Burdensome regulations are strangling California’s small businesses

(Julian Cañete, President and CEO of the California Hispanic Chambers of Commerce) - Running a small business in California can feel like death by a thousand policies. With over 420,000 restrictions – more than triple the national average of 136,000 – on everything from notifications to duplicative permits, it’s no secret that the Golden State is massively overregulated. These regulations often impose costly compliance burdens on businesses without accomplishing the well-intentioned goals they set out to achieve. And for California’s small businesses, many of these policies can be the difference between success and failure.

We need to be clear eyed in recognizing how California’s mountain of red tape is stifling thousands of businesses that are working harder than ever to create jobs, grow our economy, and strengthen our communities. Unfortunately today, our system of overregulation is hitting small, community-rooted businesses the hardest and they simply can’t afford any new and costly regulations. That’s because adding compliance costs and administrative burdens can be debilitating, forcing entrepreneurs to spend more time navigating a labyrinth of permits and documentation rather than growing their business.

California creates impediments for entrepreneurs from the day they come up with an idea for a new business. Securing a permit to even open a business is a long and arduous process that involves navigating a maze of city, county, health, fire, signage, and industry‑specific permits – a process which can take months, or even years in extreme cases. And once you are up and running, the stack of paperwork – and bills – only gets higher. In fact, in cities like San Francisco, it can take nearly two years to get a building permit for a multi-family project, driving up costs or making developers and other businesses flee the state.

But our state’s problems with overregulation are far beyond the very clear permitting issues.

Take for example the California Consumer Privacy Act (CCPA), which was pitched as a way to give local consumers more control over their personal information and data. While well-intentioned, this law shifted the real burden onto businesses who have to pony up for sky-high compliance fees and new IT software or risk facing hefty penalties. For smaller businesses and start-ups, these costs are a knockout blow – research shows that California small businesses will bear $9 billion of the law’s in-state costs as a result of these kinds of requirements - and that’s just one example.

There are many other well-meaning, but miscalculated policies that are killing our state’s economy. This includes the annual minimum wage hikes that have already led to job cuts and certainly contributed to higher costs to consumers. There are also laws on the books that foster predatory shakedown lawsuits to force quick settlements instead of costly litigation. And now, despite progress made through last year’s much-needed reforms to the Private Attorneys General Act (PAGA) - which curbed many of these predatory lawsuits on businesses - lawmakers are already trying to roll them back, again leaving small businesses exposed to costly, frivolous litigation. All of this is on top of existing hyper-specific state rules governing every industry that few small companies can manage, let alone keep track of.

California’s climate of overregulation is hurting our state - whether it’s our rising unemployment rates, soaring housing costs, or the mountain of red tape entrepreneurs face, it’s no wonder California continues to be ranked dead last as the worst state for business since at least 2014.

This isn’t a call to action – it’s a call to pause and rethink. Government needs to stop burdening our small businesses so that they can nurture their own California Dream, benefiting all of us through new jobs, increased economic activity, revitalized neighborhoods, and a broadened tax base to support important needed community benefits. Lawmakers must prioritize smart and sensible policies that keep our economic engine growing rather than regressing and contributing to an environment of overly strict red tape. Since the pioneer days, our state has been a bellwether for innovation and leadership, attracting eager entrepreneurs from around the world. Don’t regulate us out of existence.

Julian Cañete is the President and CEO of the California Hispanic Chambers of Commerce (CHCC), California’s premier organization dedicated to promoting the economic growth and development of Hispanic entrepreneurs and businesses statewide.