Nash-Hoff: Even though California is perceived as bad for manufacturing, it is the eighth largest market in the world and ranks first in manufacturing for both jobs and output.
On February 14, about 135 business, civic, academic, and labor leaders met at the conference facilities of AMN Healthcare for the "Manufacturing in California - Making California Thrive" economic summit.
I provided the overview of California manufacturing in which I pointed out that even though California is perceived as bad for manufacturing, it is the eighth largest market in the world and ranks first in manufacturing for both jobs and output. Manufacturing in California accounts for 11.7% of gross state product and 9% of the workforce. California leads the nation in monies spent on R&D, and California companies received over 50% of all venture capital dollars invested in the U.S. in 2011. California high-tech exports also ranked first nationwide, totaling $48 billion in 2011.
Besides the great weather, California also has world-famous research institutions and research universities, a skilled, educated workforce, a large pool of inventors/entrepreneurs, and strong networks of "angel" investors and venture capitalists. California inventors and entrepreneurs are supported by more than 20 business incubators throughout the state, including two incubator facilities in San Diego - EvoNexus and the San Diego Technology Incubator, as well as the incubator-without-walls, CONNECT's Springboard program.
In addition, California has 40 enterprise zones throughout the state, two of which are in San Diego's south county. Enterprise zone companies are eligible for substantial tax credits:
- Hiring credits - Firms can earn $37,440 or more in state tax credits for each qualified employee hired
- Up to 100% net operating loss (NOL) carry-forward for up to 15 years under most circumstances.
- Sales tax credits on purchases of up to $20 million per year of qualified machinery and machinery parts;
- Up-front expensing of certain depreciable property
- Unused tax credits can be applied to future tax years
- Enterprise zone companies can earn preference points on state contracts.
There are also 17 foreign trade zones (FTZs) in California that are sites in or near a U.S. Customs port of entry where foreign and domestic goods are considered to be in international trade. Goods can be brought into a zone without formal customs entry or without incurring customs duties/excise taxes until they are imported into the U.S. FTZs are intended to promote U.S. participation in trade and commerce by eliminating or reducing the unintended costs associated with U.S. trade laws.
Of course, no overview would be complete without mentioning the disadvantages of manufacturing in California. In the Small Business Entrepreneur Council Survival Index of 2011, California ranks 46thfor its business climate because of the following:
- Highest personal income & capital gains taxes
- Highest corporate income & capital gains taxes
- Highest gas and diesel taxes
- High state minimum wage
- High electric utility costs
- High workers' compensation costs
- More stringent Cal OSHA & Cal EPA regulations
- Stringent Air Quality Monitoring District rules
- Large number of health insurance mandates
As a result, California has lost over 500,000 manufacturing jobs since the year 2001.
No state, county, or city agency keeps track of the number of manufacturing companies leaving California, but there are frequent anecdotal stories in the news. Of course, everyone had seen or heard one of the ads by Texas Governor Rick Perry to woo California companies to relocate to Texas, as well as the fact that he was in California that very week to meet with some California companies.
