Mixed Messages Is California driving away businesses--or setting an example for other states?

Over the past two years, some California businesses have risenin revolt. Complaining that state regulations and high utilityprices make doing business so expensive that it's nearlyimpossible to make a profit, business organizations petitioned thestate legislature for relief, blasted the op-ed pages of Californianewspapers, and, ultimately, helped throw Gov. Gray Davis out ofpower.

Aki Korhonen, president of PC-Doctor Inc., a software producer previouslyin the San Francisco Bay area, says, "All the things that gointo the business environment are more expensive [in California]. Acombination of factors makes business hard." So hard, in fact,that Korhonen, 34, moved his business to Reno, Nevada, in October2003.

Korhonen has a point. Because of its laws, California has someof the highest costs of doing business in the nation-costs thatfall hardest on the 1 million-plus small companies in the state.California employers pay roughly twice the national average inworkers' comp rates, and this fall, California'slegislature passed the Family Medical Leave Law, mandating mostemployers to provide health insurance to employees. Meanwhile, theCalifornia Chamber of Commerce estimates California employers paythe highest unemployment taxes in the nation.