Business Owners Decry State of Bureaucracy : Government: Companies say they are being driven from California by taxation and regulation. But figuring out and fixing the problems won’t be simple.
Last year Van Jacobsen realized he didn’t need so much space to manufacture office furniture.
With furniture sales slumping, Jacobsen saw a chance to cut production costs so he could eke out more of a profit on those desks and chairs he did sell.
He hoped to find a smaller factory in Southern California, but couldn’t get a timely answer when he asked air-quality officials if he could transfer his air-pollution permits to another local site. Eventually he gave up, packed up the plant and spent more than $1 million moving it to Greensboro, N.C.
Increasingly, California businesses--especially manufacturers--say that state policies are driving them away. They deride what they view as over-taxation, over-regulation and a state that they feel doesn’t appreciate the jobs they create for Californians. The California Chamber of Commerce and other business groups are pushing the lost jobs issue to demand that state government ease up on business.
Dave Kilby, a vice president at the Chamber of Commerce, recites a litany of changes the business group wants: “No new taxes, worker’s comp reform, permit reform, tort reform, education reform.”
These are hot issues nowadays. At the national level, Vice President Dan Quayle’s Council on Competitiveness is taking whacks at federal regulations it says are unnecessary and costly; here in California, former baseball commissioner Peter Ueberroth’s Council on California Competitiveness is supposed to do the same thing for state regulations.
Not to be outdone, even cities and counties are getting into the act: San Diego recently streamlined the process for getting business permits, while in Orange County, members of the Lincoln Club--a high-powered group of Republican movers and shakers--have been meeting informally with local business groups to complain about government regulation and red tape.
Some of the official rhetoric borders on the apocalyptic. A state Chamber of Commerce official, for instance, says we are “at the downturn of California as an economic force.”
But figuring out and fixing whatever’s wrong with California won’t be simple. A close look at Jacobsen’s company, Panel Concepts Inc., shows some of the reasons why.
Panel Concepts’ subsidiary PCI/Tandem left town for one reason: the South Coast Air Quality Management District, which regulates air polluters in Los Angeles and Orange counties. Jacobsen says the district never did say whether he would be able to move his permits to paint furniture to a new plant.
It’s an oft-told story in Southern California’s furniture industry, which lately has been moving to Mexico or other states where air-pollution controls are less stringent.
“Furniture manufacturers feel the district would be happier if we all left the state,” he says. “Our sword got dull hacking at that wall.”
On the other hand, one of the company’s biggest costs--labor--won’t be much lower in North Carolina. Panel Concepts won’t disclose its wage rates, but furniture workers in North Carolina average about $7 hourly.
And Panel Concepts isn’t moving everything to North Carolina; it plans to continue operating a 45-employee factory in Santa Ana to supply West Coast customers.
Nobody, not even the state Department of Commerce, knows how many companies actually flee the state each year. There are no hard statistics available, only anecdotal evidence, Commerce Department officials say.
One thing is certain, though: California’s economy created far more jobs over the last decade than it lost--at least until last year. And it was the recession, not companies fleeing the state, that accounted for most of those lost jobs.
Sure, lots of people have gripes about doing business in California. But only three in 100 Orange County companies are even considering leaving the state, a recent survey estimates. And that doesn’t take into account all the businesses moving to the state or starting up or expanding here.
“There is a problem, there’s no denying it,” says Kenneth L. Kraemer, a professor at the UCI Graduate School of Management who did the survey. “Last year when we went to contact some of the companies we’ve talked to before for this survey, they just didn’t exist anymore.”
On the other hand, says Kraemer, during this recession “the issue (of lost jobs) has become a powerful symbol” with which to prod the Legislature for changes the business community wants.
Most companies move, experts say, not because they don’t like where they are but because of a company consolidation or reorganization.
Panel Concepts actually opened the plant in Greensboro in 1984 when it needed a handy way to supply East Coast customers. The company makes metal-and-fabric divider panels for office cubicles, as well as desks and chairs.
Jacobsen himself, however, has no plans to move to North Carolina.
“I’m a native of this state, and I’m proud of it,” he says. “We live here, we like it here. I don’t think we’ll ever move. “
