On the pulse of California's small business owners

Despite the historic rise in California's unemployment rate, two recent polls suggest that small business owners are cautiously optimistic about our state's future economic climate. Working today to remove the regulatory obstacles of Sacramento can turn the expectations of small businessmen and women into reality.

Released this week were the results of Union Bank's 10th Annual Small Business Survey, which interviewed 2,541 participants across the state on important industry issues. Overall, 53 percent of respondents believed the recession's impact will end in the next 12 to 18 months, a 17 percent jump from last year's survey results. Underscoring this belief is that more business owners expect to increase capital expenditures this year than in 2009 (reversing a nine-year low), and less than 5 percent anticipate cutting their workforce over the next eight months.

Union Bank isn't the only one discovering good feelings among the Golden State's capitalists. Earlier this month, Small Business California (SBC), an advocacy organization based in San Francisco, released the results of their annual survey of over 2,600 small business owners. SBC also found that more small business owners see the light at the end of the tunnel than last year; 40 percent believe that California's small business climate will be "somewhat better" or "much better" in the next few years, a jump from the combined 27 percent of respondents who stated the same in 2009. Though the forecast for tomorrow may be sunny skies, our business climate today is still a stormy mess. SBC pollsters found a whopping 85 percent stated that today's economy is "poor" or "very poor," and that the business climate for small enterprises is equally wretched (36 percent poor, 47 percent very poor). Sour economic times have cost business owners dearly; a full 68 percent of respondents stated their gross revenues decreased over the last 12 months, leading 43 percent to reduce the number of employees on their payroll last year.

In 2010, most small business owners are taking modest steps to rein in costs, avoiding deep layoffs and other draconian measures. Asked how they are managing business costs, 78 percent of respondents to the SBC survey stated they were delaying purchases and other expenditures, while nearly half (48 percent) were choosing to delay pay increases for employees, as well as reduce working hours. Breakout data from the Union Bank survey finds that San Diego County small business owners are equally guarded about their finances -- 69 percent plan to maintain the same staffing levels from 2009, and 64 percent intend to keep capital expenditures the same as last year.

With small business owners merely treading water this year, state lawmakers should spend some time reflecting on how their fiscal mismanagement and penchant for creating red tape have had a profound and negative impact on the lifeblood of our economy. The Union Bank poll found that 56 percent of San Diego County small business owners felt that the state's 2009 budget crisis (which raised income and sales taxes) had a moderate or significant impact on their enterprise. More defined, Sacramento's inability to cultivate a pro-growth business environment in California has cost the state billions in lost economic activity and millions of jobs; a September 2009 study commissioned by the California Small Business Advocate's Office, the total economic cost of state regulations on small businesses weighs in at a staggering $492.9 billion, depriving our workforce from 3.8 million additional employees.

If there was ever a public mandate for advancing a small business reform agenda at the state Capitol, that time is now. It's never too late to do the right thing, and 2010 can be a fresh year to pursue an economic strategy that gives tax and regulatory relief to those that need it most in the Golden State.

Both polls give a clear indication as to the policy preferences of these struggling businessmen and women. Among the issues chosen by SBC survey respondents as "top priorities" for state legislators to address, the economy (71 percent), access to and cost of health care (49 percent), the quality of public education (47 percent) and too much small business red tape (36 percent) elicited the highest responses. Union Bank's poll also found the state economy to be the primary concern of small business owners, with state and local business taxes following as the second largest (38 percent). Union Bank responses from San Diego County interviewees mirrored the statewide results.

Republican and Democratic lawmakers in California are encouraged to partner on a legislative agenda for small business owners: among respondents to the SBC poll, neither party was viewed as an overwhelmingly better representative of small business interests than the other. With his last year in office, Gov. Arnold Schwarzenegger, the self-proclaimed "post-partisan governor," has one more chance to make a lasting impression on the statewide electorate. Small business owners (and their advocates) will be watching to see if he is potent enough at the state Capitol to deliver a more business-friendly foundation for economic growth and job creation today.

Vasquez is the senior policy analyst at the National University System Institute for Policy Research.

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