Government policies help booming Texas pull business from sinking California

Do right-to-work laws, lower taxes and smaller government promote growth?

Published: Thursday, May 26 2011 12:00 a.m. MDT

When it comes to job creation and an economic boom in the middle of a recession, other states may not want to mess with Texas — they may want to emulate it.

According to bizjournals.com, Texas has added 732,800 private-sector jobs in the past 10 years, far eclipsing the growth of every other state in the U.S. Arizona came in a distant second in job creation, with a growth of 90,200 jobs since April 2001. Utah was third with a growth of 90,000.

In the state-by-state breakdown of jobs data from the U.S. Bureau of Labor Statistics, California showed the biggest loss of private-sector jobs, with a decline of 623,700 since 2001. Michigan and Ohio rounded up the last three, losing 619,200 jobs and 460,900 jobs, respectively.

For the seventh straight year, Chief Executive also rated Texas as the No. 1 best state for business, while California claimed the dubious honor of being the worst state for business — also for the seventh year in a row. Utah was ranked at a business-friendly No. 9.

The Wall Street Journal reports that Fujitsu Frontech, which recently announced it would leave California, became the 70th business to leave the state since January. According to Joe Vranich, a California business relocation expert, an average of 4.7 business are moving out each week.

Californias Orange County Register reports that more than one in five California small-business owners do not expect to be in business in the state in three years.

Whats driving the business exodus from California and the job growth in Texas? Business owners and analysts boil the problem — or the solution — down to one word: government.

In April, a group of California lawmakers traveled to Texas to speak with businesses that had moved there in an effort to diagnose why California is hemorrhaging jobs. Andy Puzder, the CEO of Hardees Restaurants, and Mark Tolley, the managing partner of B. Knightly Homes, said California's red tape and regulation are killing business.

You cant build in California, you cant manage in California and you have to pay a big tax, Puzder said. In Texas, its the opposite — which is why were building 300 new stores there this year.

The red tape is ridiculous, Tolley agreed. Regulators see developers as wearing a black hat, and the environmental laws have run amok.

Government policies and regulation have an impact on business, either for good or for bad. California's government work, from the Delta Smelt controversy to its cap-and-trade plan, which was put on hold last week, is often pushed to the center of debate, particularly as states try to recover from the recession.

In an opinion piece for the Sacramento Bee, writer Ben Boychuk argues Californias cap-and-trade plan hurts businesses through over-regulation. Boychuk cites Skip Brown, the president of Delta Construction in Sacramento, who said that even with the cap-and-trade plan on hold, other air board rules will force him to retrofit or replace his diesel-emitting equipment. Doing so will cost him $5 million.

The only climate that new cap-and-trade rules are likely to change is the states economic climate — from cool to frigid, Boychuk writes.

Critics of the plan say that false science is being used to drive business from California. In the case of Californias diesel-emitting standards, James Enstrom, a University of California, Los Angeles, professor and scientist, was fired after he reported that the study used to create the standards was based on work by a scientist who bought his Ph.D. from a diploma mill. The Foundation for Individual Rights in Education is fighting Enstroms firing.

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