California Slows Exodus Of Businesses Reforms, Emphasis On Retention Convince Some Companies To Stay

At one time, Dennis Carruth easily found enough business malcontents to fuel interest in his annual Trends 2000 shows in the Orange County, Calif., city of Anaheim - conventions where other states tried to lure away companies that were fed up with California.

But at the latest Trends 2000 show in February, attendance was down 50 percent from the previous exposition. Now Carruth may juggle the schedule of his shows as the state gets savvier in the battle for California businesses.

“I have Southern California dates set up for 1996,” Carruth said. “I may hold off a year, until 1997, and hold them every other year.”

Business owners, political leaders on both sides of the aisle and economic development officials agree California has grown up when it comes to business retention.

A state that once thought itself invincible to corporate raiding - claiming its climate and skilled work force would carry it through - has made large strides, officials said. Southern California Edison officials say the number of companies leaving the state during 1994 was 40 while that number was 105 for 1993.

California has been a key target of Inland Northwest business recruiters in recent years. Several California companies have moved to Spokane and Kootenai counties, including Harpers Inc., which opened a furniture manufacturing plant in Post Falls last year.

California Gov. Pete Wilson is credited by Democrats and Republicans for helping to stem the flow of businesses. One thing Wilson did was revitalize his administration’s business retention office, now known as the California Trade and Commerce Agency, by elevating its status and putting more people and money into it.

Now, however, business retention faces new problems. There also remains the question of whether California could slip back.

Number one, Wilson is expected to be diverted as he runs his planned presidential campaign. Administration officials maintain the retention effort will continue.

A key victory was obtained in 1993 when the Legislature enacted workers’ compensation reform, considered the most problematic issue.

Remo Inc. in suburban North Hollywood decided against a possible move to Texas or Arizona and opted for a new site for its 300-worker facility in the Southern California city of Santa Clarita instead. Workers’ comp reforms cut insurance costs from $50,000 a month to $10,000, said Doug Sink, chief financial officer.

“Workers’ comp helped fix a lot and the state helped fix a lot,” Sink said. “But there’s more that can be done.”

Other state officials agree, saying more reforms are needed if the state is going to be taken seriously by corporations and give low-cost states like Arizona, Nevada and Utah a run for their money. Taxes on businesses still are among the highest in the nation and companies still must go through a maze of bureaucracies to start a venture.

The most important question is whether state government, criticized in the past for failing to aid business, has changed its perspective toward companies or will revert to its old ways.

“There’s been a definite shift,” said Jack Kyser, chief economist for the Economic Development Corp. of Los Angeles County, a non-profit agency that promotes business development. Kyser is uncertain, though, whether that shift is permanent.

Julie Meier Wright, trade and commerce secretary, said wholesale changes in lawmakers’ attitudes still are needed.

“With 800,000 or more companies in California, I don’t think we will ever be able to reach out and touch them all except through sound public policy. We’ll never catch every single problem, no matter how hard we try,” Wright said.

Lt. Gov. Gray Davis, who stands to ascend to Wilson’s job should the governor win the presidency, agrees with Wright. Davis was involved in negotiating a number of key business victories as state controller, including Taco Bell’s decision last year to keep its headquarters in the Orange County city of Irvine.

Davis said there hasn’t been enough of an attitude adjustment among lawmakers and said he is placing a high priority on company retention.

“Government is not doing business a favor by allowing it to operate. Business is doing us a favor by providing jobs and opportunities,” Davis said.

Still, there are signs that lawmakers are willing to do more.

For example, state Sen. Maurice Johannsen, R-Redding, vicechairman of the Senate’s business and professions committee, says he is ready to work for a leaner state government.

“The solution, hard to achieve but simple in concept, is if you get rid of fat-bottomed bureaucrats who think of rules to hamper businesses,” Johannsen said.