Contributor

Ray Haynes

Mr. Haynes is an Assembly member representing Riverside and Temecula. He serves on the Appropriations and Budget Committees. [go to Assembly Member Haynes website at California Assembly]

Talk About Déjà Vu!
Special interests have brought back the economic problems of the early 90's
[Ray Haynes] 8/19/03

When I joined the Legislature in 1992, California was facing two major crises—our business environment was falling apart and our budget was seriously out of balance. Businesses were leaving the state in droves, complaining that worker’s compensation premiums were doubling and tripling, and that the regulatory environment was stifling the establishment and expansion of business in California. Other states were poaching our employers, and they were taking their jobs with them. State revenues were falling through the floor.

Governor Wilson had just tried to solve the budget crisis by raising taxes, and instead saw his revenues collapse. For the first time since 1952, California had just seen a year-over-year decrease in revenue. State spending exceeded state revenue by 15%. My first day in office I had local business owners complaining about how they had to lay off employees, and government employees asking me to raise taxes so they could keep their jobs. The Commission on California’s Competitiveness had just come out with a long report detailing how the government regulatory environment interfered with job creation. Things got so bad that even then-Speaker Willie Brown felt compelled to convene an economic summit, inviting business and labor leaders to discuss solutions to the problems.

Governor Wilson got to work. He immediately began to work on the worker’s compensation issue and other regulatory issues to make it easier for business to create jobs in California. By the end of 1993, the Legislature had reformed worker’s compensation, passed a number of regulatory relief bills, held the line on tax increases, and changed a lot of people’s attitudes about California’s approach to business development. By the end of 1994, the early 90’s California recession was over, businesses were creating thousands of new jobs, and California’s revenue was increasing so much that by 1995, and for four years thereafter, California was able to cut tax rates, and still experience huge surpluses.

Today, ten years later, the state’s problems are strikingly similar to those of the early 1990’s. The reasons for the economic problems, and the budget crisis are also similar. Worker’s compensation rates are, once again, doubling and tripling, because the Legislature, from 1999 to 2002, reversed many of the reforms that reduced rates in the previous crisis. Many of the regulatory hurdles to the expansion of business repealed in 1993, 1994, 1995 and 1996 were restored in the sessions from 1999 to 2002. Since these regulations began to take effect, beginning in January 2000, California has seen a steady stream of jobs and businesses moving to neighboring states. Today, as the rest of the country pulls out of the recession that began in December 2000, California economic growth remains stagnant.

Just like the Legislature of 1993, our current Legislature in dominated by special interests, like trial lawyers and labor unions, who benefit from the current method by which the worker’s compensation system is administered. Court decisions have made it easy to get into the system by liberally construing the means by which an injury is classified as “work-related.” Lots of people who are not injured are making money off the way the state runs the system. The same problem existed in 1993. This scenario also inhibits getting assistance to those very individuals the system was designed to help.

Whenever I look at the issues and problems of today, I get a little feeling of déjà vu. I saw Governor Wilson roll up his sleeves and fight for his reforms, sacrifice a lot of his political capital to push through the changes that were needed to fix California’s economy. I am still waiting for Governor Davis to do those same things. Perhaps, just perhaps, that is why Governor Wilson was re-elected with a record majority, and Governor Davis is facing a recall.

Just a thought.