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California Small Business Looks Ahead to 2003

California Small Business Looks Ahead to 2003

OPINION

by Martyn Hopper

Can it get any worse?

This is the question the most vital component of California’s economy , the small-business owners of the state who employ nearly 60 percent of all workers , is asking itself as one dismal year comes to a close and another one beckons.

Essentially the same pack of lawmakers who buffeted Main Street businesses last session with higher unemployment insurance rates, increased workers’ compensation taxes, and a landmark paid-family-leave law are back with only a small reduction in their ranks.

It should not go without mentioning that their handiwork, when it wasn’t raising or attempting to raise every possible tax, also took away the only break struggling small businesses needed to remain operational, the net operating loss carry forward.

Legislation that just missed clearing final hurdles are certain for a return engagement when the 2003-04 California Legislature convenes in earnest. These items include:

– Adding more health-care mandates to the already soaring costs of insurance

– Linking minimum wage increases to the consumer price index

– Allowing each municipality to set its own minimum-wage rate

– Prohibiting the state from doing business with any company that does not offer domestic partner benefits

– Abolishing confidentiality agreements and arbitration clauses that have kept the costs of lawsuits down for small businesses

– Allowing any employee to stop work for any job he or she deems hazardous.

Quite cynically, legislators will even take a stab at making employers contribute to the new family leave fund, which is run through the state’s disability account. This comes on the heels of promises made a decade ago that if family leave passed then it would only be voluntary, not mandatory, and this year’s assurance that if paid family leave passed, it would only require contributions from workers, not employers.

So much for the word of lawmakers, but they have , with proven dividends , banked on the short-term memories of the people they supposedly serve. Remember all the savings we were to receive from energy deregulation?

Assured by occasional reports that certain segments of the California economy are performing quite well, legislators can be counted on to continue merrily along the path of what their amen chorus of cause groups and media promoters tell them is the right thing to do.

But these reports almost exclusively chronicle big businesses. An entirely different story can be told by small businesses, which pay twice as much as larger companies in regulatory compliance.

On top of the State Policy Reports listing California 32nd overall in its Index on State Economic Momentum and the Small Business Survival Committee’s ranking of the Golden State at 47th as a small business friendly locale, the National Academy of Sciences recently sounded the alarm of a health care crisis. About six in 10 Americans without health insurance come from families where someone either owns or works for a small business. State legislatures are notorious for adding more mandates, which health insurers pass on in the form of higher premiums and which put small-business owners in the position of having to drop coverage completely in order to remain solvent.

In the September monthly poll of its more active members, the 38,000-member California chapter of NFIB, America’s largest small-business advocacy organization, asked if anyone had considered moving their businesses out of California.

Almost a third, 32 percent, said they had done some research and are highly considering it, 18 percent are moderately considering it, and 29 percent have thought about it. More than a fifth, 21 percent, will most likely move their business out of California.

At least in the short run, the solvency of so many small businesses revolve around the ambitions of one man. Now that Gov. Gray Davis has been re-elected, he no longer needs to play to the anti-small-business forces (trial lawyers, cause groups, some labor unions) and can let the more moderate and rational angel, who for his first three years of his term wisely counseled him to veto horrendous legislation, re-emerge. He could not do otherwise and expect to campaign for future office with his state’s largest employer slowly dying.

Hopper is California state director for the National Federation of Independent Business.

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