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Editorial: Small business is the real key to fixing state

By   /   Monday, June 28th, 2010  /   Comments Off on Editorial: Small business is the real key to fixing state

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A California Forward meeting for Ventura and Santa Barbara business leaders on June 16 provides a useful marker for how far California has come toward real reform — and how far it needs to go.

Over the past several years, voters have overhauled the state’s method for drawing districts and, thanks in part to Lt. Gov. Abel Maldonado, R-Santa Maria, they have embraced the open primary system. They seem to be ready to take on two more planks in the California Forward platform: flexible term limits and a majority vote on the budget that would maintain the supermajority hurdle for new taxes.

So, halfway to the reform agenda mapped out by the state’s biggest thinkers and underwritten by its largest philanthropic institutions, two questions remain: Why are we still in a funk? Why won’t the budget balance?

It turns out that California’s problem is devilishly simple: A complete and utter lack of job growth is sucking the air out of the economy and depriving the state of the revenue it needs to balance the budget.

You can trace the lack of job growth to the 600,000 or so small businesses — companies with 50 or fewer employees — who have hunkered down amid a lack of demand for their products. If each small business added one job, roughly half the jobs lost in the recession would be put back; two jobs, and the state’s revenue problem would vanish overnight.

It is significant that in the California Forward session there was virtually no discussion of this. Obviously, the options for government help are limited — to paraphrase Ronald Reagan, government is not the solution for many of the problems facing small businesses; it is the problem.

So, small businesses need flexibility in wage and hour laws so that they can take risks on expansion without taking on new permanent obligations. That flexibility might include some loosening of the rules governing who is on salary and who is an hourly employee.

State and local governments need to take a look at the process for issuing building permits and find ways to streamline projects that are shovel-ready and don’t involve huge environmental impacts. The recent cooperation between the Ventura Chamber of Commerce and city government holds the possibility of some progress in this arena.

Finally, on taxes, it should be essential that the sky-high taxes on personal income and capital gains should not be increased. That would be a huge disincentive to entrepreneurship. If tax hikes are necessary, why not impose bigger penalties on tobacco, alcohol and other things that increase the health care costs that the rest of us pay? That seems pretty sensible — perhaps too sensible for the Legislature.

The bottom line is that California Forward has put forth some useful ideas. Now it needs to turn its attention to the real crisis facing California: a crisis in job growth and consumer demand.

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