Why Businesses Are Leaving California

Top 10 list why firms leave California

Orange County Register

December 28th, 2010 by Jan Norman

Irvine consultant Joe Vranich has made a name for himself in the past couple of years documenting companies that are moving jobs out of California, expanding outside the Golden State because of its business regulations/ taxes or packing up and leaving completely.

So the California Chapter of Americans for Prosperity asked Vranich to come up with a David Letterman-type top 10 list of reasons businesses are leaving California:

Americans for Prosperity is a 1.5 million-member nonprofit that promotes limited government and free markets. Vranich cites several studies and surveys in his list:

10. Unfair taxes (Tax Foundation ranks California as 48th for tax fairness.)

9. Most expensive business locations (Rose Institute for State and Local Government has many California cities as the most expensive U.S. places in which to do business.)

8. Worst performing labor (Pacific Research Institute rates California’s labor performance over a five-year period) as lowest in the nation.)

7. Dreadful legal treatment (Civil Justice Association of California ranks California as 44th in legal fairness to business.)

6. Worst regulatory burden (Consultant Bain & Co., in a 2004 report for the California Business Roundtable,  said California is far worse than any other state on its “regulatory hassle index,” based on cost, uncertainty and complexity of government regulations.)

5. Harsh treatment motivates exits (Bain & Co. also said more than half of California’s business leaders said their companies had a policy to restrict job growth in this state.)

4. Unfriendliness (The Small Business and Entrepreneurship Council ranks California 48th — Vranich says 49th based on the council’s 2009 report — in business friendliness.)

3. High misery index (Associated Press publishes a monthly economic stress index that ranked California 3rd highest in December.)

2. Uncontrollable spending (Several pollsters say people are angrier about California government than at any other time in the polls’ history.)

1. Worst state to do business (Chief Executive magazine surveyed company executives to conclude that California is the worst place in which to do business.)

David Spady of the Americans for Prosperity says the California chapter has been posting a YouTube video each week as a way to educate people about issues. Another video in the series that Spady did entitled “Around the World on $69 million in Welfare Funds” has been viewed more than 276,700 times.

Vranich views California’s situation somewhat differently than do state Treasurer Bill Lockyer and Stephen Levy, director of the Center for Continuing Study of the California Economy. They defend the state in this Los Angeles Times opinion piece.

However, Vranich isn’t imagining the outbound moving vans. The Tax Foundation has an interactive database that shows Americans’ movement around the country. And more recently, the California Dept. of Finance documents moves by county.

I’ve given periodic updates of Vranich’s list of dearly departed companies. Here and here and here for example.

The Public Policy Institute of California says such anecdotes don’t add up to much impact. Its study of 1992 to 2006 (pre-recession) data concludes that “just 1.7% of California’s job losses” are tied to companies moving out of state.

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