California

What will have to happen to get my fellow citizens of the Golden State to take a big bite of reality?

In Chief Executive’s eighth annual survey of CEO opinion of Best and Worst States in which to do business, Texas easily clinched the No. 1 rank, the eighth successive time it has done so. California earns the dubious honor of being ranked dead last for the eighth consecutive year.

This year, 650 business leaders responded to our annual survey, up from 550 in 2011. CEOs were asked to grade states in which they do business among a variety of areas, including tax and regulation, quality of workforce and living environment. The Lone Star State was given high marks foremost for its business-friendly tax and regulatory environment. But its workforce quality, second only to Utah’s, is also highly regarded...

It may be no accident that most of the states in the top 20 are also right-to-work states, as labor force flexibility is highly sought after when a business seeks a location...

California’s enduring place of perpetual decline continues in this year’s ranking. Once the most attractive business environment, the Golden State appears to slip deeper into the ninth circle of business hell. The economy, which used to outperform the rest of the country, now substantially underperforms. And its status as the most ruinously contentious place to operate remains undisturbed in eight years. Its unemployment rate, at 10.9 percent, is higher than every other state except Nevada and Rhode Island. With 12 percent of America’s population, California has one-third of the nation’s welfare recipients. Each year, the evidence that businesses are leaving California or avoid locating there because of the high cost of doing business due to excessive state taxes and stringent regulations, grows. (See “Eastward Ho!”) According to Spectrum Locations Consultants, 254 California companies moved some or all of their work and jobs out of state in 2011, an increase of 26 percent over the previous year and five times as many as in 2009.

The following is a representative sample of comments from participating CEOs:

• California is the worst! They are doing everything possible to drive a business out of their state. If it were not for the climate, they would have lost half their population.
• California regulations, taxes and costs will leave only tech, life sciences and entertainment as viable. If you aren’t an elitist, no room here for the middle or working classes.
• California treats business owners like criminals. California has different overtime policies for its own employees vs. private sector.
• California’s labor regulation is a job killer. We will be moving our business out of the state, which will lose hundreds of jobs simply due to the poor regulatory environment.
• California should secede from the union—it is like doing business in a foreign country, it has its own exchange rate, and its regulation is crazy.

Although Gov. Jerry Brown deserves credit for some spending cuts, his proposed budget promises more out-of-control spending financed with higher personal income taxes. It’s little wonder that most Silicon Valley CEOs say they won’t expand in California because of high taxes and burdensome regulation. Intel long ago moved its plants to Nevada, and Cisco, Google and others have located their server farms to places like Utah, Arizona and Oregon. California still ranks first in technology, agriculture and entertainment, but even this advantage in time can be undermined.

 You can't strangle the goose that lays the golden eggs and expect it to keep laying them.