Regional Report: The West

How-the-States-Stack-UpA mix of fresh, local talent and experienced California transplants characterizes the start-up sector across the Western and Rocky Mountain states. Washington’s appeal to Silicon Valley refuges makes the state “a magnet for entrepreneurs and highly qualified technical people,” says Michael Schutzler, CEO of the Washington Technology Industry Association.

California (No. 50)
Washington’s rapidly expanding technology cluster outpaces the ability of schools to produce qualified workers. “We go on recruiting expeditions all over the country and fill our companies with people from everywhere else,” he adds. Keynote speeches at association events have featured such icons as Bill Gates, Howard Schultz and Jeff Bezos. Opportunities in neighboring and nearby states suck in talent and capital. In California, outbound companies outnumber inbound about 10 to one, estimates James Renzas, principal of the RSH Group, an Orange County site-selection consultancy.

Companies “don’t feel they’re getting their money’s worth from their California taxes,” says Renzas. Last year’s personal income tax increase, the downsizing of statewide as well as local economic development programs and the expansion of competitive relocation offers from other states helped additionally sour the state’s image in the eyes of business owners and chiefs. The Global Warming Solutions Act, with its mandated greenhouse gas emissions reduction schedule, is particularly galling.

“California now relies on its past to attract companies,” he says. “You can only do that for so long.” John Kabateck of the National Federation of Independent Business calls California a “tragic paradox.” “We are a state of great natural beauty, abounding in research hubs, a well-educated work force, enormous entrepreneurial vitality and incredible amenities,” says Kabateck, who represents the state on behalf of the organization. “But what’s disheartening is that these elements are overwhelmed by the burdensome and onerous business climate.” He lists his grievances: sales tax, income tax, corporate tax, oil and energy tax, minimum wage and others, each the highest, or among the highest, of any state.