Two days before Thanksgiving, financial services firm Charles Schwab announced it was relocating its headquarters from San Francisco to Texas. The Wall Street Journal’s explanation: “The brokerage giant heads for a state that doesn’t punish finance.”
Fresh from its $26 billion acquisition of TD Ameritrade, Schwab, located in San Francisco since it was founded in 1971, will eventually staff a 7,000-person workforce in the Dallas-Fort Worth metroplex. The $63 billion company that had nearly $4 trillion in assets before the deal said some of its employees will remain in San Francisco, and that it will continue to hire for positions in town. Despite the move, it promises to maintain “a sizable corporate footprint in the city.”
Nevertheless, Jay Cheng, public policy director at the San Francisco Chamber of Commerce, predicts “we probably will lose significant taxes.”
Schwab’s decision to shift its nerve center to Texas is just the latest runaway in the massive California business jailbreak. Joe Vranich, a relocation specialist who relocated his business from Irvine to Pennsylvania, has documented 2,183 “California disinvestment events” from 2008 to 2016. But not all moves are known publicly. Vranich says “experts in site selection generally agree that at least five events fail to become public knowledge for every one that does.” That means there were likely 13,000 disinvestment events over that period.
This is not to say the California economy will grind itself to dust after the next companies quits. The state has outperformed the U.S. economy for the last decade, and even with a slowdown forecast for the end of 2020, a recession isn’t imminent. California’s economy is solid.
But let’s imagine where it would be if it weren’t losing businesses and at the same time was attracting relocations because of its friendly business environment. The economy would be in a near-perpetual boom cycle.
Businesses aren’t the only refugees. The middle-class has found life in California, despite the mild weather around its population and business centers, to be an unforgiving hardship. Living in California is expensive all-around, but making it beyond expensive and utterly unaffordable for many are the steep housing costs. This is not only a reason to leave, it’s a barrier to many who would otherwise move to the Golden State seeking its gilded promises.
Fleeing California is an old and well-documented story that should have ended long ago. But it continues to add new chapters. And there are no plot twists, just a straight line of tragic events, with no conclusion in view.
Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.