many struggling businesses into downsizing or calling it quits.

Another new law grants six weeks of partially-paid family leave to workers for reasons such as family sickness or childbirth. While funded by worker rather than employer contributions, many businesses, especially small ones, will be hurt by the sudden loss of workers and the cost of hiring temporary replacements. Bill Nelson, who owns four oil-change shops, says that although most workers won’t abuse the law, it doesn’t take a lot of abuse to “really run up the cost and cause havoc for employers.”

Sacramento has also placed hurdles in front of specific industries. The new law limiting auto emissions prohibits new taxes, fees or driving restrictions. Thus, the burden of reducing emissions falls entirely on car companies, which will have to develop costly new designs and technologies.

Add in last year’s energy crisis and no wonder many business people are fed up. In a recent survey, a large majority of business executives listed California as having the worst business climate in the country. The runners up, New York and Massachusetts, weren’t even close.

With California drowning in red ink, business is the life preserver that can save the state. State leaders, however, have decided to poke their thumbs in their savior’s eye. The result for the rest of us: we may be sunk.

Lance Izumi is the Director of Center for School Reform at the California-based Pacific Research Institute for Public Policy. He can be reached via email at lizumi@pacificresearch.org.