Legislature Fumbles Chance to Boost Economic Recovery

The California Legislature fumbled a chance to boost economic recovery in the state by choosing the easy path: business-as-usual.

Facing the three horsemen of the CApocalypse – pandemic, economic collapse, and social unrest – the Legislature instead took refuge in the warm embrace of its special interests, legislating as if millions of residents weren’t jobless and thousands of small businesses were not bankrupted.

Economic development doesn’t do any good if a business has no customers and no jobs to offer California workers.  This year, Legislators seemed tone-deaf to the issues that are among the most important to Californians — electric reliability, ubiquitous testing and business re-opening.  Unfortunately, it seems that lack of awareness on their part is merely business-as-usual. We’re in a hole, and the Legislature continues to dig.

This year, the Legislature passed a handful of new, unnecessary business regulations, which is not unusual for a typical year, but particularly inappropriate during a pandemic crisis.

These include requiring businesses with as few as five employees to provide 12 weeks of protected leave each year; imposing novel, retroactive and unworkable “right of recall” for employees in certain industries; and requiring invasive and unprecedented data disclosure of tax liabilities and credits and employee pay, among others.

More inexplicable is the lack of interest in giving a boost to employers struggling to stay solvent, resurrect their markets and rehire their workers.

Simple, even time-limited pauses in litigation, regulation or new costs were dismissed with barely a second thought.

Restaurants struggle to regain their footing. Delay a minimum wage hike for one year? No.

Employers scramble to establish work-from-home protocols for all their employees. Pause litigation over taking meal and rest breaks at home? Not a chance.

Threats of vexatious lawsuits related to coronavirus hobble small businesses’ ability to reopen. Provide a limited safe-harbor for small businesses to limit lawsuits? See you in court!

Housing cost pressures have continued unabated during the Covid-19 crisis. Fashion a few more tools to create more housing in already-urbanized neighborhoods or larger economic development projects? Not on your NIMBY-life.

State agencies barely drew an extra breath before diving back into aggressive rulemaking, from imposing new consumer privacy rules to encouraging “road diets,” among many others.

Political leadership during prior economic crises did not hesitate to use state leverage to remove barriers to recovery.

During the 1991–93 recession, the Governor and Legislature offset temporary tax increases with tax reforms and incentives, regulatory reforms and aggressive economic development efforts and resources. During the Great Recession in the last decade, the Governor and Legislature created additional tools for regulatory oversight and some additional economic development tax benefits.

But in response to the current recession, the worst in terms of unemployment in the post-war era, the new burdens the Legislature has voted to place on small business vastly overwhelm the few beneficial crumbs.

Contact: Loren Kaye

Loren Kaye
Loren Kaye was appointed president of the California Foundation for Commerce and Education in January 2006. He has devoted his career to developing, analyzing and implementing public policy issues in California, with a special emphasis on improving the state's business and economic climate. He also was a gubernatorial appointee to the state's Little Hoover Commission, charged with evaluating the efficiency and effectiveness of state agencies and programs. Kaye served in senior policy positions for Governors Pete Wilson and George Deukmejian, including Cabinet Secretary to the Governor and Undersecretary of the California Trade and Commerce Agency. See full bio.