Rival states hope California's economic woes will send businesses their way

By Dale Kasler dkasler@sacbee.com
Published: Thursday, Jul. 2, 2009 - 12:00 am Page 1A

California's budget crisis is turning into a worldwide spectacle that could harm the state's business climate – and chase companies away.

Rival states are revving up their economic-development efforts as global news outlets fixate on the $26.3 billion deficit and the IOUs the state is expected to issue today.

California companies are making inquiries to out-of-state groups like the Economic Development Authority of Northern Nevada. Besides asking about tax rates and other expenses, many are worried about California's "general overall chaos, that uncertainty," authority marketing director Julie Ardito said from her office in Reno.

The recession is freezing many companies in place. But as the economy begins to stir, CEOs are starting to compare the costs of doing business in California vs. going elsewhere. Ardito said the volume of calls to her organization – from California and other states – has jumped 40 percent from a year ago.

Jack Boyd of the Boyd Co., a relocation consultant in New Jersey, predicted "a new wave of companies … leaving California." Many other firms looking to reach California consumers will do so from locations just outside the state, he said.

Boyd said Sacramento's budget problems are feeding the perception that California is a high-cost, overregulated, out-of-control place to do business.

"The California business climate has always been difficult," he said. "This is a whole new overlay to that."

The media aren't helping California's cause. On Wednesday, former Gov. Gray Davis was interviewed on CNBC over a headline that said, "The IOU State." London's Financial Times ran a lengthy piece on the IOUs, while a Washington Post column was headlined, "California: A Dream Decimated." An Associated Press story said that because California is so big, its economic woes could delay the national recovery. More here.