Jerry Brown's Potential Crippling Blow to California

California is facing nearly The Toughest of Times. We face historically high unemployment, perennial budget crises and more. Don’t think it could get any worse? Think again. If Jerry Brown is elected, in one short stroke, he could deal a potentially crippling blow to the California economy before it gets a chance to get back on its feet.

Even for a committed political observer, volunteer and commentator such as myself, it seems implausible – but true – that the stakes for elections grow with each successive election. For California, the 2010 gubernatorial election unquestionably could be the most important election ever – and not necessarily for a good reason. If Jerry Brown is elected, he and his fellow Democrats could deliver a devastating blow to California.

We well know that California’s unemployment rate is above 12%. We also know that well over 100,000 people are leaving California on a yearly basis. Beyond that, California faces an exodus of businesses – large and small alike. So it can be no surprise that state revenues have declined nearly $40 billion over the last three years as a result of the declining taxpayer base.

We also well know why California is having a tougher time than many other states. In recent years, California is consistently ranked near the bottom of states in which to do business. According to Joseph Vranich, president of JV Executive Consulting Inc. in Irvine: “It’s no mystery what causes companies to leave California: High taxes, undue regulation, workers’ comp costs, a legal environment stacked against businesses and lengthy and costly construction permitting requirements.” Indeed, California finished tied for last in the Country in Forbes’ Overall Tax Burden survey measuring tax burdens and structure.

Could thinks get worse? Under a Brown Governorship, the answer would have to be: YES.

Keep in mind that Brown has no published or unpublished plan for dealing with California’s many crises – and that uncertainty hurts California businesses as much as anywhere else. But that won’t be the worst of it. If Jerry Brown is elected Governor, every business owner in California can be sure that Democrats under Brown would roll back worker’s compensation reform in California to pre-2004 rates.

California small businesses and large employers simply cannot afford the cost explosion that that would entail. Recently, a Bay Area business owner told me that his company’s workers comp rates rose from $650,000 to $4 million per year before the reforms were passed. Now his rates are around $950,000 per year in his labor intensive business. Already facing cash flow issues, he believed that any workers comp roll back would more than jeopardize the jobs of his workers. Obviously, his company is not alone in that predicament.

Don’t think the Democrats would do such a thing? Know that they have pushed at least partial rolls backs every year since workers comp was reformed. Or perhaps you would like to ask the Central Valley, which features cities with unemployment rates more than double the state average, just how bad government policy can be.

Don’t think Jerry Brown would allow it to happen? Well, given that the unions are funding his campaign and the negative ads on Meg Whitman – do you really think Brown could say no to them? Are you willing to take that chance?

In sum, the environment for California employers could get worse if Jerry Brown is elected – much worse. The resulting higher unemployment and higher deficits (even higher than today) could leave California in deep trouble for at least another 6 years – four years of Brown and at least 2 more to recover from that.

Can your business afford that? Can you afford that? In my view, California can’t and so we cannot afford Jerry Brown under any circumstances – this year or any other.