SACRAMENTO : To End California’s Slump, Long-Term Policies Should Be Addressed . . .

In the mid-1970s, at the end of another recession, then Gov. Edmund G. (Jerry) Brown Jr. was blasted for policies that purportedly hurt the California economy. Among other things, he wiped out funding for the state Department of Commerce, and his Administration had put up numerous obstacles to Dow Chemical’s plan to build a new plant in Northern California.

At the time, Brown and his advisers concluded that there was a perception problem about the state’s business climate. So Brown decided to have buttons printed up that read, “California Means Business.”

The state’s economy soon grew out of the doldrums and continued to boom for nearly all of the next 15 years.

But Brown never got credit for the recovery, and no one seriously believes that his button slogan had much to do with the rebound.

Today, another dark mood has settled on the California economy. Although the recession hasn’t prompted anyone to design a booster button, it has inspired state officials in the past few weeks to offer a raft of recovery proposals.

But economists say these ideas--like Brown’s booster button--will do little to bring the state out of its current economic malaise.

“Can California (government) do anything to get us out of the recession? Probably not,” Bank of America economist Frederick Cannon said.

That sort of thinking hasn’t discouraged state officeholders from offering remedies:

* On Veterans day, Sen. David Roberti (D-Los Angeles) devoted an entire speech to the state’s economy and called for new tax legislation that would boost investment in jobs.

* Controller Gray Davis is exploring proposals such as relief from the state bank and corporation tax for companies that put 25 new employees on the payroll. “One of the most solid signals that could be sent to business is a tax credit for job creation,” said Jay Ziegler, press secretary for Davis.

* Several lawmakers have proposed exempting companies from sales taxes when they purchase new machinery and offering businesses an investment tax break to firms that build new plants in the state.

But economists say these proposals won’t turn around a sagging economy that is plagued by job flight, a national recession and a budget mess that will probably require deeper cuts and higher taxes--which could further drag the state economy.

“The state can’t do much for the short-term fortunes of California’s economy,” Berkeley economist John Gruenstein said. “They don’t have monetary or fiscal policy as a tool, and they can’t balance their budget by simply printing money like the federal government.”

Most economists say the best medicine for the state economy is addressing long-term policies that were ignored in the past 20 years, such as major investments in secondary education, an expanded state water system, ports, airports and mass transit.

Some lawmakers say this can be achieved by issuing more bonds. Assembly Speaker Willie Brown (D-San Francisco) has talked about a massive bond undertaking that would rival the colossal public works agenda of the 1960s.

Land-use laws are another powerful--albeit long-term--economic tool of local and state government, Cannon said. “How we zone property affects land prices and the cost of doing business here,” he said.

But none of these strategies will produce immediate results.

“It took many years to get into this position and will take many to dig us out,” said Joel Singer, an economist and executive vice president of the California Assn. of Realtors.

Although the economic issue will probably get bogged down in the politics of Sacramento, it will temporarily give business a more friendly legislative environment in the state capital.

“If nothing else, it should be an easy year for killing anti-business bills,” said Fred Main, vice president of the California Chamber of Commerce.

He believes that labor bills such as VDT computer screen legislation will go nowhere next year. Main also predicted that a proposal to raise property taxes on commercial buildings will face stiff opposition in this economic environment.

Consumer and labor activists are concerned that the poor economy will be used to kill meritorious legislation that they argue won’t hurt the economy.

“Wilson has already taken their (business) message hook, line and sinker,” said labor lobbyist Lenny Goldberg, who pointed to Wilson’s veto of several measures, such as the anti-discrimination bill to protect gays and lesbians and a white-collar crime measure, because of purported concern about the economy.

“We expect a major propaganda campaign, which will make our jobs tougher,” said Goldberg who represents the California Tax Reform Assn., which is a coalition of labor and public interest organizations.

The group plans to introduce legislation next year “that would wipe out state income tax deductions for luxury sports boxes, convention travel to exotic places like Hawaii and green fees in plush country clubs,” Goldberg said. “Business will say these changes are bad for the economy, but I think they will be hard pressed to prove it.”

Taxable Sales at 30-Year Low

If the slump in taxable retail sales is the measure, the California economy has reached a 30-year low.

In two weeks, the State Board of Equalization will report that second-quarter taxable sales dropped 4% to 5% from the same quarter in. In the first quarter, sales dropped 5.4%, which was the sharpest plunge in three decades.

“It’s the worst I have ever seen it,” said Board Research Manager David Hayes.

Many retail experts predict that the downward spiral will continue until year-end.