Joel Fox on PRI’s California Business Climate Survey

Joel Fox on PRI’s California Business Climate Survey

Survey:  Biz Execs Down on CA

A survey of business executives in highly sought after industries such as clean tech and research & development conclude that California has a number of problems that prevent businesses from locating or expanding in the state. The Pacific Research Institute survey discovered that housing and real estate costs, a poor quality education system, and taxes and regulations are stumbling blocks for the business execs.

The survey was based on 200 interviews with business executives in R&D, IT, manufacturing, clean tech, and energy – industries identified by California’s public officials as highly-coveted industries, according to the survey release. Many of the executives were considering or had considered opening operations in California, while some had closed California facilities in the last five years.

Housing and real estate costs were tabbed as the top reason to avoid doing business in California. Housing costs were a major factor cited by 88% of the respondents. 71% of the executives thought labor laws and regulations made it tougher to operate in the Golden State.

Nearly two-thirds of the executives considered education a major key in determining whether to establish a business in the state, with many concerned that the state’s education system was not producing enough high-skilled workers. That concern may be turning around according to a new study by the Public Policy Institute of California.

Taxes were another concern, cited by 58% of the respondents. A reform of the high rate income tax system would induce more businesses to look positively at California, according to the survey.

The business executives will find no comfort in a number of proposals to continue to raise taxes on businesses or income in the legislature or measures that could make the ballot. AB 22, a business tax surcharge, and AB 2731 to increase taxes on investment income are in the legislature, a business property tax increase and millionaire tax increase are initiative proposals.

When asked what the executives would like to see improved in the state to encourage a move or business expansion, two-thirds talked about improving housing affordability, reducing taxes and improving transportation infrastructure.

One note of seeming incongruity was that executives cited the gas tax as an issue to consider when determining a move to California. The recent gas tax increase is designed to improve infrastructure, a need mentioned by the executives. However, this could be explained by different reactions from the varied industries—clean tech and environmental-oriented industry leaders may approve of the gas tax while manufacturers and others may not.

The Pacific Research Institute went beyond traditional surveys by offering solutions to the problems raised by the business executives.

For example, PRI suggested major changes to the California Environmental Quality Act (CEQA) to lessen the cost of housing; better teacher trainer and teaching tools to prepare students for high skill jobs; and a dramatic overhaul of the tax system.

You can find all the recommendations at the close of the survey here.

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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.