What is the best metaphor for California’s current economic crisis, which is plagued by billions in budget red ink, millions in unpaid bills, thousands of state employee work furloughs and the threat of total insolvency?
For my money, the state’s fiscal follies are best embodied by the news that North Carolina has courted Cupertino-based Apple Inc. to transfer services to the Tar Heel State. In fact, the move is already under way.
Just last month, the North Carolina Legislature overwhelmingly passed—and the state’s Democrat Gov. Beverly Perdue signed—a law to specifically attract an Apple server facility.
The state’s Department of Commerce estimates that when all job types (including maintenance and construction) are factored in, the Apple facility will result in more than 3,000 jobs created for the regional economy.
To make the Apple sale, North Carolina actually changed its law to allow a sizeable break on corporate income taxes that could be worth about $46 million in the next decade, assuming that Apple reaches its stated $1 billion investment target within nine years.
The Math
So let’s review the math: North Carolina extended a tax credit of no more than $46 million, and, in return, will receive an investment of no less than $1 billion.
This is the quintessential low-risk, high-reward idea and the kind of move states make when they are serious about attracting economic development.
While this may seem like a solid deal, it’s important to note that in California’s current political climate, it is unthinkable that we will see anything resembling an innovative move of this kind.
From a symbolic standpoint, this should be a serious blow to the state’s economic potential and even perhaps our very own prestige.
But as a public policy matter, this development depicts everything one needs to know about the nature of competitiveness, business portability and the cold, hard truth that California rolled up the welcome mat to business a long time ago.
The statement that Gov. Perdue issued says it all: “North Carolina continues to be a prime location for growing and expanding global technology companies, and we welcome Apple to North Carolina and look forward to working with the company as it begins providing a significant economic boost to local communities and the state.”
Why Not Us?
Why couldn’t California do something like this?
Many will conclude that we are so mired in partisan gridlock and political maneuvering that we stood by and watched Apple invest a billion dollars and create thousands of jobs thousands of miles away because it was offered an innovative deal and a partner in state government.
This should be a wake-up call to everyone that there is a limit to how much even businesses as large as Apple will endure before they inevitably start listening to en-treaties from other states.
Irvine-based Edwards Lifesciences Corp. has been offered a similar opportunity in Utah.
The heart valve maker currently is considering a deal where it will receive $11.5 million in incentives during a 15-year period in exchange for keeping a manufacturing plant, along with its current workforce, in the state and adding 1,000 jobs in the next 15 years.
California’s Crisis
We must come to grips with the reality that California is not in a mild economic downturn, but a full-blown recession that includes record unemployment, unprecedented home foreclosures and the possibility of serious inflation.
Government is now compelled to make unpleasant cuts and other disheartening choices none of us wants to make.
When the state emerges from this crisis—as it surely will—state leaders will hopefully look back and conclude that rather than isolated events, these were symptoms of a much larger problem and the validation of this fact: If California can’t offer a better environment for business development, job creation and corporate investment, even more will follow Apple’s lead and leave the state forever.
Where will they wind up? In my mind, they’re going to Carolina.
State Assemblyman Jeff Miller represents the 71st district, which spans parts of Orange and Riverside counties.
