Businesses, GOP demand Calif. regulatory relief

By Adam Weintraub

Associated Press

Published: Saturday, May 28 2011 3:11 p.m. MDT

A man walks past a sign for a Carl's Jr. restaurant in San Bruno, Calif., Wednesday, May 25, 2011. Republican lawmakers have made an overhaul of California’s business regulations one of their main negotiating points in talks to close the budget deficit, and with the state mired in slow job growth and businesses stepping up the clamor for relief they’re hearing some indications of support from Democrats.

Jeff Chiu, Associated Press

SACRAMENTO, Calif. — As the president of an office and retail property firm in Sacramento, Tim Cahill is used to keeping buildings up to snuff. But he often feels boxed in by California's myriad regulations, including one being phased in this year that requires him to conduct energy audits of his tenants even though they pay their own utilities.

"I'm not sure anybody understands the state system," said Cahill, president of Charles C. Bell Inc. "It can be expensive and it can also be extremely frustrating — and I don't know which is worse."

Under pressure from the slow pace of the economic recovery, California's business interests are pushing back on the state's stringent workplace protections and environmental rules. They say the Golden State remains a hotbed of entrepreneurial innovation but regulations squelch growth, and the state can no longer demand so much at a time when the job market remains weak.

U.S. Bureau of Labor Statistics data shows that California lost more than 600,000 private sector jobs over the past decade, the biggest loss in the nation; best-in-the-nation Texas added more than 700,000 private sector jobs over the same period. While California has added back roughly 200,000 jobs in the past six months, the jobless rate remains just below 12 percent and there's still a long road back to single-digit unemployment.

Job creation has become such a priority that Democrats, who control the governor's office and both houses of the Legislature, are trying to grapple with the issue. That's given hope to business groups and executives that the state will rip out some of the tens of thousands of pages of business regulations, or at least replace them with simpler rules.

Republican lawmakers have once again made regulatory relief one of their key goals in budget negotiations with Gov. Jerry Brown, but it's still unclear how much they will get.

Most bills the GOP introduced this year addressing specific regulations that chafe businesses — from rules about meal breaks and overtime to environmental reviews that can last years — have stalled or died in committees controlled by Democrats.

While some Democratic-backed reform bills have been passed, Sen. Bob Huff, R-Diamond Bar, called them "toothless" and said the failure to aggressively revise California's onerous system would cost the state jobs.

Republicans have pushed for bills targeting single regulations, such as eliminating an $800 minimum corporate tax on small businesses or making it easier to schedule workers on flexible schedules without overtime. The GOP has also targeted the system as a whole through automatic expiration of regulations after a few years or requiring a review of the whole structure to weed out duplication and conflicts.

Several companies have made well-publicized announcements in recent months that they're leaving or moving future expansion to other states, and Chief Executive magazine's survey this month of U.S. CEOs chose California as the worst state in which to do business — for the seventh year in a row.

While many businesses complain that the state's regulations discourage expansion and job growth, there's little firm evidence that the long-bemoaned high-tax and regulation-heavy business environment is sending entire companies fleeing to other states.

The Public Policy Institute of California, a nonpartisan think tank based in San Francisco, released a report last month looking at why California's economy continued to grow at roughly the same rate as the national average over the past 30 years despite low ratings on business-climate indexes. The report found that many such indexes used narrow criteria and simplistic comparisons that don't capture the state's natural advantages, such as good weather.

PPIC concluded that some economic growth is associated with less spending on welfare and a more uniform and simple corporate tax structure.

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