According to The Wall Street Journal, 70 businesses have left California this year at an average of 4.7 businesses per week. Twenty percent of these businesses will relocate to Texas, where the unemployment rate is 8% versus California’s 12%.
Over the last three years, Texas added 165,000 jobs, while California shed 1.2 million. California now has the second highest unemployment rate in the country after Nevada.
Many businesses cite California’s unfavorable regulatory climate and labor laws as key reasons why it is difficult to operate a business in the state. For instance, California is one of only three states that requires overtime pay after an eight-hour work day.
Adding to California’s woes are its fiscal troubles and failed experiment with direct democracy. Since California relies heavily on the “wealthy” to support its tax system, revenues tend to collapse during recessions.
According to The Economist, personal income tax accounts for over 50% of California’s revenue. Californians earning over $100,000 per year account for over 80% of income-tax revenue. The state allocates nearly 10% of general fund spending to prisons. Its credit rating is now the worst among the United States.
A major reason why California is nearly ungovernable is that its ballot initiatives have spun out of control. In the 1960s, only 9 initiatives qualified for the ballot. Between 2000 to 2010, that number increased to 74.
In turn, many of these initiatives either limit taxes or mandate spending, making it much more difficult for the legislature to balance the budget.
At this point, I am convinced that only a state constitutional convention can solve California’s woes. Frankly, citizen democracy has gone too far.