LAW AND GOVERNMENT
It wasn ’ t supposed to end this way . Kerry Sachs is a son of the Capital Region if there ever was one . He and his brother Jim co-founded Puroast Coffee in Woodland in 1993 , both are UC Davis graduates , and their father Roy was a professor there . A UC Davis researcher helped develop the company ’ s low-acid coffee . “ Our company wouldn ’ t exist had it not been for UC Davis ,” says Sachs .
But in March 2021 , Puroast closed up shop in Woodland and moved to North Carolina . Sachs points to problems in the state ’ s business climate . When the company opened a retail store in Florida in 2015 , the California Franchise Tax Board sent them a bill — $ 25,000 to $ 30,000 , he remembers — for revenue generated outside the state . They later looked into basing a franchise operation out of Woodland , but their research showed the state was one of the least favorable from which to run a franchise enterprise , in part because of state rules . Meanwhile , the costs to lease their industrial space rose , in part because of a state tax increase , he says . Their shipping and logistics costs went up too as they grew their national customer base during COVID-19 , with more orders coming from the eastern half of the country .
By late summer 2020 , they were at the end of their lease and deciding whether to renew . Sachs and his plant operator started scouting other states and put together a report for their board and key stakeholders . North Carolina came out on top , and the board said it was Sachs ’ call whether to stay or leave . “ I said ‘ Look , I think we need to move ,’” says Sachs . When the company did , it took 25 jobs with it .
State and local business leaders point to a thicket of California policies they say are driving companies to leave for other states . And companies that have left the region say the state ’ s business climate is part of the reason .
More software engineers , fewer back office workers
There ’ s no reliable count of the net inflow and outflow of businesses in the region . But an August 2021 report from Stanford ’ s Hoover Institution said 300 companies moved their headquarters out of California from
“ The mom with three kids who ’ s working two jobs , she should be able to go to work at Wells Fargo and make $ 75,000 a year . That job doesn ’ t exist in Northern California because of the labor laws .”
BARRY BROOME President and CEO , Greater Sacramento Economic Council
January 2018 through June 2021 — a figure likely understated since not all relocations are public , the authors noted . Fifteen of those left the Sacramento region . It didn ’ t tabulate companies that moved into the state from elsewhere , so the overall loss or gain isn ’ t known .
Barry Broome , president and CEO of the Greater Sacramento Economic Council , blames state labor laws for making it harder to attract and keep businesses . He points especially to the Private Attorneys General Act , which allows employees to sue their companies on behalf of the state : GSEC ’ s internal data show that PAGA alone adds $ 10,000 in costs per job , he says . ( A June 15 Supreme Court ruling limits , but doesn ’ t eliminate , the instances in which an employee can sue a company under PAGA .)
Broome says the labor rules price California out of back-office , middleincome jobs — companies take those to places like Arizona , Idaho and Nevada . “ We have a talent play around engineers and software and biotech and cell therapy — we ’ re better than everybody else in the United States , and if you want that best talent , you have to be here ,” he says . “ But the mom with three kids who ’ s working two jobs , she should be able to go to work at Wells Fargo and make $ 75,000 a year . That job doesn ’ t exist in Northern California because of the labor laws .” California ranked last in Chief Executive magazine ’ s 2022 poll asking roughly 700 CEOs and business owners which states are best and worst for business .
Of course company decisions about whether to stay or leave are often based on factors other than state policies on taxes and regulations , says Jeffrey Michael , executive director of the University of the Pacific ’ s Center for Business and Policy Research . But the state ’ s business climate doesn ’ t help , with California workers ’ compensation costs among the highest in the country and labor laws on how exempt employees are treated raising company outlays , he says . “ I think it ’ s not an issue of two or three ( regulations ) — it ’ s just a large thicket of regulations that have to be dealt with and I think some perception that the trend is toward more not less ,” Michael says .
For Deborah Keller , CEO at Chordline Health , the immediate push was
48 comstocksmag . com | August 2022