SACRAMENTO : Wilson Works to End Aerospace Defections

Political observers were surprised during the state budget logjam in June when Gov. Pete Wilson went to the mat with the Legislature over the reform of workers’ compensation regulations. His persistence that these arcane rules be changed nearly shattered the delicate budget package.

It wasn’t surprising to a group of aerospace executives, however. A month earlier, they had met the governor with a laundry list of problems they faced doing business in California. One proposal was to reduce the financial burden on employers caused by workers’ compensation fraud.

“A key reason he stuck his neck out on this issue was the message from (the) aerospace (industry),” said Julie Wright, California’s director of commerce. Before Wilson appointed her to her post, Wright worked for TRW Inc., a diversified Ohio-based corporation with a huge space and defense operation headquartered in Redondo Beach.

Although the governor’s proposal for workers’ compensation reform was watered down by the Legislature, the final bill will help to prevent fraud by extending stress claims only to employees who have been on the job for six months or longer.

“The governor’s determination on this issue was evidence that the meeting was more than just symbolism,” said Katheryn Strehl, spokeswoman for Lockheed Missiles & Space Co. in Sunnyvale, Calif.

Such actions by Wilson have given hope to some aerospace companies. “Two years ago, we may have said it was hopeless to consider expanding here; today, we would look at that decision much closer,” said James G. Roche, vice president of Northrop Corp. “This governor is bringing a lot of attention to the aerospace industry, which is getting local officials and others to reconsider how they approach us.”

Recent job losses in aerospace have jolted the state. At its peak in January, 1990, 251,000 Californians were employed in the industry. By May, 1991, the number had dropped more than 14% to 215,000.

Besides workers’ compensation reform, the Wilson Administration has taken other actions to appease the aerospace companies.

During the budget brawl, Wilson persuaded the Legislature to extend the state research and development tax credit for five years, providing millions of dollars in tax savings to aerospace firms. The credit had been scheduled to sunset at the end of 1993.

In response to requests made at an aerospace powwow in May, the governor fired off letters to Congress in support of the B-2 bomber and NASA’s space station project, in which several California companies have a stake.

“For the first time, a California governor is sending a message to the state’s U.S. congressional delegation that their decisions about defense and space spending affect jobs back home,” Wright said.

Several other issues will take more than a letter to Washington to satisfy the aerospace industry. For example, “high housing costs and traffic congestion directly affect our productivity and our labor costs,” Strehl said.

Holding out some hope for the governor’s campaign promise to push for growth management, Strehl added, “Maybe we have a chance to better plan the state’s infrastructure needs and make sure housing is placed closer to jobs, which together should minimize commutes.”

Elected on a strong environmental platform, Wilson is certain to shun some items on the aerospace wish list. Many business leaders would like, for example, to weaken the 1988 California Air Quality Act.

“The regulations are too onerous and inconsistently enforced,” said Michael McGill, executive director of the Bay Area Economic Forum, which is supported by major industrial firms. “This law alone could discourage an aerospace company from expanding here.”

Glenn Brank, deputy director of the California Environmental Protection Agency, said the Wilson Administration is reviewing the state’s environmental regulations so “we maintain a proper economic and environmental balance.” But, he said, there are no immediate plans to push through amendments to the Clean Air Act.

With or without these policy changes, some economists are pessimistic about the prospects for aerospace in California.

“Even if these firms didn’t have to worry about environmental regulations, the cost of doing business in California--land, space requirements and labor costs--will discourage many firms from expanding here,” Federal Reserve Bank economist Carolyn Sherwood-Call said.

Minorities Not Getting Contracts, Report Says

One reason that business firms owned by minorities and women are not getting a crack at more state contracting work is that the largest government agencies are doing a poor job of opening up the bidding process to underrepresented groups, according to a new report from the state auditor general,

The 50-page report examined $3.7 billion in contracts from the five state agencies that do the most procurements. It showed that minorities capture only 4.5% and women only 2.4% of the contract work. The agencies studied were the California State University system and the Departments of Corrections, General Services, Transportation and Water Resources.

In 1989, legislation was approved requiring state agencies to establish bidding rules to increase the participation of minority- and women-owned enterprises. The goal called for minorities to get 15% and women 5% of all construction, professional services, materials, supplies or equipment contracts.

The report concluded that three agencies--transportation, water resources and corrections--had done virtually nothing to implement the law and that California State University and general services had only partially met the legislative mandate.

“Though the bill has been in effect for nearly three years, action is long overdue,” acting Auditor General Kurt Sjoberg said.