Invest in California: Plan for Job Creation and Economic Recovery

White Paper

Historically, California has been a place that fosters big, bold ideas. We led the technological revolution in everything from computers to solar panels. Our world-class universities gave thinkers a place to innovate and invent and our schools turned out the most productive and skilled workers in the world. Our infrastructure of roads, bridges, rail and ports connected our economy to the rest of the country and the world. California’s high standards and booming economy made us a beacon of innovation and prosperity for generations.

Shortsighted policies and an alarming lack of investment in our state place at risk California’s role as a global leader. Today, California is a state in steady decline. The recession put 2 million Californians out of work through no fault of their own and strained the state budget. As a result, state has slashed funding for schools, universities, infrastructure, public safety and all essential services.

Deregulation of the financial industry freed up Wall Street to gamble with our retirement, our jobs, our homes and our futures. Wall Street and corporate excess may have gotten us into this mess, but it is up to us to get ourselves out. A healthy private sector is key to rebuilding our economy and creating the jobs of the future in California. But we can’t build up the private sector if we continue to drastically cut public investment in all the areas that make us competitive in the global economy.

This is a time of enormous opportunity and great challenges. But Californians are—and always have been—visionaries who see no limit to our future. The world looks to us for leadership and we must take that responsibility seriously. We cannot cut our way to the future. The way to grow our economy and create good jobs is to invest in California again. It means investing to make California a good place to do business and a good place to raise a family again. This is our path forward for rebuilding the economy and creating jobs:

1. Build the California of the Future: Infrastructure
2. Build Here Buy Here: Manufacturing
3. Innovation and Skills Training for the Future: Education
4. Invest in California: Revenue
5. Clean Energy for a Strong Economy
6. Good Jobs Now: Ending Income Inequality

1. BUILD THE CALIFORNIA OF THE FUTURE: INFRASTRUCTURE

Under Governor Pat Brown, California made massive public investments in infrastructure—roads, water, energy, parks, bridges and schools. That was a necessary investment in California’s future. Decades later, that infrastructure has fallen into disrepair and is inadequate to support California’s growing population and economy.

Crumbling bridges, pockmarked roads and decrepit schools not only hurt our quality of life, they further drag down our ailing economy. The disrepair of surface transportation systems cost U.S. businesses nearly $130 billion in 2010 . Close to 13 percent of California’s bridges are structurally deficient and 17 percent of our roads are in “poor” condition, much higher than the national average of 5.8 percent. Clogged ports cost the U.S. economy close to $200 billion a year and California has some of the busiest ports in the world.

A healthy economy depends on a robust infrastructure to support business and job growth. We cannot get there by allowing our existing infrastructure to crumble and fail to meet the challenge of a growing population and economy. Public investment in infrastructure will create the jobs we need to get Californians back to work, smooth the way for commerce to help businesses thrive while rebuilding the state for the economy of the future.

Infrastructure investments are proven job creators. Every $1 billion spent on heavy construction creates an estimated 13,000 jobs . In 2007, every $1 billion of federal highway expenditures created 30,000 jobs . Yet not all investments are equal. Simply putting money into repairing what we already have creates more jobs than building new projects. Repair work on roads and bridges generates 16 percent more jobs than new construction and transit, such as high speed rail, creates 31 percent more jobs.

Infrastructure can also put people back to work right away. Roads, bridges, courts, schools, sewers and water systems are all in desperate need of repair. Water infrastructure is critical to key sectors of the economy like agriculture, manufacturing and production. A strong economy depends on modern water systems to move, store and distribute water across the state. The clean energy economy requires retrofits of existing buildings to make them energy efficient. Millions of skilled construction workers are unemployed and ready to work. An investment in infrastructure would put Californians back to work immediately while at the same time laying the foundation for a vibrant state economy.

California built some of the greatest highways, bridges, dams and infrastructure marvels of the 20th century. That infrastructure served as the foundation for creating the eighth largest economy in the world. Now is the time to invest in repairing and retrofitting the legacy of construction that made California great. To do so, we need bold, decisive action that puts Californians back work immediately rebuilding our state and our economy.

POLICY RECOMMENDATIONS:

Put Bonds to Work Now: Immediately get out the $9 billion in infrastructure bonds that have already been sold by the state. Develop a plan to get the funds to shovel-ready projects and expedite the process to get projects ready for funds.
Public Pension Investment: Work with CalPERS and CalSTRS to increase investment in infrastructure projects in California to create union jobs. Between 1995 and 2010, private, Taft-Hartley and public pension plans invested $21.8 billion in construction and real estate and created over 161,000 jobs in the U.S.
Transportation of the Future: Begin the construction of a state high speed rail system that breaks ground in 2012 to create hundreds of thousands of union construction, operations, maintenance and service jobs for Californians.

2. BUILD HERE, BUY HERE: MANUFACTURING

California is still the No. 1 technology state in the nation because we have a legacy of valuing education and fostering innovation. However, if we invent big ideas in California, we must manufacture them here. We can no longer afford to outsource our innovation to other countries. It’s no longer acceptable for our politicians to subsidize the practice of big corporations shipping jobs out of state or overseas. The state can play a critical role in creating a market to encourage the growth of in-state manufacturing jobs while drying up tax breaks to companies that ship jobs away. .

Revitalizing manufacturing is key to CA’s economic stability and growth. Investment in manufacturing, in particular, is a smart way to spur economic recovery. Manufacturing jobs have the highest multiplier effect of any job classification in any industry—for every manufacturing job created, an additional 2.5 jobs are created in the broader economy.

The presence of one manufacturing firm gives rise to an entire supply chain creating business opportunities for suppliers, component manufacturers, contractors and professionals. In addition, producing goods in state spurs economic activity in the transportation and shipping industries.

Jobs in manufacturing are good for working families. The average wage for a manufacturing job in California is $25,000 higher than that of a service sector employee and $35,000 higher than retail trade wages. These jobs are the backbone of the middle class.

California’s technological innovation, research capacity and highly skilled, productive workforce make it ideal for manufacturing. The state has the potential to turn innovation into manufactured products. However, there is a gap between innovation and the capacity to commercialize those innovations and produce in state.

California needs to create markets and demand for products and services built in California in order to re-establish ourselves as a leader in production. That means leveraging public dollars to foster in-state production. It means increasing domestic content standards and cracking down on corporations that take public money and outsource jobs. And it means rejecting a race to the bottom fueled by flawed trade policy.

POLICY RECOMMENDATIONS:

Keep Jobs in State: Create a “claw back” provision on all state contracts that penalizes companies that outsource jobs to other states or countries during the life of the contract.
Stop Outsourcing: Prohibit the state from unnecessarily contracting out union public sector jobs to private companies.
Jobs Impact Statement: Require bidders for state contracts to include a “jobs impact statement” in bids that outlines the number of jobs created in or outside of California and the quality of jobs created. Bidders with higher positive job impact statements would be given a bid preference.
Job Creation Database: Create a database of companies that receive public subsidies in the form of contracts, grants or tax breaks and the number of jobs they outsource out of state. Require annual reports of the impact of outsourcing jobs with public money on California’s economy and state budget.
Build it in California: Create a state program to support business to manufacture in California the products that they invent here. Many of the technological innovations of the 21st Century come from Silicon Valley, but very few of those products are manufactured there.
California’s Red Carpet for Jobs: Work with employers and legislators to streamline, simplify and speed-up the ability of business to create jobs in California without weakening worker protections or environmental standards.
Fair Trade: Urge Congress to establish stronger worker protections and environmental standards in trade agreements that support good American jobs.

3. INNOVATION AND SKILLS TRAINING FOR THE FUTURE: EDUCATION

California cannot compete in the global economy if we do not have the most educated and skilled workforce in the world. Our top-notch public education system helped make California into an economic and innovation powerhouse. We used to have the best public schools and universities in the world, but now the state is plummeting to the bottom by slashing funding and laying off teachers. Cutting investments in the educational system that built our economy makes economic recovery and growth even more difficult. California cannot compete in a global economy if our school funding ranks behind Mississippi and Alabama, let alone China and Korea.

It’s time that every child in California has access to public schools that allow them to compete in the global economy, regardless of their race, immigration status or family’s income. This includes not only reading and mathematics, but the computer literacy that is as essential to getting a good job in the 21st century as basic literacy was in the 20th. We must foster the creative spirit that defines California by offering our kids a well-rounded education including music, career technical education and art. You don’t cut education when you know that countries that out-educate us today will out-compete us tomorrow.

It’s time to recommit to our kids, our workers, and our future by making sure California returns to having the best-educated, most skilled workers in the world.

Right now our state faces a two-fold skills crisis. The baby boom generation will retire in large numbers over the next few years leaving huge skills gaps in many areas. And as new sectors like advanced manufacturing and health care rapidly expand, we face a skills gap between workers and new jobs.

Successful workforce training programs begin with a solid K-12 education. All California children need to learn the core skills in reading, mathematics and computer literacy that will allow them to excel in the jobs of the future. We cannot continue to slash education funding and expect that our workforce will have the skills to make our economic strong and competitive. Job training only works when the fundamental skills are in place.

To train and retrain the workforce of the future, California must align training programs with job skill needs and anticipate rapid growth sectors. Training pipelines that build on a solid K-12 education and lead to apprenticeship programs can place skilled workers into appropriate positions. We need to invest in an educated workforce and partnerships with business and labor that train the workforce in growth sectors like health care, clean energy and advanced manufacturing.

Career ladders within new sectors allow workers to advance in their field and increase productivity. Federal health care reform will greatly expand and change the health care workforce. Expanding the roles of home care workers and other health professionals will allow patients in underserved areas and the elderly to access the care they need with the requirement for individuals to have health coverage.

POLICY RECOMMENDATIONS:

Fund Education: Restore the recent $18 billion in cuts to K-12 and billions in cuts to community college and higher education and increase access to higher education by building new and expanding existing campuses across the state.
Jobs Scan: Commission a state job scan to track future job growth as well as existing job training programs in order to align training programs to job needs by region.
Job Training: Track existing federal, state and local funding for job training and set standards, benchmarks and accountability for the programs that are funded.
Training for Quality Jobs: Create a preference for state training dollars to go to labor-management training programs and programs that place trainees in high-wage jobs.
Education for Jobs: Expand career technical and vocation education in the K-14 public schools to connect students with quality jobs upon high school graduation.

4. INVEST IN CALIFORNIA: REVENUE

Private sector job creation requires the state to invest in education, infrastructure and essential public services to support business growth and fuel the economy. That requires a revenue base capable of fueling a robust economy and the public services that meet the needs of a growing population.

California has a choice: we can invest in our future and rebuild our economy, or we can keep wasting billions of dollars on tax breaks for those who need it the least. The rich are raking in more money and paying less in taxes than at any point in decades. Major corporations are racking up record profits and using tax loopholes to get out of paying their fair share in taxes. CEOs are giving themselves multi-million dollar contracts and golden parachutes while stripping away wages and benefits from workers. As a result California faces a perpetual budget crisis forcing more cuts from the programs that our economy depends on.

Corporations in California pay less in taxes than in many other states, including New York, Florida and Texas, because of our lavish corporate tax breaks . Yet corporations that receive tax breaks have no obligation to create or keep jobs in California. Corporations can ship jobs to Mississippi or China on the taxpayers’ dime and we have no recourse to recapture lost budget dollars. The state does not track which companies take tax breaks or what kind of jobs, if any are created. Taxpayers do not even have the information needed to hold corporations accountable for the tax breaks they get. The practice of blindly giving corporations huge tax breaks without any accountability or transparency is wasteful government spending at its worst.

If we are serious about rebuilding California, we should reward corporations that create good jobs in California and punish those that ship jobs out of state with our taxpayer dollars. Every dollar that corporations claim in tax breaks is a dollar that is taken away from our schools, universities and libraries. Every job that corporations send out-of-state adds another Californian to the unemployment rolls and creates a drag on our already struggling economy.

Our current tax code is outdated, riddled with loopholes and creates incentives for corporations to outsource jobs. The only long-term solution to our economic problems in California is a tax system that is fair and benefits all Californians, not just the wealthy few. That means taxing the wealthiest Californians who have seen their incomes skyrocket and tax rates drop over the last two decades. It means making sure corporations pay their fair share and leveling the playing field for small businesses that can’t afford consultants to find tax loopholes. It’s time that we give tax breaks to corporations that create quality jobs here in California and raise taxes on corporations that ship jobs overseas while giving CEOs lavish compensation packages.

POLICY RECOMMENDATIONS:

Fair Taxation: Raise revenue to fund education, public safety and other essential services through fair taxation measures that include taxing the wealthiest Californians and corporate properties at fair rate.
Corporate Accountability: Require clawback provisions on corporate tax breaks so companies that ship jobs out-of-state have to refund the public their money.
Tax Break Reform: Reform the Enterprise Zone program companies can only claim tax credits for the creation of new, high quality, middle class jobs that pay a fair wage with benefits. Credits should be calculated on the amount of wages paid and targeted to the most economically distressed areas in the state.
Create Jobs, Not Tax Loopholes: Require that every new tax break require the creation of net new high-quality jobs and union jobs and include a sunset date and annual review for effectiveness. Require a majority vote to repeal wasteful tax breaks.
Evaluate Existing Tax Breaks: Review all existing tax breaks on effectiveness, cost and creation of high-wage, union jobs. Reform or eliminate ineffective tax breaks and redirect those funds to public programs.

5. CLEAN ENERGY FOR A STRONG ECONOMY

For decades, California has been ahead of the curve in developing a renewable energy technologies and instituting efficiency standards. As early as the 1970s California emerged as a leader in clean energy and the development of solar, wind and advanced battery technology. The state also has a history of instituting policies to both support and push the clean energy economy—from standards for fuel efficiency to the landmark AB 32 to reduce greenhouse gas emissions statewide.

The economic crisis has taken its toll on California’s investment in clean energy. As a result, other countries have taken the lead in renewable energy technology innovation and manufacturing. Despite California’s ground-breaking leadership, today more than 90 percent of solar photovoltaic production happens abroad. The economic crisis has forced California to cut programs that support clean energy research and development as well as the schools and universities that helped foster that innovation.

California still has many advantages that position us for new leadership in clean energy. The state has instituted a number of demand-side policies, such as AB 32 and a Renewable Portfolio Standard of 33 percent. These programs have the potential to create new clean energy markets and jobs. However, state action is critical to ensure that clean energy jobs are created and retained in California. The clean energy technology that is invented here should be built here, from the solar panels on schools to lithium ion batteries.

California can continue its legacy of groundbreaking policies to grow the clean energy economy. By continuing to mandate retrofits and supporting the retooling of existing businesses, California creates a market that will drive innovation and help create jobs here in state.

POLICY RECOMMENDATIONS:

Clean and Green Revolving Loan Fund: Create a state loan and loan guarantee fund for manufacturers that create union jobs in California to retool to meet the environmental standards of AB 32. Extend loans to manufacturers to build clean energy products such as solar panels and related energy efficiency end-products.
Meet Energy Efficiency Standards: Retrofit public buildings using union labor to make them energy efficient and to capture energy savings for the public. By redirecting tax breaks or increasing pension fund investment, cities and counties could retrofit existing buildings, save money and create jobs.
Green Schools: Invest in rebuilding, repairing and retrofitting schools using high quality standards and skilled union labor to be energy efficient using existing state funds for clean energy.

6. GOOD JOBS NOW: ENDING INCOME INEQUALITY

We cannot fix California’s economy by slashing wages, eliminating health care and taking away retirement security. Economic recovery starts when workers have enough money in their pockets to buy products made in California. The creation of living wage jobs with benefits and retirement security will allow California to reclaim our place as a global economic powerhouse.

Creating low-wage jobs not only slows economic growth, but it hurts our budget. You can’t balance the state budget when millions of Californians can’t balance theirs. We can pay for employment that grows our economy or we can pay for unemployment and social services for those workers who still can’t afford to support their families.

A secure economy in California depends on the economic security of Californians. Californians should be working their way into the middle class, not falling out of it. Big corporations use special tax breaks and pay their CEOs billions of dollars while our state’s families struggle to get by.
Taxpayer dollars should go to create economic security for all workers, not just those CEOs at major corporations.

POLICY RECOMMENDATIONS

Keep Workers on the Job: Require worker retention clauses in all state contracts so that if a new contractor takes over, workers’ jobs are protected for 60 days during the transition.
Create Middle Class Jobs: Require companies that receive state contracts, grants or tax breaks to pay a living wage with health benefits and respect a workers’ right to organize without employer interference. Index the living wage rates to inflation to ensure wages increase with the cost-of-living.
Jobs that Build our Communities: Preserve the right of state and local governments to use Project Labor Agreements on public workers projects. Require payment of prevailing wages on any project funded all or in part by public dollars.
Right to Organize: On every project that uses public funds, workers should be allowed to choose a union free of coercion or intimidation through majority sign-up and employer neutrality.