Friday, June 3, 2016
California Business Alert: 'Sanders Effect' to Move the State Further Leftward
In the volatile Trump versus Clinton battle now underway, one result of Bernie Sanders’ campaign deserves more attention – particularly if you run a business in California and are concerned about higher taxes and more regulations.
A column in today's Wall Street Journal by editorial writer Allysia Finley points out that even if Bernie loses to Hillary in the June 7 primary "he could be a winner for California’s liberal politicians: The self-described socialist is expected to turn out masses of young people, and that could be a boon for down-ballot left-wing candidates for the state legislature."
Agree. And I'd add that is also true for candidates for county and municipal offices.
She explains how in California's open primary "The Sanders effect could give Democrats a supermajority in Sacramento, pulling the party – and the state – even further to the left than it already is." Democrats need only to pick up one Senate and two Assembly seats to hold a supermajority, and "This time around, thanks to Bernie Sanders, a Democratic supermajority would likely be much more liberal than the last one."
While voters are moving leftward, California businesses are moving eastward. Within just the last week, I’ve learned about several companies opting to put facilities in other states.
For example, another aerospace company is saying Adios. C&S Propeller, in the state for 50 years, is moving its Burbank headquarters to Fort Worth, Texas. According to the Dallas Business Journal, the company said it's looking forward to a lower cost of living for its employees and "greater flexibility in our day to day operations." (I'll bet that the reference to flexibility reflects the more liberal overtime regulation in Texas versus California's inflexible overtime rule.)
General Magnaplate Corp., which has made reinforced parts for the aerospace, transportation, medical, oil and other industries for 36 years, decided to shut down its California facility in Ventura altogether. According to the Orange County Register, “This is a very sad day for our employees and for my family, who have a long history of job creation in this area, but the simple fact is that the state of California does not provide a business-friendly environment,” CEO Candida Aversenti said. "Increases in workers’ compensation costs and government regulations, combined with predatory citizens groups and law firms that make their living entirely by preying on small businesses, have left us with no other choice but to shut down our California facility. This is in stark contrast to our New Jersey and Texas facilities, which are flourishing in small business-friendly environments created by the respective local governments and environmental agencies.”
By the way, General Magnaplate has been quite an asset to California, as described here: "Newest Company to Leave California: An Environmentally Friendly One."
Next, Jacobs Engineering Group Inc. will move its Pasadena headquarters to Dallas, Texas, with CEO Dan Noble saying, "The big move from California is being made for business reasons, such as lower taxes and the business friendly environment." That story is in the Dallas Business Journal.
In Northern California, a food company is moving by the end of the year. According to the Oroville Mercury Register, "Mary’s Gone Crackers is building a manufacturing plant in Reno that will also include research and development and the company’s headquarters, all of which are done now in Gridley and Chico."
California also experiences opportunity costs when a company that would have considered moving here goes elsewhere. Such is the case when Silent Aire, a Canadian company, decided to establish a U.S. presence, it selected Arizona. Its leaders knew they wanted to be West of the Mississippi River – but they quickly ruled out California, where the cost of relocating and doing business was too high, vice president of operations Brett Manning said, according to the Arizona Republic.
The disinvestments in California mentioned above are ignored by Sacramento politicians. And if indeed the Sanders campaign helps put more business-hostile Democrats in the legislature, then I predict even more companies will have little choice but to leave California in the future.
Finally, getting back to that Wall Street Journal column, rarely do I identify anything as a "must read," but I do for this one. See more at "California Liberals Await the Bernie Effect."
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One focus of this blog has been to address California’s hostility toward business, as addressed in the new study, California Business Departures: An Eight-Year Review 2008-2015, updated Jan. 14, 2016.
Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. He offers an introductory phone consultation at no cost to help company leaders understand the Site Selection process and explore whether a project makes sense. Also, he has established a Confidential One Day Coaching Program for Business Owners as a safe, economical way to explore location options in a more detailed way.