Welcome to the August Bio/Med issue of NorthBay biz. What is it about the North Bay that continues to attract tech companies? Just a few years ago, the telecom industry was expanding exponentially here, until changing market forces brought a screeching halt to that and drove many companies to either reinvent themselves, consolidate through sale or acquisition or simply close their doors. However, right on the heels of that contraction and with persistence unique to the tech industry came the arrival of another wave of companies specializing this time in med-tech, biotech and nanotechnology. The emergence of these new companies broadens the mix of existing businesses in the North Bay and bolsters the local economy. In our cover story, “The Biotech Trek,” you’ll learn how this industry is beginning to hit its stride and what that means to the North Bay. There’s also a great assortment of other stories in NorthBay biz this month, plus all our columnists and, of course, all our new and regular features. So, please enjoy this month’s magazine and remember your feedback is always appreciated.
In his budget remarks to the California State Senate on June 27, as the Senate debated the passage of budget bill AB 1801, Senator Tom McClintock told his colleagues they had an unprecedented opportunity to put the State of California’s fiscal house in order—finally! This was the long-awaited opportunity to refloat the boat and recapture California’s fiscal integrity. That’s especially significant since the state is carrying $9 billion in debt from the Davis years. However, California has some cash in the bank thanks to the $9 billion it borrowed through the passage of Prop. 57 last year. So here’s the long-awaited golden moment to erase the state’s debt…right? Could there be any other answer?
This year, a rebounding economy accounted for $7.5 billion in extra tax revenues that no one was expecting. What should the state do with this unexpected windfall? This question, of course, is where the rubber meets the road. McClintock argued that despite a 23 percent revenue increase over the past three years, the proposed budget they were about to vote on amounted to a 29 percent increase in spending over the next three years. In round numbers, this year’s state income is $94 billion and the budget calls for $101 billion in spending—a $7 billion deficit. So the money the state has in the bank isn’t enough after all, because if this budget passes, debt would grow to $16 billion. Last year’s state budget was $90 billion. So if the budget increased to $94 billion, spending would equal income and all the “sorely” needed programs could still be funded at record levels. Pretty novel idea isn’t it? Spending only what you bring in. You know, sort of how you and I run our business and/or household. Of course, we’re spending our money when we do this. When the politicians spend, they aren’t spending their own money, they’re spending ours. So I guess they don’t really have to be responsible or sensible in their rush to fund special interests!
Senator McClintock concluded his remarks on the Senate floor with the following: “At this fleeting moment in our history, having just enjoyed a huge surge of revenues, we’re within reach of putting the state’s books back in good order. We have the revenues to accommodate a brisk 23 percent increase in spending over just three years and still have the money in the bank to pay off the Davis debt in full. We can start fresh—and put all the damage of the Davis years behind us. But if you adopt this budget and run up spending at the unsustainable rate of 29 percent—while producing a record budget deficit in a time of plenty—then that moment of opportunity will slip from our fingers and we will expose the next session of the legislature to the very real risk of an unprecedented and intractable fiscal crisis. And I have to ask in all earnestness, why in the world would you want to do that?”
The California State Senate approved budget bill AB 1801, by a vote of 30 to 10 on the evening of June 27, 2006. So thanks to our elected officials, who once again have failed to grasp the basic precepts of Econ 101, the State of California remains on the road to perdition.
In another vein, but equally as damning to the state and country, we often hear corporations bemoan the ever-growing cost of government regulation as a major impediment to economic growth and vitality. Apparently this complaint is made with good reason because when Federal regulations are looked at in their entirety, the annual costs are staggering. The Competitive Enterprise Institute just published its annual report on Federal regulations titled, Ten Thousand Commandments. The report states regulatory costs in this nation exceed all pretax corporate profits ($874 billion) and all personal income taxes ($894 billion) combined. President Bush’s budget calls for $2.77 trillion in discretionary, entitlement and interest spending. That however, is the on-budget scope of the federal budget. When you add environmental, health, safety and economic regulations into the mix, there are $1.13 trillion in off-budget costs every year. That’s almost half the amount of the entire federal budget. This is the extent of the hidden tax of regulation on our economy—a trillion-pound anchor dragging at the nation’s prosperity. It’s gotten so out of control that regulatory costs are more than triple the $300 billion-plus budget deficit.
The 2005 Federal Register, the depository of all federal rules and regulations, contains 73,870 pages. There are 4,062 new regulations in the pipeline. Of those, 137 are deemed “economically significant” meaning each will have a minimum $100 million impact. And of particular interest to most readers of NorthBay biz, of the 4,062 new regulations, 788 will directly impact small businesses. To further help put into perspective the runaway effect of federal regulations, while Congress passed and the President signed into law 161 bills in 2005, regulatory agencies issued 3,943 final rules. It seems clear, that often, new regulations are nothing more than new taxes, without the bother or negative press attendant to really having to vote on the tax increase in Congress. All I ask here is some accountability. By piece-mealing almost 4,000 new regulations through all the various federal agencies, it’s very easy to keep the overall impact out of the public’s view. However the ever-rising costs to businesses and individuals is real. Why not have Congress do its job and review regulations and vote on them as it does all other federal spending, weighing the benefits against the costs before a new regulation is made final? As it is now, the agencies, in effect, wield the power to tax us and I don’t remember ever voting for the bureaucrats who are making these decisions.
That’s it for now. Enjoy this month’s magazine.
