Business Exodus from California Accelerates

What happens in California doesn’t stay in California.  For better or worse (and right now, it’s much worse), what’s happening in California is coming your way as cash-strapped liberal states turn to higher taxes

In 2010, 204 California companies expanded outside California or moved out completely.  In 2009, the number was 51.  The gold is fleeing the Golden State.

California’s infrastructure is crowded and crumbling.  The school system is in a death spiral.  The universities are overpriced and bloated with unions and bureaucrats.  The tax base is narrow and focused on the rich, many of whom are leaving.

The state’s environmental laws have crippled a can-do culture with can-never-do paralysis.  An estimated 5 million residents are illegally in the state.

The official unemployment rate is 12.5%.  Counting those who have given up searching for a job and those who are working reduced hours or part time, the rate is closer to 20%.  In parts of Los Angeles, and in the water-starved Central Valley, unemployment ranges from 20% to 40%.  More than 3 million California residents receive food stamps, up 47% since 2007.

This decline did not happen overnight, but the negative trends are accelerating.

Businesses have been leaving California for some years now, driven to greener pastures by a growing anti-business atmosphere that has fostered a toxic mix of high (and complicated) taxes, labyrinthine regulations, and crazy jury verdicts.

For a long time after World War II, California’s opportunity attracted the best and brightest to a great climate.  Government investment in freeways, a statewide water system, good schools, and great universities provided a framework for an explosion of private investment that built on the wartime spending to make California an industrial giant and the most valuable agricultural state in the U.S.

By 2000, dozens of aerospace firms such as General Dynamics, Lockheed, and McDonnell Douglas were practically gone, along with vehicle manufacturing companies including Chrysler, Ford, GM, and Toyota, which are now closed.  All the tool and die makers, sheet metal stampers, tire makers, and workers in a myriad of other supply and industrial support businesses have evaporated along with the companies.

Tech and biotech businesses have sprouted in their place: Google, eBay, Intel, Qualcomm, Cisco, PayPal, Genentech, Apple.  Yet even these giants that grew from modest beginnings have stopped growing in California, sprouting new plants and thousands of new jobs in other states and other countries around the world. 

While the executives and scientists of these remarkable companies populate Palo Alto and La Jolla, their products are made elsewhere, the bulk of their employees in plants in low-tax states or hospitable foreign countries. 

PayPal has moved to Malaysia to serve Asian customers.  Intel’s top three expansions last year were in Ireland, Vietnam, and China.  Cisco announced that it would invest $1 billion in Russia.  Apple is spending $1 billion to build a plant in North Carolina. 

While international economics pulls these companies to expand outside of California, the state’s culture of punishing success is increasingly pushing them out.

Many smaller companies, with little fanfare or notice, have joined the exodus. 

Buck Knives was founded in El Cajon, Calif.  This third-generation family-owned company reluctantly gave up and moved to Idaho.  CKE Restaurants (Carl’s Jr., Hardee’s), a chain of more than 3,300 restaurants started in 1941 by Carl Karcher with a hot dog cart in Los Angeles, announced last month that it will move its corporate headquarters to Texas.

And it isn’t just businesses.  How many uber-liberal Hollywood stars’ legal residences are in (no-income-tax) Nevada, Tennessee, or Florida?  How many “Hollywood” productions are now filmed out of California?  The great Titanic set was built by uber-liberal James Cameron in Rosarito, Mexico, because the environmental permits to build it on the coast of California would never have been issued.

At the beginning of his success, Tiger Woods moved from his hometown in Orange County, California, to (no-income-tax) Florida before accepting a $40 million contract with Nike.  The move netted Woods $4 million in California income tax he didn’t have to pay.

Nor has the new “green economy” touted by the politicians replaced those lost jobs.  Green jobs still go to friendly jurisdictions that actually want them.

California-based Stion Solar Panels is a three-year-old start-up solar panel manufacturer employing 115 people in California.  It just announced that its new plant will be in Hattiesburg, Miss., where it will employ 200 people to start.  Why?  Mississippi offered financial incentives, lower land and construction costs, and an educated and motivated (non-union) labor force. 

What’s not to like?

This year, Schott Solar will close its sales and customer service office in Roseville, Calif., and relocate those functions to Albuquerque, N.M.

Ditto Barefoot Motors.  The small green manufacturer will close its Sonoma facility and grow the business in Ashland, Ore., instead.

Policy counts, words matter.  Decades of demonizing “greedy” profit-making enterprises has paid off for California in a lower standard of living, crowded prisons, decaying schools, potholed streets, and an approaching welfare majority.

The sun still shines as brightly, the surf still beckons, but the California Dream has turned into a nightmare, and unless you stop it, that nightmare is coming to your state too.