Measures Spell Relief for California Businesses

Relief is probably the best way to sum up the reaction of California business owners to the Nov. 2 elections, as voters generally sided with their interests on just about every important measure.

Voters repealed employer-mandated health care, opted to fund stem cell research that could help jumpstart a new industry in the state, and agreed to curtail unfair business practice lawsuits.

A handful of propositions did not go the way business interests would have liked, including an effort to make the primary process less partisan. And Gov. Arnold Schwarzenegger’s coattails were not long enough to make the Legislature more business friendly by ousting targeted Democrats.

“I think (the election) is a positive thing, but there are no quick fixes here,” said Christopher Thornberg, a senior economist at the UCLA Anderson Forecast. “It got a little better, but the business climate is a long-run drag, not a short-run drag.”

While some thorny problems remain unresolved , including a rise in the uninsured that has been linked to increases in the cost of health care , the results are being taken as another sign that the state’s business climate is warming.

“From a Schwarzenegger-business community perspective, it was almost an unalloyed victory,” said Rob DeRocker, the executive vice president of New York-based Development Counsellors International, a consulting firm that helps California communities attract new business. “All eyes were on Arnold. You can live that way and you can die that way. He won that way big time.”

Proposition 72







The one issue most important to business interests was Proposition 72, a referendum placed on the ballot by the California Chamber of Commerce on the landmark law Senate Bill 2.

The legislation, passed last year in the waning days of the Gray Davis administration, would have required large and medium-sized businesses to provide health care to their workers.






California would have been the only state aside from Hawaii to have such a mandate, and the chamber and other business groups saw it as a threat in attracting and retaining businesses, especially those that employ lower-wage workers.

“The defeat of Proposition 72 is a victory for all Californians because it sends the message across the country that California continues to be serious about bringing employers and jobs back to our state,” said chamber President Allan Zaremberg.






The law was turned down by 50.9 percent of voters, a margin of 160,755 votes.



Also going down was Proposition 67, which would have placed a tax on in-state telephone calls , generating an estimated $600 million to support emergency services, including the 911 system, hospital emergency rooms and emergency medical specialists.

Telecommunications companies and small businesses vigorously opposed the measure, which was defeated 72 percent to 28 percent.






The one industry that took it on the chin was health care.






“We are not on the cusp of a crisis. We are in a crisis,” said Jan Emerson, the vice president of external affairs for the Healthcare Association of Southern California, a hospital trade group.

Not even the passage of Proposition 61, which set aside $750 million in bond money to renovate 13 children’s hospitals, lessened the blow. Emerson blames a good share of the industry’s problems on the rising number of patients who are uninsured.






The trade group plans to try to come up with a plan more acceptable to other businesses to cover more of the uninsured. Other proponents agreed that the loss of Proposition 72 did not mean the issue had died.






“The real story of SB 2 is how close it came to passing, even with the huge opposition from the business community,” said Jerry Flanagan, a health care expert with the Foundation for Taxpayer and Consumer Rights, who vowed the group would try to get its own health care initiative on the 2006 ballot.







Other Victories

If Proposition 72 was the top business priority, Proposition 64 was not far behind. The measure, which won with nearly 59 percent support, placed limits on a state statute that allows private citizens to bring lawsuits against businesses for unfair practices.






Proponents argued that the law, which was liberalized in 1992, had allowed unscrupulous attorneys to “shake down” small businesses for alleged minor violations of the law. The proposition will require any such lawsuits to go forward only if there is a named, harmed victim of the allegedly unfair practices.

Consumer and environmental groups vigorously opposed the measure, saying the law had been an effective tool in curbing false advertising, pollution and other problems. However, attempts to amend the statute and curb its abuse by some attorneys repeatedly failed in the Legislature, leading to business groups to bring for the proposition.

“The law was used as a bludgeon,” said Jim Burgess, a partner in the Century City office of Sheppard Mullin Richter