San Diego Business Journal

Swaying to the political center is the most difficult political dance step of all, and whether Gov. Arnold Schwarzenegger does it with gazellelike grace or Clydesdale-like hoofing is the big question in Sacramento this year.

Small business is one of the dates the governor brought to his political dance. The question was how long it would have to patiently wait by the punch bowl while the state's chief executive made his necessary spins on the floor with other guests. It was answered "not long" when he unveiled his state budget Jan. 10.

The governor's track record on small-business issues before 2006 has been stellar, beginning with his ballot initiatives reversing the state's budget woes, to his bullying of the California Legislature into passing workers' compensation reforms, to his leadership in helping pass another initiative curbing frivolous lawsuits. In between, he vetoed two minimum-wage increase bills that would have done nothing for the majority of workers earning above the minimum wage, and everything to hurt those at the bottom of the pay scale.

But the defeat of his four reform initiatives in November brought about the nearly universal call from pundits for him to move to the center and work with lawmakers. This he did in his State of the State speech, where he called for increasing the minimum wage.

Increasing the minimum wage is an anathema to small-business owners for one important reason: they see the devastation in job losses it causes when they are forced to scale back on hiring. It is vital to understand who loses when minimum-wage rates go up. The majority of minimum-wage earners, according to the latest data from the U.S. Bureau of Labor Statistics, are young adults looking for their first job or part-time job. Others, small-business owners will tell you, are seniors looking to stay active and people already with jobs looking for overtime work at another firm.

The governor's budget, calls for minimum-wage increases of 50 cents in September of this year and another 50 cents in July 2007.

But if there were any doubt whether the governor had abandoned one of his political partners he had brought to the dance, it was cleared up in another very important item in his budget proposal: his call for aligning the state's tax code with the federal government's in regard to tax credits for health savings accounts.

About 60 percent of the estimated 44 million Americans without health care live in homes where someone either owns or works for a small business. The cost and availability of providing health care for themselves and their employees has ranked as the No. 1 concern (out of 75) among small-business owners surveyed by the National Federation of Independent Business for nearly the past 20 consecutive years.

Congress created HSAs so any person with a high-deductible insurance plan can contribute $2,600 annually in pretax dollars to an HSA. The amount is $5,150 per family. HSAs give employers who do not already offer health plans an incentive to do so, when it can be combined with a high-deductible plan. Many states have conformed their tax structures to the federal government's on HSAs, but not California. With the governor's backing, HSAs might finally get the badly needed political push they need and assure small-business owners that he is so far dancing with the grace of Fred Astaire.

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