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Community Commentary: Regulation is killing state’s jobs

California’s recession is over. You didn’t notice? Well, not many Californians did. According to the Business Forecasting Center at the University of the Pacific, California’s two-year recession ended in the fourth quarter of 2009.

The report acknowledges that, certain economic indicators aside, it will “feel like a recession” to Californians for a while longer. Unemployment rates — still hovering above 12% — are not predicted to fall back into single digits until 2012.

Herein lies the distinction between words and reality. Economists and academics can split hairs over whether California’s economy is in a recession, a slump or a downturn. The fact remains that more than 2.2 million Californians are out of work.

About half of California’s general fund revenue comes from personal income taxes, and the sales taxes add another third. As the economy falters, these two revenue sources that account for 80% of the state budget fall precipitously.

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As a conservative legislator, I would hope that putting the economy back on track, and bringing long sought-after jobs to California, are the year’s legislative priorities. They are certainly the surest ways to right the state’s budget woes. Sadly, the relationship between jobs and revenue is so frequently overlooked in Sacramento that many policies ultimately hurt business. In an attempt to stem the outflow of jobs and businesses to other states, I have introduced Senate Bill 954, the Jobs Protection Act.

What SB 954 will do is send legislation deemed to have an adverse impact on business to a “suspense file,” where it will be considered in a special hearing with other measures that add burdens to the state’s business community. This is the so-called reality check liberal do-gooders need to actually understand the practical impact lofty policies ideas can have on jobs and communities.

The global recession is a convenient scapegoat for California’s economic ills — and certainly a factor — but overregulation has been driving businesses out of for years, and taking the good jobs with them. A recent study by the Milken Institute attributes the loss of 79,000 manufacturing jobs to high taxes and overregulation between 2003 and 2007 alone.

The consequences of these policies are evidenced by any number of sobering measures. The Census Bureau’s 2010 Statistical Abstract of the United States indicates one of every six American employers that closed permanently in 2008 was in California. Our state experienced 45% more business closures than launches, and by the end of 2008, there were almost 47,000 fewer businesses in California than in 2007.

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The College of Business Administration at Cal State Sacramento conducted a study that pegged the cost of state regulation on small businesses in California at close to $500 billion annually and concluded that excessive red tape costs the state 3.8 million jobs. The Small Business & Entrepreneurship Council recently released its annual Small Business Survival Index for 2009, and California placed a dismal 49th.

Sacramento is abuzz with talk on both sides of the aisle about jobs and the economy, but words are not enough. California needs private sector jobs and a healthy economic climate. To that end, California’s government needs to cultivate a business climate that encourages growth and job creation. After all, business is not the enemy. SB 954 will give legislators a big picture as to the impact policies and regulation really have.


TOM HARMAN is a state senator for the 35th District, which includes Laguna Beach.


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