FRESNO, Calif. (FOX26) — California is the land of innovation.
But whether the innovators—and their companies-- stick around, is another story.
A recent report by the Hoover Institution found twice as many companies moved their headquarters out of California in 2021, compared to 2020.
"There's been this view among policymakers that 'Oh, well, you know, we'll lose a few businesses. But we will start new businesses.' Yeah, that's true, businesses will start here, but the real problem is that they end up leaving," says Lee Ohanian, Senior Fellow with the Hoover Institution.
Ohanian co-authored the report released in September.
It found 352 companies moved their headquarters out of state between 2018 and 2021 – with countless more moving warehouses or production facilities.
It counted 46 headquarters that relocated in 2018.
That number ballooned to 153 in 2021.
These include big names: Oracle, Tesla, Charles Schwab, and the list goes on.
"We're not only losing the really big companies,” Ohanian said. “We're also losing some small, very rapidly growing companies. Some of which could become the Google or the Apple and Microsoft of tomorrow."
The reasons vary—but there are some common ones including high tax rates, punitive regulations, high labor costs, and a high cost of living.
Many CEOs say their employees can’t afford housing in bigger cities like San Francisco.
Red tape – including long permitting processes-- doesn’t help, either.
Economic policy evaluations by the nonpartisan American Legislative Exchange Council ranked California’s business climate 48th out of 50 states.
“We’re not making it easy,” said Ohanian whose co-author, Joseph Vranich, owns a business relocation service.
So, CEOs are left to look elsewhere.
One big destination: Texas, which has no personal tax rate.
Between 2018 and 2021, 132 business moved their headquarters from California to the Lone State State.
"Why Texas? Why not?" says Ed Curtis, CEO of YTexas.
Curtis’ group provides a corporate relocation concierge service to help cut through red tape and connect CEOs with key people in the community and state.
"They feel like the state is on their side,” Curtis says.
“It's the business community and legislators basically saying to them, ‘Welcome to Texas. What can we do to make your life easier?’ They are blown away by that.”
Curtis says one selling point is Texas’ vast investments in infrastructure, which helped prepare it for steady growth over the last ten years.
The Covid pandemic made a difference, too.
"People were moving here like crazy during Covid for a number of reasons. Probably the main reason is that we were open for business and other states weren't," Curtis said.
YTexas hosted the YTexas Summit in September and is planning another in October of 2023.
So what is California doing about the exodus?
The Governor's Office of Business and Economic Development wasn't available for an interview.
But, it did highlight California is on the heels of being the 4th largest global economy.
It also provided Fox26 a list of 15 businesses that either started or expanded in California in the past two months.
These include Tesla, which built a new mega factory in Lathrop to produce its new "battery energy storage system" or BESS; Amazon, which opened a new fulfillment center in Turlock; Amgen, which opened a research and development site in San Francisco; and SIR robotics, an Italian firm that chose Sacramento for its U.S. headquarters.
The state also offers the California Competes Tax Credit for businesses looking to move to California or stay and grow.
Businesses compete for $180 million in income tax credits, judged on a number of factors including the number of jobs created, training opportunities, economic impact, and amount of investment.
So far, Fresno County in Central California has been bucking the trend, says Will Oliver with Fresno County Economic Development Corporation.
"We actually have more deals than we have available buildings and land property,” Oliver said.
He says Fresno County EDC is constantly looking for ways to attract businesses-- and help those already here, expand.
"Compared to Southern California, Bay Area we can move projects much further through the process. It depends on municipality, it depends on context of type of property, what’s required," Oliver says.
Along with collaborating with local city governments, EDC also works with other organizations to help companies find a skilled labor force –- or train one.
Fresno County EDC received a $23 million grant from the U.S. Department of Commerce through the "Good Jobs" challenge, which is focused on connecting employers with a trained workforce while removing systemic barriers.
The Central Valley Community Foundation received another $65 million in Build Back Better Act funds.
Oliver says the money that can be used to train welders, machinists, assemblers, and other trades.
Another incentive program, in collaboration with social services, gives businesses a 100 percent wage reimbursem*nt for the first three months.
"I think the state legislature, Republicans and Democrats, should be thinking about how we can be agile, how we can be competitive. Evaluating our regulatory landscape, also evaluating our incentives and programs that have been on the books for some time," Oliver said.
Ohanian agrees, lawmakers need to reconsider how policies are affecting businesses.
"The state needs to make some changes in economic policies, taxes, regulations, the ability to build new housing, the ability to put in new infrastructure,” Ohanian said. “Those are all areas that are fixable if the political will is there and there's a clear vision".
Ohanian said some Republican lawmakers did contact him, to thank him for the report’s findings.
He says they told him they have been raising the same concerns for years.
As of late November, no one on the Democratic side has reached out to him.
