Op ed from today’s Union Tribune here.

California is facing a 24 billion dollar deficit.  While there is no shortage of ideas for how to deal with it, I suggest we learn a lesson from Clyde Jennings, the CEO of J&W Lumber.  On a recent visit to his facility, Clyde told me about the difficult cuts he has been forced to make in our declining economy, the efficiencies he has found, and how every member of his 50-year family-run small business has been working longer and harder for less money. This story is not unique—it is shared by millions of California families and small businesses.

 

In dealing with our $24 billion deficit California needs to follow Clyde Jennings’ example—make tough reductions, find efficiencies, and work harder.

 

We didn’t have to end up in this situation.  If the legislature had constrained government growth over the past decade to the rate of inflation and population growth, we would have a balanced budget today.  There would be no deficit and we could have returned billions to taxpayers, paid off debt, or invested in desperately needed roads and water infrastructure.

 

Instead as the economy contracted, government expanded.  From January 2001 to February of this year, California experienced a net loss of 235,000 private sector jobs.  During the same time the state added 163,700 government jobs.  It gets worse – from the middle of last year until this February (the peak of our fiscal crisis) – 66 state agencies added employees.  It’s no wonder the public is angry and losing faith.

 

Facing such a deep crisis, we are left with few options.  We have to make cuts to our state government.  But just as importantly, we must change the way our state does business by setting priorities and finding more effective and efficient ways to operate.

 

We have a responsibility to eliminate agencies, boards, and commissions that do the same thing or that aren’t critically important.  In education, we should require that 70% of all funding go directly to local schools—reducing unnecessary bureaucracy.  We also have an opportunity to save hundreds of millions of dollars each year by letting local school boards use competitive bidding for landscaping, maintenance, and other services and by beginning the transition to electronic textbooks.  These types of reform need to take place across the board in state government. 

 

However, these reforms alone won’t be enough to solve the problem.  Unfortunately, services that people rely on will be reduced.  This is not a situation I wish on anyone, but it’s the situation we are in.  To mitigate the impact, we need to prioritize our programs and make tough decisions.  California can only spend the money it has, so the task now is to do the least harm in balancing our budget.

 

Attempting to deal with this budget crisis without addressing job creation is shortsighted.  The best way to increase revenue is through job growth.  We have to put Californians back to work to generate economic recovery.  

 

California is consistently ranked around the bottom of the 50 states in competitiveness.  CEO magazine lists us 48th in environment for job growth and Forbes magazine said we have the single highest cost for doing business. Clyde Jennings showed me what that means exactly for California business owners.  When he sells a $10,000 redwood deck, he makes just over $150 in profit and the government takes almost $1,000.  This is wrong. 

 

Despite these facts, some in Sacramento are proposing further tax increases.  Raising taxes is the worst thing the legislature can do—it will reduce consumer spending and cost us more jobs.  We cannot tax our way out of this problem—it will only make matters worse.

 

Other states recognize California’s harmful policies and are attempting to capitalize on them.  Colorado recently sent notices to thousands of California companies touting their low tax rates, low regulatory burden, and helpful state government.  Other states like Texas, Nevada, and Florida have also launched efforts to lure California employers and their jobs.   All too often they are successful. 

 

We can’t afford to let them succeed anymore.  It is time to take immediate action to keep and create jobs here.  Let’s bring back Governor Wilson’s Council on California Competitiveness.  Let’s take a hard look at the regulations on California’s books to see if they are necessary and make sure they carry automatic sunset dates. 

 

As we take action to protect the jobs we have, let’s also find creative ways to encourage job growth.  Right away, we can establish innovation zones that provide incentives for private sector investment.  These would help expand existing epicenters of innovation and commerce like the biotechnology cluster we cherish in San Diego.  Bottom line—if you can generate jobs, California should welcome you.  

 

From the gold rush to today, the hardest working, most innovative, and most entrepreneurial have sought to make California their home, their place to start the American dream.  One of them, Charley Jennings, started a lumber business 50 years ago with $20, grew it into the company it is today and passed it on to his son Clyde.

 

We have some challenges, but if state government will learn a lesson from our hard working people, we can come out of this crisis stronger.

This entry was posted on Thursday, June 18th, 2009 at 12:00 am and is filed under Blog Posts.