Environment for Tech Firms Found Lacking

The American Electronics Assn. today will release its annual report card on California’s business climate for high-tech companies, and despite Silicon Valley’s position as the industry’s epicenter and the sector’s high profits and rapid growth, most of the grades are poor.

Among six categories evaluated by the national trade group, only one--the environment for electronic commerce--received an A grade.

The two most problematic areas will surprise few. The state’s educational system and business infrastructure--including bridges, roads and water and sewer systems--were each awarded a D+.

The report card, effectively the organization’s lobbying agenda for the coming year, will be unveiled at a meeting with new state legislators in Sacramento.

Teresa Casazza, the group’s executive director for state public policy, applauded Gov. Gray Davis’ educational initiatives and said the AEA supports bills to finance more rapid integration of technology into the grade school curriculum.

The AEA also urges a drop in corporate taxes, but “politically, California is probably not ripe for reducing the corporate or sales tax this year,” Casazza acknowledged.

Instead, the AEA will support a bill to allow companies to carry over all of their operating losses from one year to the next--reducing their tax burdens in profitable years following losses. Currently, California companies can carry over only 50% of losses; some other states and the federal government permit 100%. Such a change could greatly benefit high-tech start-ups that lose money in their initial years and companies in cyclical businesses.

But some policy analysts view the industry’s goals as out of sync with the needs of the state’s population.

Despite high tech’s vast and growing wealth, the gap between rich and poor in Silicon Valley has risen substantially during the 1990s, according to Joint Venture: Silicon Valley Network, a San Jose-based public-policy coalition. The group also reports a severe shortage of affordable housing for lower-wage workers.

While some AEA members have made substantial donations to schools, the industry’s desire for both lower taxes and improvements in public services reflects national competitive realities, according to Casazza.