CALIFORNIA CHAMBER OF COMMERCE

EXECUTIVE SUMMARY Strategy for Economic Recovery

State Issues Economy: Economic Recovery, Job Creation Depend on Policy Choices Affecting Business Costs Protecting California’s economy over the next 12 months will be a key challenge for policy makers. The state’s recession is expected to last until the second quarter of 2002, at the very least. The California Chamber recommends: continuing California’s investment in infrastructure, expanding incentives to investment, protecting businesses from unreasonable increases in cost and promoting California tourism, both inside and outside California.

Workers’ Compensation: Workers’ Comp System Reforms Needed to Reduce Waste, Boost Benefits for Injured

For the third year in a row, employers renewing workers’ compensation increases are likely to see steep price increases due to higher system costs. Several significant factors contribute to driving up the cost of premiums, including an increase in the pure premium advisory rate, a surcharge to cover the cost of carrier insolvency, and increased systems cost, particularly in the area of medical costs. The California Chamber supports clarity of employer responsibilities and liability; a fraud-free system; employees healed, compensated for their loss of ability to compete in the marketplace and returned to work; litigation kept to a minimum.

Education: Academic Standards, School Facilities, Critical to Educated Workforce The last four years have produced the most significant investments and reforms in California’s K-12 public education system. The business community has supported efforts to increase public school funding, with a focus on making sure local school districts have the flexibility to use the resources as a reward for improved performance. The business community also has been instrumental in bringing about many changes, including higher academic standards, smaller class sizes and an improved system of student testing and school accountability. The business community supports these efforts because it must ensure an educated workforce is available to meet the demands of the 21st century economy. The California Chamber will continue promoting the need for accountability, competition and local control. In addition, the Chamber will work with a legislative-appointed committee in preparing a “master plan” for education, which will discuss many of the pertinent issues affecting education today and into the future. The Chamber believes providing additional state funding for school facilities is a key step toward ensuring that quality education is available for California’s future workforce. Efforts also should be made to expand career technical education opportunities for those students who may never go to college or earn a college degree.

Transportation: Transportation for California’s Future: Efficient Use of Scarce Dollars Important

Californians in every part of the state are aware of and concerned about the mobility problem. In addition, travel demand is expected to increase gradually in 2002, and once again airport scheduling and capacity issues will have an impact on the airline traveler. California must begin to consider ports as an integral part of the state’s transportation system and fund improvements commensurate with their impact for the benefit of all Californians.

The California Chamber believes six steps must be taken to ease congestion and prevent gridlock in our transportation system and economy: keep local transportation sales taxes; enhance state funding by permanently dedicating the sales tax on gasoline to transportation (Proposition 42 on the March 2002 state ballot); maintain federal funding; encourage state support to keep California ports competitive; support capacity improvements to California’s airports; become more innovative in dealing with congestion. To make efficient use of scarce dollars, the state should prioritize spending and planning, encourage multi-use, support high-use mass transit (such as buses), expand capacity and improve the efficiency of the existing system.

Privacy: Sharing Information May Help Many Firms Get through Economic Slowdown

In 2002, California businesses will face the difficult task of maintaining profitability in a slumping economy. As a result, the use of efficient marketing strategies will become greatly important. The California Chamber will lead a coalition of businesses, Internet providers, insurers and bankers to fight burdensome “opt-in” legislation. Many businesses will need the freedom to share consumer information to help them stay profitable in the uncertain economic times ahead. California Water: Securing Adequate Water for California Depends on Joint State-Federal Approach The water system that contributed to California’s emergence as one of the world’s major economic powers is faltering. Existing facilities are unable to meet current public demands. California is a dry winter or two away from a drought and subsequent water rationing for some parts of the state. The California Chamber believes regulatory consistency and stability are two essential components for any strategy that attempts to integrate the many water issues confronting the state into one long-term, comprehensive water plan. The Chamber supports the Calfed Bay-Delta process so long as it continues to focus on a long-term solution to the problems in the Delta. Until solutions to the many problems in the Delta are addressed, many areas in the state will be prone to frequent and potentially severe water shortages. To this end, any solution must include new supply,

storage and conveyance elements. California Growth: Housing Supply, Cost Solutions Can Help Stimulate Economy in State’s Job Centers California’s population has grown by approximately 5 million people each decade. If current trends continue, California will build less than 60 percent of the new housing units needed to accommodate population growth. Addressing the multitude of challenges associated with the state’s growth will necessitate attacking several policy issues. For the second year, the California Chamber will be leading the Job-Center Housing Coalition of business, labor and development interests to fashion public policy proposals to promote housing production in the state’s job centers. These policy proposals will include, but not be limited to: increased infrastructure financing, construction dispute resolution, reform of the California Environmental Quality Act and allocating more property tax revenue to local governments to create incentives for economic growth.