6 Things Legislature Can Do to Help State Recover from Economic Devastation

The COVID-19 pandemic has devastated the California economy, especially public-facing businesses. Entertainment—including motion pictures, television, live shows and theme parks—restaurants, accommodations and retail sectors have been laid waste, evaporating thousands of jobs.

Few states depend on this sector as does California. Tourism, hospitality and retail also are the very sectors that employ workers on the lower rungs of the economic ladder. The supply and service chains that feed into and out of those industries are likewise on the brink. Like a boulder crashing into a lake, the longer this crisis persists, its waves will widen their reach and affect more industries and throw more Californians out of their jobs.

Governor Gavin Newsom has focused on the factors necessary to reopen the economy, including increased testing, contact tracing, availability of personal protective equipment and re-engineered workplaces. More recently the Governor has begun to loosen some of the initial stay-at-home restrictions.

California businesses have volunteered their support in numerous ways, including altering manufacturing operations to produce PPE and other necessary supplies. Restaurants are donating food to vulnerable populations in their communities. Many businesses have continued paying employees’ wages and benefits, even though the employees are not working. Employers are finding ways to help out where they can.

Employers have also reworked their operations and made significant changes to the physical environment and work practices, including health screening, personal protective equipment (PPE) and social distancing, among others, to make employees and consumers feel safe once back in business.

That said, the private sector cannot be the safety net for this crisis; that is the role of government. Instead of imposing new burdens on employers, the key is to alleviate financial pressures so they can recover and rebuild the workforce.

Policies to Boost Recovery

With the Legislature returning to work, state leaders can adopt policies that will boost recovery and mitigate the worst of devastation. Economic recovery and public health should be their exclusive focus in the 2020 session.

• First, do no more harm. State leaders should reject new taxes on employers and working Californians and resist new regulatory or statutory mandates.

• Second, improve liquidity for businesses to buy time for economic recovery. Lawmakers should conform state tax law to ensure small businesses do not pay taxes on emergency federal assistance, reinstate net operating loss carrybacks to alleviate cash flow burdens on businesses expecting a loss this year, and suspend the requirement to prepay 100% of estimated sales tax liability based on last year’s collections.

• Third, postpone nonessential compliance and rulemaking activities. Dozens of state agencies are committing regulatory business-as-usual. Instead, they should pause all non-essential state regulatory functions not urgently needed to protect human health and extend the time to implement rules that have not yet taken effect, such as California Consumer Privacy Act regulations.

• Fourth, eliminate disincentives against telecommuting. Even when the economy reopens, employers will need to limit the number of people in the workplace. Telecommuting provides that alternative, but employers will only embrace that option if it doesn’t lead to liability and frivolous litigation.

Lawmakers should also settle the continuing uncertainty created by AB 5 over independent contractor status for numerous occupations and business conditions, such as enabling workplace protections for freelancers without jeopardizing their status.

• Fifth, jump-start global tourism marketing for California once the all-clear is sounded for public gatherings.

• And sixth, boost economic activity and construction jobs by streamlining new housing, public infrastructure and commercial developments. Remove incentives to litigate and delay, temporarily pause new mandates on analysis and mitigation of vehicle trip thresholds, and place a cap on development fees for new housing projects.

State and local governments can also improve their guidance to employers on compliance with the many COVID-19 orders. Once the state begins reopening the economy, it should take care to issue clear and concise guidance that reflects operational considerations for the diversity of industries across California. It should also counsel local jurisdictions to conform to state guidance to ensure business re-openings are as uniform as local conditions allow, and that compliance with new orders is easily understood.

Like no time in our modern history, all Californians must pull together to overcome this unprecedented convergence of natural disaster and government-ordered shutdown. Business as usual is not an option.

Loren Kaye is the president of the California Foundation for Commerce and Education, a think tank affiliated with the California Chamber of Commerce. This guest commentary first appeared on CalMatters.org.

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Loren Kaye was appointed president of the California Foundation for Commerce and Education in January 2006. He has devoted his career to developing, analyzing and implementing public policy issues in California, with a special emphasis on improving the state's business and economic climate. He also was a gubernatorial appointee to the state's Little Hoover Commission, charged with evaluating the efficiency and effectiveness of state agencies and programs. Kaye served in senior policy positions for Governors Pete Wilson and George Deukmejian, including Cabinet Secretary to the Governor and Undersecretary of the California Trade and Commerce Agency. See full bio.