Capitol Punishment: State Needs to Get Back in Balance Guest Column by Gregory N. Lippe “Eat what you Kill” is the law of the land for the majority of the animal kingdom. An animal’s needs are restricted, primarily, to food and protection against predators. Since the animal’s only protection is what nature has provided, the only need he can fulfill for himself, is to acquire food. If he is a carnivore and not a scavenger, he must kill the food for himself. As humans, our needs and wants have developed far beyond food and protection. They now include clothing, vitamins, cosmetics, medical equipment, automobiles, fitness equipment, toys and many others. In the early years of our country and state, the needs of the population were less and the ability to fulfill those needs was significantly dependent on the individual and the local population to produce the necessary goods. Metaphorically speaking, the people who lived in those days were required to eat what they killed. As the years passed the ability to manufacture in, and obtain goods from other places grew. As the costs of goods increased, due to higher wages, increased employee benefits, taxes, service fees etc., the relocation of manufacturing facilities to other states and countries and the purchase of goods from other markets became more attractive. Today, in California, it appears that we eat more of what is killed by others than what we kill ourselves. In the year 2001 the value of imports passing through California ports exceeded the value of exports by $86.7 billion. California’s manufacturing sector has been bleeding jobs for more than two years. Just last month, 6,500 manufacturing jobs were lost. American Racing Equipment, Inc., one of the nation’s largest manufacturers of custom car wheels announced that it intends to eliminate approximately 300 Southern California jobs and shift most of its production to Mexico to cut costs. Another issue is that the composition of our Gross State Product (GSP) has changed to include far more services than manufacturing. In 1980, GSP from services was approximately equal to GSP from manufacturing. In 2000, GSP from services was approximately 60 percent higher than GSP from manufacturing with services accounting for $328.3 billion or approximately 25 percent of total GSP. Jobs in the service industries tend to require higher skill sets. As a result, job availability for the unskilled labor, heavily utilized in manufacturing, is becoming severely diminished. To solve the problems, perhaps we need to return to the concept of “eat what you kill” or, alternatively, to produce an equivalent value of exportable goods, to create a balance. To accomplish this, will take time. It will also require compromises and a multi-pronged approach. We will need to reduce the costs and provide incentives to businesses. Instead of continuing to raise costs by the passage of business and job punishing bills, our legislators must introduce bills to decrease these costs and provide tax incentives. The recent elimination of California’s Manufacturers Investment Tax Credit is the exact opposite of what is needed. Additionally, our residents will need to “bite the bullet” and pay more for locally manufactured goods until the effects of the incentives and reduction of costs to businesses can be realized. We must plan for the long term and forego the instant gratification of acquiring goods produced elsewhere for less money. Higher wages and increased benefits cannot help those that are jobless. We must have a cooperative approach or we will all lose. Legislators that can’t or won’t work toward solving the problem should be replaced. We can no longer afford to elect people based on popularity and rhetoric. I believe that all of our legislators have good intentions. Unfortunately, not all of them have the appropriate experience. The following are a few of the bills that will add further costs to manufacturers and other businesses, thereby creating additional incentives to migrate from California: – SB 2: Requires employers to either provide health insurance benefits or pay a “user fee” to the state to allow the state to pool the fees and purchase coverage for all uncovered employees. The small businesses of California provide many jobs. Unfortunately, many of them cannot afford to provide health insurance. If they cannot afford to provide this insurance, they will not be able to afford the “user fees.” These employers will be forced to move, close or reduce their labor force. Either alternative will result in the loss of jobs. Status: Passed Senate June 3, 2003, amended by Assembly June 23, 2003. Passed Assembly July 7, 2003, Failed Senate July 10, 2003, currently in conference committee. Valley Assemblymembers voting for bill: Frommer, Koretz, Levine, Montanez, Pavley Valley Assemblymembers voting against bill: Richman, Strickland – AB 274: Creates a rebuttable presumption that an adverse employment action taken by an employer within 90 days after an employee exercises his or her employment rights is retaliatory. This will allow an employee, who anticipates termination for cause, to file a claim for an alleged Labor Code violation to stall his or her termination for 90 days. There is nothing in the law to prohibit the same employee from filing an additional claim before the 90-day period elapses and stall for another 90 days. This bill will severely interfere with the employer’s ability to discipline troublesome employees. It will also create costs through inefficiencies in the workplace and probable litigation. Status: Passed Assembly May 22, 2003, currently in Senate Valley Assemblymembers voting for bill: Frommer, Koretz (Author), Levine, Montanez, Pavley Valley Assemblymembers voting against bill: Richman, Strickland Gregory N. Lippe, CPA, is managing partner of the Woodland Hills-based CPA firm of Lever, Lippe, Hellie & Russell LLP (LLHR) and a director of the Valley Industry and Commerce Association (VICA).
