Lt. Gov. Gavin Newsom Pushes Ambitious Economic Development Plan

Export more, increase innovation, get greener and manufacture more of what is invented in-state, are the cornerstones of an economic development plan being unveiled today (July 29) in San Jose by Lt. Governor Gavin Newsom.

Nine months in the making, the 30-page Economic Growth and Competitiveness Agenda for California lays out a general strategy to improve the state’s economic condition and competitiveness as well as a few specific steps to implement it.

“This document and the actions it calls for outlines how we can retake control and drive forward again, moving California back into the lead on sustainable growth and real job creation – regaining our leadership role as America’s opportunity capital,” Newsom says in the report’s cover letter. “It marks the beginning of a statewide conversation about how we can win again.”

Since taking office, Newsom has made economic development and job creation the centerpiece of his administration, using his office as a bully pit to trumpet the state’s need to not only revitalize but also transform its economic policies.

“This agenda does not seek to recreate the past and restore the jobs lost to global competition or to revive the debt-fueled follies of the past,” the report says.

“It embraces the shift from a consumption-based economy to a production economy focused on global trade.”

For an overall economic model, Newsom turns to Bruce Katz, the vice president and founding director of the Metropolitan Policy Program at the Brookings Institute in Washington DC. Katz preaches a “next economy,” which he explains in a December 8, 2010 speech in Chicago, Illinois.

In the speech, Katz says the following, quoted almost verbatim in the fourth paragraph of Newsom’s report:

“We must shape a different kind of US economy…where we export more and waste less, innovate in what matters, produce and deploy more of what we invent and ensure that the economy actually works for working families.”

Newsom applies the same broad goals to California.

Like Katz, Newsom says the state’s metropolitan areas will drive most of this “next economy.”

California’s largest 11 metropolitan areas already house 87 percent of California’s population, provide 88 percent of all jobs and generate 90 percent of the state’s economic output.

They are: Los Angeles, San Jose, San Diego, San Francisco, Sacramento, Riverside, Fresno, Modesto, Stockton, Oxnard and Bakersfield.

Some are strong in exports, others in winning new patents, others in the educaiton level of their workforce and others in percentage of “green” jobs.

Newsom suggests a variety of policy changes, including additional incentives to retain existing manufacturing and lure more to California.

That would allow a greater number of new products being developed through the venture capital flowing to the state to be created here, adding more well-paying, middle-skill jobs.

California receives more venture capital than all other states combined but, too often, after the new product is created the actual manufacturing takes place elsewhere.

Among some of the report’s recommendations:

–Develop more research and development partnerships between business and academia.

–Push for federal Research and Development tax credit renewal.

–Foster more collaboration between higher eduation and small businesses — by the far the largest creator of new jobs.

Among the more novel suggestions in the report is to allow programmers to compete to create an application that allows businesses or wanna-be entrepreneurs to register for state and local taxes, obtain the proper licenses and appropriate permits all in one transaction.

Several of Newsom’s recommendations are familiar.

Improving the state’s transportation network and building other public works projects that support the economy and ease the mvoing of exports to market is a concept dating back to Gov. Pat Brown.

Newsom would also have a team of researchers examine the effectiveness of state’s various tax incentives, a process that has been conducted off-and-on for several decades.

The researchers are charged with determining which ones work, suggesting elimination of those that don’t and recommending alternative approaches “with measurable economic impacts” that could be introduced as legislation in 2012.

Permitting should be streamlined and the state’s regulatory thicket thinned, Newsom says.

Attempts to overhaul California’s voluminous Code of Regulations date back to at least the mid 1970s when one of Newsom’s predecessors as lieutenant governor, Leo McCarthy, introduced a “regulatory reform” package as the Assembly’s speaker.

This year, Senate Democrats introduced a measure in February, SB 366, requiring all state agencies to do a “top-to-bottom” review of their regulations to find “duplicative, inconsistent or outdated provisions.”

The bill has never had a hearing.

“The state must consolidate permitting and regulatory reviews into a single agency and give it the explicit mandate to simplify — to the greatest extent possible – business development, creation and retention efforts,” Newsom’s agenda says.

During his first go-round as governor in the 1970s, Jerry Brown created the Office of Administrative Law whose job was to review all state regulations for clarity, duplication and economic impact.

As part of his agenda for the next six months, Newsom seeks the creation of “action teams” of “government and business leaders” to find state and local permitting rules that “pose the greatest barrier to speed and certainty as a result of inconsistency and redundancy.”

Given their past pronouncements, Republicans would be quick to select California’s Environmental Quality Act as fitting those criteria. The Legislature’s Democratic majority would strongly disagree.

Newsom also advocates revival of California trade offices, urging a “state presence” in China within six months.

He suggests piggybacking on existing efforts by the Bay Area Council and the Los Angeles Economic Development Corporation.

The Bay Area Council opened an office in the Yangpu District of Shanghai in June of 2010. China is Los Angeles County’s Number One trading partner.

Another of Newsom’s “action teams” would compile a list of other countries and markets the state should next enter.

A major focus of Newsom’s agenda is increased manufacturing, which is now comprised mainly of small to medium-sized businesses.

The action plan advocates another “action team” be created to “develop and prioritize highly specific proposals” to speed development of more manufacturing including possibly equipment purchase tax exemptions, advance permitting for land sites slated for manufacturing and other changes that would drop California’s operating costs to better compete with other states and countries where those costs are cheaper.

Higher education – from community colleges up – also needs to retool and refocus in order to create the broad array of multi-skilled and nimble workers necessary for California to prosper, the report says.

But, Newsom notes:

“The agenda to repair California’s vast education and workforce development system is beyond the scope of this plan.”

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This from California Chamber of Commerce President Allan Zaremberg:

“(We) applaud the lieutenant governor for joining us in putting jobs, the economy and California’s business climate front and center.  We particularly appreciate … highlighting the importance of international trade and the global economy, regulatory reform and the priority Sacramento policy makers must place on doing no more harm to our economy.  We look forward to working with the lieutenant governor as California moves from agenda to action.”

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