Panel
Creative California: Where the World Comes to Innovate
- California is expected to remain the world's primary innovation center due to its university system, though long-term scaling incentives in Canada, Hong Kong, and other regions are viewed as increasingly competitive temptations.
- Financial projections indicate a transition from a $27 billion deficit faced two years ago to a projected surplus of $4 to $5 billion for the current year, with a strategy to reduce a debt "wall" of over $30 billion by $3 to $4 billion annually through 2017.
- Solvency issues involving debt and entitlements, currently on a collision course for the next three to four years, are expected to be resolved, provided the state shifts from a defensive posture to aggressive economic partnerships and regional development pilots.
- Significant risks include a potential collision on energy costs within the next year and a half driven by Prop 30 and AB 32, which could substantially hinder manufacturing recovery, alongside rising corporate taxes, income taxes, and capital gains taxes that may push companies to leave.
- Companies like Capstone Turbine face pressure to move operations to lower-cost locations such as Texas, Alabama, South Carolina, or Asia, while the medical device industry sees factories for printed circuit boards shifting to Malaysia or China, threatening the retention of second and third plants.
- The state faces a "collateral damage" risk where companies start and innovate in California but do not stay long-term, or where talent educated in California stays in other states due to perceived inferior K-12 and higher education quality.
- To address skills shortfalls and high tuition costs, there are plans to leverage online digital education (MOOCs), implement universal standardized lower division courses, and require computer science as a standard K-12 course starting at age five.
- Economic growth projections warn that without investing in engines of growth like education and infrastructure, California risks "flatlining" at 1.1% annual growth compared to the 3.7% seen during the 1950s through 1980s.
- Specific proposals to retain manufacturing and innovation include subsidies for R&D (matching Canada's 40 cents per dollar model), labor hiring subsidies similar to farming programs, and matching labor rates to Mexico or China.
- The state aims to reassert national leadership on immigration reform, specifically the H-1B issue, and federal R&D tax credits, while also advocating for organic growth and retention strategies rather than solely focusing on recruitment.
- A unique workforce advantage of sophisticated investors and a "fail fast" culture is identified as critical to preserve, with warnings that these elements could be lost if taxes and regulatory environments push the "best and brightest" out of the state.
- Demographic concerns highlight a drop in women graduating with computer science degrees from 34% in the mid-1980s to around 12% nationwide, necessitating a redesign of educational strategies to prevent losing the lead in the future business sector.
- Future strategies involve a new privately funded economic development plan utilizing pilots to build momentum in specific counties, shifting the focus from Sacramento-centric preaching to regional collaboration across the state.
- The panel expects the governor's office to demonstrate energy and passion for economic development over the next two to six years, moving away from "casing other people's joints" to actively connecting economic dots east to west.