Like a bruised and battered heavyweight fighter, California's economy is pulling itself off the canvas and showing its neighbors it still has some fight left.
Facing an eight-count because of military base closures, high workers' compensation insurance premium costs and a tort-prone legal system, California officials made some drastic changes in business-related areas to stop the economic hemorrhaging that has dramatically impacted the nation's most populous state.Ironically, it was Utah and other states that have been enticing California companies to relocate that helped Californians wake up and realize major changes were needed to turn the situation around, according to Lee A. Grissom, senior advisor for economic development and director of the California Office of Planning and Research.
"California became arrogant and insensitive toward business needs, and many companies felt like they were being pushed out of the state," said Grissom, who is former president of the San Diego Chamber of Commerce. "They were fleeing because they were being pushed out, but now the need to leave no longer is there," he said.
Between May 1960 and May 1993, California lost 720,000 jobs, 200,000 of which were in the defense industry and 300,000 indirectly connected to defense, Grissom said. About 19 percent of all job losses in the United States in one 24-month period occurred in the Los Angeles area, an indication of the impact on the California economy.
In previous recessions, Grissom said, upturns came in 14 months, but in the early 1990s the recovery didn't come for 44 months.
Facing the situation, Gov. Peter Wilson appointed the Council on California Competitiveness, which was chaired by Peter Ueberroth, and Grissom was the executive director. The study determined that the state had developed a "fine-tuned job-killing machine" and made 155 recommendations for change, Grissom said. He was told to implement the re-com-men-da-tions.
It's no secret that many of the companies exiting California did so because of the high workers' compensation insurance premiums. At one time, Grissom said, California companies were paying $11 billion (and going up) for workers' compensation insurance premiums, but that has been reduced to $8.3 billion.
Anytime someone was injured, laws firms were hustling to get clients and ask for large sums of money for damages. Grissom said many people were claiming that mental stress or physical problems caused them to reture, and they collected huge sums of money.
Changes in the workers' compensation law have forced a higher threshold for mental stress, and when a person is fired, mental stress cannot be factored into damages sought in lawsuits.
The California Legislature made some changes in the tax structure, Grissom said, including eliminating the sales tax on purchase of new manufacturing equipment. Re-instated was relief in taxes on small business.
Grissom said California has formed "red teams," consisting of officials from various governmental jurisdictions, who figure out ways to make it easier for business to obtain licenses and regulatory permits. Also, all of California's economic development corporations joined to form Team California.
The result of the changes is that Packard Bell decided to move from the Los Angeles area - not out-of-state like many predicted - to Sacramento. A Lego theme park has been announced for San Diego and companies from Argentina and Japan have combined to purchase Cal Steel Industries and soon will start making steel.
Also, United Motors, which builds Toyota trucks and sends them to Taiwan, took over an abandoned military fort and will double in size in the next year. Six weeks ago, Apple Computer broke ground on a new plant in Sacramento, Grissom said.
While in Salt Lake City, Grissom visited Fred S. Ball, president of the Salt Lake Area Chamber of Commerce.