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A New Year’s Resolution for California: Get It Together : An economic renaissance will take better policy-making

Angst , an unusual malady for the Golden State, has touched the California psyche. Economic signals point to a lingering recession. The state is expected to have a harder time than the rest of the nation in shaking free of economic malaise.

Never before has the need been more pressing, to put it colloquially, for the state to get its economic development and competitiveness act together. Never before has the need for leadership been so great. A newly invigorated California with innovative programs could become the model for the rest of the nation. New trends, after all, often begin here and work their way eastward.

The economic contractions plaguing California are not just recessionary impulses. The state’s recovery will be slowed by the ongoing restructuring of its diversified economy, which accounts for 13% of the nation’s output. Industries from aerospace to banking are slashing costs in an effort to eke out profits. Thousands of Californians are out of work. The state coffers are empty, $4 billion in the red so far. Yet more people are coming to California, although, fortunately for the state, at a slower pace.

STATE OF THE STATE: Listen for Gov. Pete Wilson to address these issues in his state-of-the-state speech early next month. The governor and the Legislature must work together to craft long-term solutions to revitalize California’s underlying economic strengths. That means rising above the political fracas of short-term interests. A recent survey of voters by the California Business Roundtable found that 85% say the governor and the Legislature should act to improve the business climate.

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“It is the collective responsibility of government--both Republicans and Democrats--and the private sector to help craft good public business policy,” state Commerce Department Director Julie Meier Wright recently told a Senate committee.

REFORM: The fiscal restraints on the state require that the governor and the Legislature be tight-fisted yet innovative. To help cut costs for business, Sacramento should put top priority on reforming the costly $10.4-billion workers’ compensation system, eliminating government red tape (one-stop processing would be ideal) and simplifying often contradictory environmental regulations. A growth management agenda that embraces regional policies on water, education, transportation and affordable housing would help create an atmosphere attractive to business.

TROUBLE IN PARADISE: Such measures would go a long way to instill confidence inside and outside California. Fears of an out-of-control California are pervasive:

--When asked in a Times Poll, “Is California on the right track?” 69% responded “no” in December, up from 59% in a similar poll in May. In ranking the most important issues facing California, the economy, unemployment and crime topped the December poll. In May the key concerns were education, crime and drought.

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--Standard & Poor’s Corp. recently downgraded California’s investment rating to double-A from triple-A, amid concern over the government’s seeming paralysis and the rising deficit. So far Moody’s Investors Service Inc., another ratings firm, has left its triple-A rating unchanged, but with a warning: “Absent significant and meaningful budgetary adjustments over the next several months, rating actions should be expected.”

--UCLA’s Business Forecasting Project predicts California will not experience a turnaround until late 1992. With six quarters of economic stagnation, the state is facing its worst economic downturn since the Depression.

PILLARS OF STRENGTH: Still, Southern California is the largest manufacturing center in the nation. California benefits enormously from booming trade with Asia. Fortune magazine’s list of the 100 fastest-growing U.S. companies showed 33 in California. Forbes magazine’s list of America’s 200 best small companies had 42 in the Golden State. Conway Data Research reported California had 263 new plant expansions and locations during 1990. Still, the state’s big challenge will be to create 250,000 new jobs annually for a population that will rise to 36 million by the year 2000.

A California renaissance will take hard work. It will bear no resemblance to the near-effortless recoveries of the past. A maturing California is facing new challenges that mirror those facing the nation. Successfully remaking California could help drive the nation at large to new levels of industry and competitiveness.

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