Texas Gov. Rick Perry has been actively and successfully recruiting California businesses to move to the Lone Star State. Now, Rick Scott, Florida's businessman-turned-governor, has also decided to capitalize on the Golden State's hostile business climate, outrageous regulations, and job-stifling tax rates.
Scott told the Republican Party of Sarasota County in late May that he was "working on putting up a billboard out there [in California] that has Jerry Brown's picture and mine."
"It's going to say [...] 'same haircut, no income taxes. Number One in teacher quality. Move to Florida'."
The "no income tax" pitch is perfect considering California's income tax rate is 13.3%, the highest in the nation.
California is also home to some of the largest tech companies in the world including Apple, Google, Hewlett Packard, PayPal, Intel, Facebook, and Oracle. Although these companies are based in California, many of them have expanded or moved manufacturing operations out of the state to places like Florida, a state with no income tax and a supportive business climate.
In fact, as CalWatchdog's John Seiler wrote on June 3, Apple is building its new graphics processing unit in Orlando, Fla. "This is significant because it shows that Apple, while keeping its top management and design teams in California, continues to build major units in other states and countries," Seiler said.
In another blow to the California economy, the Silicon Valley Business Journal reported that Google will be manufacturing the first U.S. made smartphone in a massive 500,000-square-foot facility near Fort Worth, Texas.
But it is not too late for California to reverse its negative economic trend. It can start by rescinding job-killing laws such as AB 32 - the Global Warming Solutions Act of 2006.
AB 32 was signed into law on Sept. 27, 2006, by then-Governor Arnold Schwarzenegger, a Republican, and imposed the strictest, most top-down, anti-global warming regulations at the state level in the nation. It created, for example, a cap-and-trade scheme aimed to curb CO2 emissions released by commercial trucking, utilities, oil and gas fracturing operations, and other "polluting" businesses.
If a business goes beyond the CARB-imposed carbon cap, AB 32 penalizes them with arduous new taxes.
AB 32 significantly increases the cost of energy, thus significantly increasing the cost of doing business in California.
Boston Consulting Group recently conducted a sophisticated economic analysis that examined the impacts of an AB 32 future on refineries for California's economy writ large. They found that under full implementation of low-carbon fuel standards, California could lose 28,000 to 51,000 jobs - that's a net 2,500 to 5,000 jobs created due to investments in energy efficiency.
Making California Business-Friendly
By loosening its regulatory hand and extirpating its appallingly high tax rates, California will begin to see an improvement in its employment statistics, an increase in in-state manufacturing, as well as an explosion in yet untapped markets.
If the state can successfully accomplish this, fracking might become one of the state's most promising industries, alongside the Silicon Valley's Fortune 500 tech club. Although the oil and gas "fracking" industry's primary impediments are environmental lobbies' lawsuits, as well as limited technology for drilling harder oil, the California government still plays a role in the unappealing, high cost of production with its high taxes, building codes, permits, and carbon emissions regulations.
The state's massive shale gas and oil plays have the potential to create thousands of jobs, enrich millions of lives, and bring hope back to our economically depressed state. In North Dakota, the unemployment rate is 3.6% and both state and local governments are seeing budget surpluses due to the Bakken fracking operations that are producing about 800,000 barrels per day.
Even more substantial results could come from California's Monterey Shale oil play in particular. Its potential is outstanding, and its capacity to bring the state's economy from its current rut is equally impressive.
Extending across much of the San Joaquin Valley, the Monterey Shale is estimated to contain approximately 500 billion barrels of crude oil - 15.4 billion of which, as the U.S. Energy Information Administration reports, is recoverable. The City Journal's Tom Gray wrote an extensive commentary entitled, California Needs a Crude Awakening, "Those 15.4 billion barrels would be worth about $1.5 trillion at today's crude prices," Gray said.
The potential impact of 15.4 billion barrels of oil is enormous. Even if California managed to tap just half of that quantity over the next 35 years, the state would be adding an average of 220 million barrels a year - doubling its current output and matching its peak year of 1985."
"It would also be pumping $22 billion each year into its economy if crude prices stayed near their current levels (in light of global demand, it's more likely that prices will rise)," Gray added. "If the EIA estimate is reasonably close to the mark, the Monterey Formation would be in a class with oil fields in Saudi Arabia."
"'Having a field like this on American soil would be a game changer for American dependence on foreign imports,' said Chris Faulkner, CEO of the Dallas-based exploration company Breitling Oil and Gas."
Managing With AB 32
Knowing that legislation to repeal AB 32 stands no chance of passage, the next best thing is to tighten its language to ensure that it is not being used as a cash cow for reckless state spending. If we can make sure the revenues obtained by the bill are used, not for a high-speed train few Californians want, but for a quantifiable purpose like carbon emission reduction, that would be fine.
Critics of the fracking industry point to environmental hazards in order to argue against the promotion of the industry within California borders. Half of what is said against fracking, however, is dead wrong. http://bit.ly/15FU6Fn "Studies have shown repeatedly that fracking is fundamentally safe. It creates jobs and cuts dependence on foreign oil," a Los Angeles Times commentary reads.
Others want to increase regulations, while at the same time increasing taxes. Sen. Noreen Evans (D-Santa Rosa) famously told The Los Angeles Times: "If we as a state are going to expand fracking operations, we ought to tax it."
By taxing the fracking industry more, the cost of oil and natural gas will only continue to rise.
Let's hope that California state lawmakers will begin to realize that jobs and prosperity for the public are critically important right now. And let's hold optimism for the improvement of fracking technology so we can begin seeing more barrels produced, more revenues, and more jobs.
Alec Scheer is the editor-in-chief of "We Are 1776". Follow the group on Twitter at @WeAre1776.