Orange County Business Council was recently in Sacramento, disappointed by the finger-pointing and budget negotiation paralysis that seemed to plague the legislature. In response to the situation at the Capitol, OCBC joined with business organizations from politically diverse parts of the state to form the Coalition for a California Financial Workout Plan. The coalition developed a five-point workout plan to assure a more business friendly and economically viable California for companies domestic and foreign. Our perspective is non-partisan. We simply are focused on steps that will support economic growth and reduce the long term budget deficit.

Here is the Five-Point Plan we recommend the legislature and governor approve:

1. Spending Control and Budget Reforms

To regain the public trust, constitutional spending controls must be put in place to ensure fiscal discipline, along with performance-based budgets, performance-based management, and multi-year forecasting.

2. A Path to Job Creation

The only way to grow the revenue pie is to improve the business environment to allow for economic growth.  The business community needs to see a detailed and hard commitment to regulatory reform integral to  the “financial workout plan,” including evaluation of economic impacts as a requirement of the regulatory process, CEQA reform, and a fix for the Redevelopment Area and Enterprise Zone programs to prevent abuses.

3. Pension Reform

The financial workout plan must include reforms that massively reduce current and future unfunded liabilities in pension programs at every level of government.

4. Government Closer to the People

A smaller state government with more flexibility afforded to local governments and assurances that new responsibilities will be matched with permanent funding sources that don’t rely on additional local taxes.

5. Extension of Temporary Taxes

Support of temporary tax extensions is possible, but only when coupled with the proposed structural reforms.  The underlying budget problems must be resolved or the tax dollars will simply be throwing good money after bad. Tax extensions, if needed, should only be in place for a period long enough to allow these reforms to take effect and for the economy to recover.

Although this workout plan has been shared with legislative leadership, the mixed response indicates that there remains a disconnect in Sacramento between a thriving business environment and a solution to California’s perennial budget problems.

Recently the U.S. Chamber, Forbes and CEO Magazine rated California in the bottom tier of states in the friendliness of its laws to business investment. Taking corrective action now to improve the business climate in the state will allow businesses to grow, hire, create new jobs, and stimulate the economy. Businesses generate the money that fills the state’s general revenue coffers.  Plus, thriving businesses hire people, which means less demand on the state-funded social safety net. It’s good for the state’s budget, it’s good for business, and it’s good for our communities.

Here in Orange County we have the lowest unemployment rate of any metropolitan area in California, and the third lowest unemployment rate in the nation. We are unique in the way we do business, and we have the innovation and industry diversification to withstand the toughest economic climates.

Despite OC’s strengths, California cannot withstand a prolonged budget battle.  Year after year of financial uncertainty inhibits business investment, lowers California’s credit rating and highlights the ineffectiveness of California to address major issues.  What would help the state is a setting aside of political positioning and spiteful partisan actions, and a return to the negotiating table to develop a budget plan that is conducive to economic growth and jobs stimulation.

OCBC and the Coalition strongly urge the Governor and the Legislature to finalize an honest budget plan by June 15th that includes significant and detailed structural and regulatory reforms.  Budget balancing is hard and successfully implementing these needed reforms will also prove difficult and require real leadership.  Now is when the voters need to see that we have elected leaders who are committed to a healthy future for California.

Posted on May 24, 2011

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