CLEANING UP CALIFORNIA'S BUSINESS ENVIRONMENT
By State Controller Gray Davis

For most of its recent existence, California has had a sort of
"Field of Dreams" mentality when it came to economic development:
Because we're here, jobs and businesses will come.

And for decades, they did. Other states with fewer advantages
had to aggressively sell themselves to both domestic and foreign
companies as a good place to relocate and to do business. But
unconcerned California -- fat, happy and rich -- usually had the pick of
the litter.

Those days are gone -- most likely forever. Now, we've got to
roll up our sleeves, check our collective ego at the state line and
compete vigorously. We not only have to better sell our many strong
points, we must work to eliminate or at least lessen the more onerous
aspects of doing business in California.

And it's no secret that California has not been a particularly
easy place in which to operate. Nearly every public official at all
levels of government hears frequent complaints about the painfully slow
procedures and often overlapping regulatory structures that can
economically strangle a commercial venture in this state.

Perhaps no area draws more complaints than environmental
regulation. Here, good intentions -- protecting our precious natural
environment -- often seem to conflict directly with the goal of maintaining a
friendly business environment.

For example, in Los Angeles County alone businesses face a
battery of no fewer than 72 different agencies that enforce environmental
regulations. A little less than half (44 percent) are state agencies,
while 38 percent are local and 18 percent federal.

Sometimes, even the best of intentions on the part of business do
not go unpunished. I recently talked to the managing partner of a large
and profitable retail chain who, after rumors of a move out of state,
decided to keep its headquarters in Los Angeles. A festive ceremony was
arranged to mark the occasion, attended by dozens of city officials,
including the mayor. A few days later, the company was cited and fined
by the city for hanging a banner over the platform at that event without
the proper permit!

Some blame what they call overly zealous environmentalists for
the confusing maze of regulations. But in fact, when the rules were
written most environmentalists argued for making them simple and clear.
Lobbyists for some polluting industries, on the other hand, worked behind
the scenes to make them complex and ambiguous, thereby ensuring loopholes
they could exploit.

Whoever is to blame for the origin and state of California's
labyrinth in environmental regulatory system, it is critical that we fix
it. While the state Legislature last session made some important strides
in the areas of workers' comp and tax incentives, we must still do more.
Because whether you are a Democrat or a Republican, an environmentalist
or industrialist, a Northern Californian or Southern Californian -- all
of us have a huge stake in finding better ways to protect our natural
environment without driving businesses out of state.

One proposal I have advanced that would help do that is the "lead
agency" concept. Simply put, this idea is based on this reality: It is
not so much the actual regulations businesses complain about, but rather
the process they must go through to comply with those rules.

For example, I've heard many stories about getting two or three
different answers to the same simple permit question. The California Air
Resources Board says yes, the regional AQMD says no -- and the U.S. EPA
says it can't decide until California makes up its mind. Meanwhile,
business expansion plans are put on hold for months or even years --
meaning carpenters aren't working, plumbers aren't working, landscape
engineers aren't working, equipment and furniture manufacturers aren't
getting orders, and so on.

This new procedure would work like this: In each category of
environmental enforcement -- air, water, soil, safety, etc. -- the state
would conduct an inventory of those agencies that exercise regulatory
functions. In cases where more than one agency enforces the law -- which
in California is almost every instance -- those agencies would huddle to
determine which one of them had the most stringent regulations. Then
that agency, and that agency alone, would take the lead in actually dealing
with businesses in that area of regulation, while the other agencies butted out.

This obviously would not guarantee an answer more to the liking
of businesses in every cases. And no one should confuse streamline with
weaken, which is certainly not my intention. But the point is to
eliminate process as the goal of environmental regulation and replace it
with results. This new system would at least ensure that there is only one
answer -- and that it comes faster.

Another proposal I have made is to establish an Environmental
Extension Service as part of the University of California system. This
would be modeled on the proven success of the Agricultural Extension
Service in helping the farm sector overcome problems and thrive. It
would draw on the tremendous brainpower and research capabilities of the
UC system and its personnel to solve environmental problems that threaten
to drive business and jobs out of the state.

Drive -- or fly. Both Lockheed and McDonnell-Douglas, for
example, now fly planes built in California to other states to paint
them. Why? Because the paint used is toxic and violates California's
clean-air standards. An Environmental Extension Service could be
directed to work with these companies to produce a non-polluting paint,
so the planes can be painted in California by California workers.

Our challenge in California in 1993 and beyond is to think boldly
and creatively to solve problems like these. I often say the state used
to act like the police: Do what we say or we'll close you down. Today,
the new economic realities demand that we act more like paramedics,
working with businesses to help keep them alive so they don't shut down
or leave the state altogether, taking our jobs, our tax base -- and our
future -- with them.

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