Family businesses are the bedrock of our state’s economy. The state’s 1.4 million family businesses employ 7 million Californians. Nationally, they generate 57% of the GDP, employ 63% of the workforce, and create 75% of all new jobs.
At the same time, family businesses invest more in their employees’ training and benefits, are more likely to promote women to executive management, are less likely to lay off workers in tough economic times and engage in higher levels of philanthropic giving – while enjoying a better record on environmental stewardship.
With this track record, you would think the lawmakers and regulators in Sacramento would want to encourage family businesses to grow and expand. Unfortunately, our family businesses did not fare as well in 2022 as we would have liked. And with a recession potentially looming, we can only hope that lawmakers and the Governor are more willing to take steps to support family businesses when they return to the Capitol
The Family Business Association, and the broader business community generally, did achieve some victories. Perhaps most significant was the defeat of AB 2932, which would have imposed a tremendous cost on employers by reducing the weekly overtime threshold from 40 hours to 32 hours and mandating that employees’ base rate of pay be increased. The provisions of this bill would have been impossible to comply with, exposing businesses to innumerable lawsuits under the state’s misguided Private Attorneys General Act, thus discouraging job growth in the state and likely reducing opportunities for workers. Fortunately the bill quietly died.
Another win – at least for now – was the defeat of AB 1400, which would have created a government-run health care system, and its companion bill, ACA 11, which would have raised taxes by an estimated $162 billion the first year alone, with those taxes likely increasing every year to cover rising health care costs. Had these measures passed, it would have led to significant layoffs and relocations as employers would have been forced to cut costs to pay the higher taxes. However, proponents have already said they’ll bring the proposal back in 2023, so the threat continues.
However, family businesses also saw several bills enacted that will add to the cost of doing business in California. And two bills we supported were vetoed.
The first was AB 1951, which would have created a full sales and use tax exemption for the purchase of manufacturing equipment, which exists in 38 other states. The bill would have been particularly helpful for the 70% of manufacturers that have 20 or fewer employees and would have been a powerful incentive to create more high-wage jobs, ensuring that students being trained in STEM fields would have opportunities when they enter the workforce.
Governor Newsom cited the loss of tax revenue for local governments but did leave the door open to reconsidering the issue as part of the budget process next spring.
The other veto was particularly painful. AB 2611 was an FBA-sponsored bill that would have placed a definition of what a family business is into state law and would have been a good foundation for future legislative and regulatory efforts to help family-owned businesses that have called California home for generations.
The bill passed both houses of the Legislature without opposition, but the Governor – a family business owner himself – vetoed it.
Despite these vetoes, California’s family businesses are committed to the Golden State and to continuing to be the bedrock of their communities. We will continue our efforts in 2023 to enact legislation that supports family businesses and to oppose measures that would make it more difficult for them to thrive and be passed down to the next generation of family ownership.