Can Arnold Put a Shine on a Tarnished Golden State?

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A Recovering Economy and an Optimistic Celebrity Governor Boost Odds for an Improved California Business Climate

By Don Lipper and Michael J. Marando

From its problems to its politics, little about California is normal, making even tougher the greatest challenge in a generation to face California’s corporate and political establishments: forging a top-to-bottom reorganization of state government and creating a more inviting and competitive business environment. If history is any indication, California’s entrepreneurial spirit – and its belief that competition fuels innovation – will rise above the state’s woes, and the state will reconfirm its role as a leader in new technology, invention, discovery and job creation. Gaining a new marketing asset in last year's recall election may be a first step. After appearing in broadcast commercials pumping the state's produce, Gov. Arnold Schwarzenegger was turning on his charm and turning to Hollywood-style glitz to sell California in a nationwide marketing campaign.

“Open for Business”
Billboards went up in 10 cities across the nation (Atlanta, Boston, Chicago, Dallas, Las Vegas, Los Angeles, Phoenix, Portland, Seattle and San Francisco) as part of the “California: Open for Business” campaign commissioned by the governor's nonprofit California Commission for Jobs and Economic Growth. The billboards featured a photo of the Republican governor and the pitch, “Arnold says California wants your business.” A Las Vegas photo-op depicted him in the driver's seat of an 18-wheeler moving van whose side was plastered with another message: “Arnold's Moving Company.” The governor said he’d send the van to help move any company that wanted to locate, relocate or expand in California — and drive it himself.
Meanwhile, California’s vital signs are improving on Wall Street. At the end of August, Standard & Poor's upgraded California's credit rating on nearly $33 billion of state bonds to “A” from “BBB,” the second boost this year, after Moody’s Investors in May hiked California's rating to A3 from Baa1. In another positive move, Fitch Ratings removed the state from its “watch” list. The shifts mean California will pay lower interest on future bond sales. A proactive governor and progress on Wall Street are positive and promising, but much remains to be done — from creating new jobs to reducing regulations — for California's economic climate and business environment improvement efforts to get wheels. California’s economic problems have been well-chronicled: high costs for workers’ compensation, housing, energy and water; a time-consuming, expensive and onerous regulatory climate; and fiscal policies that some complain are confusing, even confiscatory.

All have contributed to the loss of businesses and jobs to other states and abroad. An alarming number of  California manufacturing jobs — nearly 353,000 — have disappeared since the  end of 2000, reports the California Manufacturers Technology Association (CMTA). Over the past four years, employment in California’s manufacturing sector, the major driver of new job creation, has fallen 18 percent, far off the mark for a state that needs to deliver 250,000 to 300,000 new jobs yearly to sustain and grow a strong economy.

Paying More in California
California is the second-most expensive state in which to do business, with a cost index of 128.5. That means, says Jack Stewart, president of the CMTA, the cost of manufacturing in California is 28.5 percent higher than the national average.

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