California Gov. Gavin Newsom, 53, has nothing to say about the raft of businesses that have left the Golden State because conditions under his rule have become intolerable. When the world’s second richest man Tesla and SpaceX CEO 49-year-old Elon Musk decides to move out the state it’s a slap to the governor. Newsom’s Covid-19 lockdown restrictions have made it impossible to run a business in California, unless telecommuting is a viable option. For the hospitality and restaurant industry, it’s just not an option, leaving the state in ruins financially. Businesses are now seeing more heavy-handed regulation and taxes on the horizon, prompting some high profile industries to pack up and get out. Texas and Florida have become more business-friendly environments for many California-based businesses. Musk already had his run-in with Newsom over shutting down his Freemont Tesla plant last spring.
Musk doesn’t want any more surprises from a governor that is in over his head, drowning in debt with only one hope for a bailout from the Biden administration. Newsom already asked the Trump administration for $1 trillion for a three-state consortium to be split with Oregon and Washington State. California’s currently running at least a $54 billion budget deficit, perhaps a much as $100 billion. Newsom can’t possibly think that only the federal government can make California whole, relying instead on over-regulation and taxation. Musk’s decision to move to Austin, Texas shows that Texas has capitalized over the years on businesses unable to profit in California’s high tax and regulation atmosphere. Tech giant Oracle Corp.’s Larry Ellison also announced that he would be following Musk to Austin, citing California’s unfriendly business environment under Newsom.
Ellison plans to keep his headquarters in Redwood City for now but all options are on the table. “We believe these moves best position Oracle for growth and provide our personnel with more flexibility about where and how they work,” Ellison said. Over 670,000 Californians have moved to Texas over the last 10 years, averaging about 67,000 a year. Texas has about 13% of its population from California over the last 10 years. Last year 82,235 Californians moved to Texas, under the 2018 peak of 86,164 but accounting for 300,000 more Californians move to Texas, than Texans moving to the Golden State. Real estate values in most preferred urban areas in California are about four-to-five times more costly than urban areas in Texas, accounting for why less Texans move to California. One-bedroom apartments rent for $2,600 in San Francisco compared to $1400 in Austin.
Texas has lower state taxes and more relaxed regulations for businesses, making it a preferred destination. While the Census Bureau has not yet reported on 2020 trends, Allied Van Lines, the nation’s largest mover, says that more people are moving to Texas and Florida than California. When Hewlett-Packard [HP] announced it would relocate from Silicon Valley [San Jose suburbs] to Houston, it expects to add some 2,600 jobs to the Houston area. Unlike Oracle that hasn’t yet committed to leaving Silicon Valley completely, HP plans to build a state-of-the-art headquarters in Houston. “HP’s largest U.S. employment hub, Houston, is an attractive market to recruit and retain future diverse talent,” HP said in press release. Pulling the plug on California, Musk planned to build $1.1 billion assembly plant in Austin that will bring about 5,000 jobs to the area, dealing California a big blow.
Newsom has a real problem dealing with the state’s Covid-19 response without turning off existing and future businesses in California. If trends continue, California will have protracted recession, driving many more residents out of the state. When you consider the exorbitant cost of living, especially rent and home prices in California’s big cities, it’s no wonder companies are relocating because it’s hard to get talent to relocate to California. Florida and Texas have clearly made a play for California’s best-and-brightest, especially in the tech industry, to take up residence in more affordable, family-friendly locations. With the Covid-19 pandemic spiking unemployment, cost considerations are more pressing that ever for young residents looking to survive, raise families and have a future. Rioting, looting and anarchy also drive residents to places where it’s more suitable to raise families in peace.
Watching companies vacate California for more business-friendly environments shows that Newsom has failed as a governor to create optimal conditions for struggling workers. Whether Newsom gets bailed out or not by Biden, California under Newsom doesn’t take seriously the awesome responsibility of creating a hospitable business and family environment for young residents. Companies like Tesla, Oracle, HP and Toyota have seen the handwriting on the walls in California, that the Golden State is no longer competitive to attract business and young families. With the cost of living only getting higher in California’s big cities, look for the mass exodus to continue with more employers and families relocating to more hospital places. Newsom proved he’s not the right guy to manage the Covid-19 crisis but certainly not the right person to attract businesses opportunities to the state.
