California Foundation for Commerce & Education California Chamber of Commerce March 2012

◦ Online survey with 42 questions regarding the current California economic and business climate ◦ Multiple choice options randomized to avoid bias ◦ 699 responses generally reflecting the California business market by size of company, geographic location and industry ◦ Margin of error is ± 3.8% at 95% confidence level. ◦ Third in a series: 2008 and 2011 Quantitative Study questions repeated for trends ◦ New questions added to obtain input on current political and policy issues

Generally speaking, do you think things in California are going in the right direction, or do you think things have gotten pretty seriously off on the wrong track?

How would you currently rate California's economy?

What is your outlook for California's economy over the next year?

Would you say it is easier or harder to do business in California than in other states?

What would you say is the single biggest CHALLENGE to doing business in California? And, what would you say is the SECOND biggest challenge to doing business in California?

What would you say is the single biggest ADVANTAGE to doing business in California? And what would you say is the SECOND biggest advantage to doing business in California?

What is the outlook for your own business over the next year?

Overall, has your company added or reduced jobs in California over the last year? Does your company plan to add or reduce jobs in California over the next year? * Respondents can check all that apply

Does your company provide health care as a benefit to your employees? Why does your company not provide health care as a benefit to its employees?

 Main Reason: ◦ 42% - Improved ability to recruit and retain employees ◦ 22% - This benefit is the standard in my industry ◦ 18% - It helps employees stay healthy and productive ◦ 16% - It’s my responsibility as an employer ◦ 2% - My employees have requested this as part of their compensation  Second Reason: ◦ 29% - It helps employees stay healthy and productive ◦ 28% - Improved ability to recruit and retain employees ◦ 15% - The benefit is a standard in my industry ◦ 12% - It’s my responsibility as an employer ◦ 11% - No additional reason ◦ 5% - My employees have requested this as part of their compensation

Over the past year, have your company’s health care costs increased a lot, increased a little, stayed about the same, or decreased?

Very Likely Somewhat Likely Percent Likely Not too Likely Not at all Likely Percent Not Likely Increase premiums paid by employees 34%30% 64% Down 3% 17%14% 31% Down 2% Increase co-payments or deductibles paid by employees 25%38% 63% Down 4% 19%14% 33% No change Change prescription drug benefits for employees 11%26% 37% Up 2% 35%20% 55% Down 10% Make no changes to health care benefit 16%19% 35% Down 11% 26%28% 54% No change Restrict eligibility of employees and/or their dependents 5%7% 12% Down 7% 37%45% 82% Up 1% Drop health care as a benefit to employees 1%2% 3% Down 2% 20%73% 93% Down 2% What is the likelihood that your company will make the following changes next year In order to address increasing costs of providing health care to employees?

Now talking about health care policy, what is your impression of the national health care reform law called the “Affordable Care Act” that was passed by Congress in 2010?

The federal Affordable Care Act provides a tax credit for small business employers who provide health insurance for at least half of their employees. Businesses must have 25 or fewer employees with average salaries less than $50,000 to claim this tax credit. Are you aware of this tax credit?

Employers who currently provide health insurance Employers who currently do NOT provide health insurance Begin providing benefits? If you qualified for a tax credit under the Affordable Care Act, how would it affect whether you decide to provide health benefits in the future – would it make you more likely to provide benefits, would it make you less likely to provide benefits, or would it not affect whether you provide benefits or not in the future?

Issues:Most AttentionNext Most Attention Combined Percentage Economy and job creation and unemployment 29%17%46% State budget deficit28%16%44% Labor regulations governing overtime, wages, rest periods and benefits 13%10%23% Quality of public schools and higher education 8%12%20% Immigration, including illegal immigration 6%10%16% Taxes 5%8%13% Increasing cost of health care and health insurance 6%7%13% Mortgage and foreclosure crisis 2%6%8% Physical infrastructure, such as roads, bridges and levees 1%5%6% Energy and gas prices 1%3%4% Environmental issues, such as pollution and climate change 1%2%3% Cost and supply of housing 1% 2% Crime 0%1% Here is a list of issues that people would like our elected officials in state government to address. Please select the issue you think the elected officials in Sacramento should pay the MOST attention to? And which issue do you think the elected officials in Sacramento should pay the NEXT most attention to?

As you may know, the state is still facing a$9 billion budget deficit out of a total budget of $92 billion. How serious a problem do you think this is?

Do you think California state government should deal with the budget deficit through all spending cuts, mostly spending cuts, mostly through tax increases, all tax increases or a mixture of both?

Do you believe California state government could balance the budget without raising taxes or do you believe that raising some taxes may be necessary?

2012 California Business Climate California’s Budget Crisis Priorities In dealing with the state budget, which of the following is the highest priority for elected officials in your opinion as a business leader?

#1#2#3#4#5#6Average Rank K-12 public education Economic Development and job creation Higher education, such as community colleges and public universities Courts & public safety Health care and social services Prisons Below is a list of state programs that are at risk of receiving cuts in funding in order to balance the state budget. Please rank each of these programs in descending order with the most important program that you believe should be spared from cuts receiving a one (1) and the least important program receiving a six (6). NOTE: Low score = highest priority to protect from budget cuts

Strongly Support Somewhat Support Percent Support Somewhat Oppose Strongly Oppose Percent Oppose Ensure that whatever mix of new taxes and spending cuts are adopted, the end results is a truly balanced budget without gimmicks 75%2196%2% 4% Reform public employee pensions to more resemble private sector 401 (k) plans 76%18%94%5%1%6% Conform overtime rules to federal law, which would return California to a forty hour work week before adding on any overtime (rather than on each eight hour day) to provide workers and employers greater flexibility and savings 74%20%94%4%2%6% Place a cap on all state spending so it cannot grow faster than the rate of inflation plus population growth 67%26% 93% 6%1%7% With approximately half the state budget going to education, reform the education system to strengthen the role of principals, expand teacher training, ease termination of incompetent teachers, and pay higher salaries to teachers who improve student performance 58%34%92%6%2%8%

Strongly Support Somewhat Support Percent Support Somewhat Oppose Strongly Oppose Percent Oppose Ensure that one-time revenues cannot finance ongoing state programs 61%30%91%8%1%9% Place a cap of up to five percent of an employee’s salary as the most a public agency can contribute to an employee’s retirement per year 56%28%84%11%5%16% Reform environmental regulations to increase certainty and reduce the time to develop a project 43%41%84%12%4%16% Provide long-term funding certainty for California universities and colleges to ensure continued innovation and skilled workforce 34%47% 81% 16%3% 19% Release some non-violent criminals early to reduce prison costs 13%44%57%26%17%43% Below is a list of some reforms that legislators are considering in order to balance the state budget. For each one of the following reforms, please indicate whether you would strongly support, somewhat support, somewhat oppose or strongly oppose that reform to balance the budget.

Can you name one action that California state government has done In the past year to help make it easier to run your business?

 Enterprise Zones Tax Credits (5 mentions)  Worker’s Compensation reform (2 mentions)  “Veto or refusal to increase minimum wage”  Ruled on rest periods  Streamlined some paperwork  Taking action to trim the size of state government

Is there any one action that California state government can do To help make it easier to run your business?

Is there an action California state government can do to help make it easier to run your business? Please briefly describe that action.  Reduce/simplify regulations (72)  Conform California regulations to Federal regulations(63)  Reduce business taxes (30)  Reduce Worker’s Comp costs & regulations (27)  Less paperwork & administrative burden (23)  Tort reform to reduce lawsuits against businesses (17)  Balance the state budget (16)  More flexibility in meal & rest breaks (15)  Reduce environmental regulations (14)  Reduce state government bureaucracy (10)  Make California “business friendly” (10)  Stop cuts to social services/Medicare (10)