Capitol Punishment: Anti-Business Bills Await Action GUEST COLUMN by Gregory N. Lippe Legislation that punishes jobs and businesses continues to be introduced into our state legislature at an alarming rate. At the same time, businesses continue to leave and jobs continue to be lost. Recently released statistics for May show that California has become one of the weakest labor markets in the nation. Since February, we have lost a net of 54,300 jobs statewide. This is almost 0.4 percent of all non-farm jobs and is twice the national rate. In May, California’s jobless rate was 6.6 percent, compared to the national average of 6.1 percent. Recently, approximately 500 attendees at the Economic Alliance of the San Fernando Valley’s “Gala Dinner and Awards Ceremony” listened, in dismay, to warnings by honorees, Angelo Mozilo, chairman of the mega home loan company Countrywide Financial and Los Angeles County Supervisor Zev Yaroslavsky. Mozilo said that because of the current “unfriendly business environment” in California he was looking to other states to continue the expansion of his 33,000-employee company. Citing recent legislation creating tremendous cost burdens to local businesses, referring specifically to two bills (AB 60, changing the definition of overtime from over 40 hours per week to over 8 hours per day, signed into law 7/20/99 and SB 1661, requiring paid family leave, signed into law 9/25/2002), as well as staggering increases in workers’ compensation insurance premiums, Mozilo asked all in attendance to urge their state legislators to reverse the tide before California loses all of its major employers. Yaroslavsky said that he agreed with Mozilo and would like to tell his “fellow Democrats” in the state legislature to “wake up!” He said “if I was considering starting a new business today, I would not do it in California.” Yaroslavsky also cited the recent increase in Los Angeles County’s workers’ compensation insurance premiums from $150 million annually to $400 million annually as an example of the extreme burdens being placed on California’s employers. Perhaps the most significant effect on business and the business environment is the potential result of California’s looming budget deficit. Many agree that the deficit resulted primarily from fiscal irresponsibility by our governor and legislature creating too many legislated giveaway programs during the dot.com boom. If the new state budget places the responsibility for payment for this fiscal irresponsibility significantly on business, the result could be frightening. Yaroslavsky said that he enjoys being in local government because it is non-partisan, therefore he doesn’t need to follow the party guidelines or take orders from a party boss. Many times Yaroslavsky, a Democrat, will call Supervisor Michael Antonovich, a Republican, to work out a joint, simple solution, to a complex issue. At the state level, which is partisan, when attempts are made to cross party lines for solutions, those trying to solve the problems can be severely criticized by their parties and, in fact, lose the support of both parties, including key chairmanships, office locations and endorsements. This is unfortunately what is happening to a good business-sense proposal co-authored by Assemblymembers Keith Richman (R- Northridge) and Joe Canciamilla (D- Pittsburg) and overwhelmingly approved by the many business leaders comprising the Board of Directors of the Valley Industry and Commerce Association (VICA). Instead of being criticized by their parties, these Assemblymembers should be commended for their heroic efforts in developing a compromise of party positions to solve the most serious problem in our state’s history. Of course, heroic efforts are not new to Assemblyman Richman who has spent the last year organizing groups of business leaders from both parties to develop solutions to save our great state from economic collapse. Additionally he has voted against the numerous anti-job/anti-business bills, and has been a leader in proposing legislation for reform of our tremendously costly, inefficient, workers’ compensation system. To retain the businesses and jobs we currently have and to attract new businesses to bolster our economy and provide new jobs, we need creative, tough, good-sense solutions to our fiscal problems. We do not need inflexible legislators creating partisan impasses and utilizing political blackmail. The following are the job and business punishing bills that I have chosen to profile this month: – AB 76: Expands an employer’s liability for harassment of a worker to include harassment by parties such as customers and clients, over whom the employer has no control. Potentially increases insurance costs, legal costs and damages, resulting in increased product costs, lower profits and possible layoffs. Status: Passed Assembly 4/24/2003, currently in Senate. Valley Assemblymembers voting for bill: Frommer, Koretz, Levine, Montanez, Pavley Valley Assemblymembers voting against bill: Richman, Strickland – AB 1715: Limits the use of arbitration in employment contracts. Potentially increases the amount and cost of settling employment disputes by causing more disputes to seek remedies in the courts. The increased costs and expense of time is a disincentive for creating jobs. Status: Passed Assembly 5/19/2003, currently in Senate. Valley Assemblymembers voting for bill: Frommer, Koretz, Levine, Montanez, Pavley Valley Assemblymembers voting against bill: Richman, Strickland – AB 1690: Allows cities and counties to impose their own local income taxes, subject to 55 percent voter approval. Voter turnout is historically low for local elections. Therefore 55 percent of very few voters could enact an income tax that would impose greater costs on employers resulting in making their businesses less competitive and less profitable than businesses in neighboring cities and counties. This, in turn, could cause them to relocate to those neighboring cities and counties, leaving their workforce behind. Status: Passed Assembly 6/5/2003, currently in Senate. Valley Assemblymembers voting for bill: Frommer, Koretz, Levine, Montanez, Pavley Valley Assemblymembers voting against bill: Richman, Strickland – SB 20: Requires manufacturers of electronic devices to provide for funding of recycling or to pay a fee to the California Integrated Waste Management Board to implement the recycling and prohibits sale in the state of any device for which these provisions have not been made. Businesses from other states who sell to consumers in California could avoid this requirement thereby placing California businesses at a competitive disadvantage resulting in the loss of California jobs. Status: Passed Senate 6/4/2003, currently in Assembly. Valley Senators voting for bill: Alarcon, Kuehl, Scott Valley Senators voting against bill: Knight, Margett, McClintock – SB 921 Requires employer funding of universal (single-payer) health insurance. Places additional burden on employers for a multi-billion dollar health insurance program. Makes employers less competitive and causes increased costs to consumers. Could result in additional flight of businesses to other states and represents a disincentive for employers to create jobs. Status: Passed Senate 6/4/2003, currently in Assembly. Valley Senators voting for bill: Alarcon, Kuehl, Scott Valley Senators voting against bill: Margett, McClintock The bills profiled above represent solid evidence of the continuing unfriendly business environment in California. We must convince the legislators that are perpetuating the problem to alter their course. Time is of the essence. Gregory N. Lippe, CPA, is managing partner of the Woodland Hills-based CPA firm of Lever, Lippe, Hellie & Russell LLP (LLHR) and a director of the Valley Industry and Commerce Association (VICA).