Alex Madison | May 9th, 2016

What’s Next?: California’s Legislative and Regulatory World

What’s Next? is pleased to interview Matt Klink, one of California’s savviest public affairs strategists and a partner in the Los Angeles-based government and public affairs firm Ek, Sunkin, Klink, and Bai.

Matt, what happens in Sacramento doesn’t always stay in Sacramento and, in fact, often travels eastward to state capitals and to Washington, D.C. Why is that and do you see any change in that trend?

Klink: I do not see any change in trends starting in Sacramento and traveling east, particularly because of the liberal or progressive bent of the entire state of California. Democrats control every single statewide office, both houses of the legislature by large majorities, and it has become a progressive experiment laboratory for such things as the $15 minimum wage and six days of paid sick leave in the city of Los Angeles. On energy, they also have a robust cap and trade program that is generating a lot of money for the state but is one of the primary reasons that Californians pay some of the highest gas prices of any in the country. Active labor unions will probably become more so depending on what happens in Washington. D.C., this November. So I think the trend of California leading the way, if you will, is only going to get more pronounced.

So what in your mind are two or three of the biggest issues confronting the business community in Sacramento right now?

Klink: Right now the business community faces a couple of issues that come to the forefront. One is simply the cost of doing business in California. There is so much red tape whether it™’s at the local level, or the state level, all the way up to the federal level. Plus the highest fuel prices in the nation, or the continental United States, Hawaii pays more but they are literally an island. High tax rates overall on many things make the cost of doing business in California very significant. High labor costs don’t help either.

Speaking of significant, the referenda situation in California continues to escalate. What does this election cycle look like?

Klink: So for November 2016, the California ballot will be exceptionally long.  We could have as many as 15 initiatives on the statewide ballot.  That™’s due in part to the low number of signatures required to qualify for the ballot and to the fact that the legislature and governor decided to put everything on the November ballot because they assumed turnout would be higher in a presidential year.

California voters will likely see multiple tax increases, efforts to legalize marijuana in the state of California, prescription drug pricing that would be negative for the pharmaceutical industry with limited consumer benefit. Multiple initiatives make for a long, complicated ballot and will likely lead to significant ballot drop off, meaning voters who vote at the top for president and our first competitive Senate race since the early 90s but will not make it to the bottom of the ballot. So we still could have a low turnout election for some of the initiatives at the bottom of the ballot. But very significant (and costly) tax measures will be on this ballot.

If you were counseling a client, what is the single thing you would advise them to do to protect or inoculate themselves in Sacramento.

Klink: We tell our clients, specifically those who want to come and build a bigger footprint in California, that doing so takes time – you have to come and build relationships. You know, what Tip O’Neill said – “All politics are local” – remains true.

You need to be on the ground in the communities where you want to do business. That™’s what the legislators expect – that™’s what they demand, because you have to know what the people are saying and doing. You can’t fly in and spend a lot of money quickly and expect to influence a decision. It takes time and it takes commitment and staying power because that™’s what the legislators need in their districts. They want long-term jobs and stability; they want to build relationships with companies that have good corporate social responsibility programs. So we counsel clients to think long term not short term.