AB32 Having a Negative Effect on Today’s Unemployment Rate

A recent Fox & Hounds Daily opinion piece by David Crane, economic advisor to Governor Schwarzenegger attempted to dismiss the contribution of AB 32 to the state’s high unemployment rate. AB 32 is California’s “Global Warming Solutions Act,” a bill signed into law by the governor in 2006 prior to the current economic crisis. While we can agree that California’s skyrocketing unemployment rate – currently at a staggering 12.5 percent – is due to many factors, the fact is that AB 32 is only adding to the problem.

Mr. Crane’s article was written in reaction to State Assemblyman Dan Logue’s initiative calling for AB 32 to be suspended until California’s unemployment rate drops to 5.5 percent. This is much less than the state’s current unemployment rate, but is still higher than the 4.8 percent that existed when AB 32 was passed.1

The Assemblyman’s initiative seems like a reasonable proposal for easing economic pressure during these difficult times. But Mr. Crane erroneously claims that AB 32 isn’t affecting unemployment rates since it has yet to be implemented. This, unfortunately, is not true.

It’s no secret that the private sector is far more proactive than the government. So when burdensome regulations like AB 32 are expected to create obstacles to economic growth in the near future, most companies adjust their long-term business strategies accordingly. Anticipating upcoming constraints, such as required capital changes, undoubtedly triggers layoffs and downsizing.

Two specific examples demonstrate how state and local government responses to AB 32 are already disrupting much-needed growth and investment. Sadly, this has a direct impact on job creation, as well. In one case, “speculative regulations” were imposed by the San Joaquin Valley APCD’s CEQA review of the Castle Gardens Air Force Base redevelopment. Similarly, the attorney general admonished the Siskiyou County Planning Department that an Environmental Impact Report dealing with a planned Nestlé bottling plant was inadequate. This poor analysis meant that, because of AB 32, the plan would need to be withdrawn – and the entire project revised – to better address global warming concerns.

So, at least in these cases, the creation of jobs will be delayed by possible AB 32 regulation, and others may be lost altogether. What’s more, other significant – and mandatory – measures are being taken statewide that burden public and private projects with adopted-but-not-yet enforced regulations.

Assemblyman Logue’s initiative notes that “several studies predict that AB 32 will cost small businesses billions of dollars thereby slowing economic recovery and job creation.”

Yet considering the capital investment necessary, along with duplicative reporting requirements that increase the administrative burden on businesses, it’s important to understand that these factors are also taking money away from the creation of jobs right now. Just when AB 32 is implemented exactly may not be important. However, suspending anti-growth regulations like AB 32 until unemployment rates have subsided seems like a bit of common sense certainly worth entertaining.

Tom Tanton is with the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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