ORANGE – Doing business in California has become even more difficult over the past year, according to CNBC’s annual state-to-state business poll. The annual poll ranks each state in a number of major categories including workforce, economy and structure.
Overall, California currently ranks 32nd in the country, down from 25th a year ago, and 50th for its regulatory and legal climate. Cost of doing business, cost of living and business friendliness all received an F grade.
“Companies come here to get in on the gold rush of venture capital, but high costs and regulation can stifle the dream,” states the poll.
Anthony Caso, director of Claremont Institute’s Constitutional Jurisprudence Clinic based at Chapman University, shared his thoughts on the poll.
“It’s a fairly standard analysis,” said Caso. “California is usually pretty low because of the … civil litigation climate. It does well because it has a great physical climate, but for businesses they can find it kind of tough. The regulations are very steep here in California, the cost of living’s very high, so it’s hard to keep your employees … and like I say, the civil litigation is a big issue.”
Caso also touched on Prop 65 as being a big factor in the difficulty, especially for small businesses, to be successful in the Golden State.
The proposition was first implemented as the Safe Drinking Water and Toxic Enforcement Act in 1986 to protect the state’s drinking water sources from being contaminated with chemicals known to cause cancer, birth defects or other reproductive harm.
The law requires businesses to inform Californians about exposures to such chemicals and requires the state to maintain and update a list of chemicals known to the state to cause cancer or reproductive toxicity, but has steadily grown into a logistics nightmare for California.
“Proposition 65 is mostly an issue for small businesses who don’t have on staff legal help to let them know where they have to post warnings. Pretty much everyone has to post a warning everywhere," said Caso. "There’s nowhere you can go that doesn’t have a sign because everyone’s been sued. It’s just the small business who aren’t clued into this because they don’t have legal assistants.”
The poll was conducted by CNBC through the economic profile sources of U.S. Census Bureau, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, Federation of Tax Administrators, American Petroleum Institute (excluding 18.40 cent/gallon federal tax), Moody's Investor Service and S&P Global Market Intelligence.