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California boasts the eighth largest economy in theworld; the state’s 2009 Gross State Product (GSP) wasapproximately $1.88 trillion. California’s strengths lie inthe size, diversity, and adaptability of its economy, as wellas in the talent and range of its population. Despite the lossof more than a million jobs during the recession, Californiaremains a center of venture capital and the entrepreneurialspirit.

To help address some of the issues facing the state,Governor Jerry Brown and other Golden State leadershave developed a list of priority issues to be resolved inorder to address California’s budget shortfall and movethe state forward. These priorities include creating jobs forCalifornia’s future, improving education, addressing thebudget, tackling pension reform, and developing a plan forthe creation of clean energy jobs.

Addressing the Budget

The recent recession and housing market bust have left

FY2012, greater than just three other states. GovernorBrown began his budget restructuring effort with revenueprojections viewed as much more reasonable than thoseused for previous budgets. While conservative forecasts

assumptions have provided a realistic budget frameworkwithin which to make tough decisions.

Brown’s budget plan relies equally on tax increases

is reviewing the extension of previously enacted taxincreases, including increases in income taxes, salestaxes, and vehicle license fees, as well as major spendingreductions.

While California’s university system—with over twomillion students enrolled at nearly 300 colleges anduniversities and over 270,000 graduates each year—hasbeen considered one of the foundations of the state’ssuccess in the innovation economy, the system couldsuffer under the state’s current budget situation. GovernorBrown has proposed reducing funding for the state’s twouniversity systems by $1 billion. This would bring nominalspending for the University of California system down tothe FY1999 level, a time when the system had 31 percentfewer students than it does today. However, the governor’scurrent plan exempts cuts to the K-12 education system.

Additional budget cutting initiatives include reducingfunding for the Medi-Cal (Medicaid) program by $1.7billion. The governor’s budget would limit the use ofMedicaid services by setting an annual dollar limit onthe amount the state will pay for certain services such ashearing aids and durable medical equipment, reducingprescriptions (except for life-saving drugs) to six per year,and limiting doctor visits to ten per year. The governoralso would eliminate a program that helps elderly residentsat risk of being placed in a nursing home to remain intheir communities, and would cut long-term care providerpayments by 10 percent. Governor Brown also proposesscaling back the state’s Healthy Families (children’s

increasing premiums for families with incomes between150 and 250 percent of poverty, and increasing co-payments.

CALIFORNIA

California’s Place in the Rankings

1st Academic R&D Intensity

7th Productivity Growth

7th Economic Output Per Job

7th STEM Job Concentration

7th Small Business Lending

8th High School Advanced PlacementIntensity

11th High Speed Broadband Availability

13th Entrepreneurial Activity

19th Gross State Product Growth

21st High-tech Share of All Businesses

23rd Business Birth Rate

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Globally Connected and High-Tech

California remains one of the largest economies inthe world, due in part to its world-class transportationinfrastructure and seaports. The state’s export shipmentsof merchandise totaled $142.3 billion in 2010, a 16percent increase from 2009. The state is home to 12 cargoairports and 11 cargo seaports, as well as 18 foreign tradezones and 42 enterprise zones that provide access to a

maintain this competitive advantage, the state created theCalifornia Infrastructure and Economic DevelopmentBank (I-Bank) which was intended to promote economicrevitalization, enable future development, and encouragea healthy climate for jobs in California. The I-Bank hasbroad authority to issue tax-exempt and taxable revenue

enhancements, acquire or lease facilities, and leverage stateand federal funds focused on industrial development andinfrastructure.

California continues to be one of the nation’s leadinghigh-tech states, ranking in the top 10 in concentration ofscience, technology, engineering and mathematics (STEM)workers. Historically, California has been the leadinghigh-tech export state with $41.3 billion in exports in2009, almost $6 billion more than the next closest state.California is home to 40 federal laboratories. In 2009, over23,000 patents originated in California, far more than anyother state. This represented one quarter of all U.S. patentsissued in 2009.

To help harness and enhance California’s innovativespirit, the state launched the forward-thinking InnovationHub (iHub) initiative. The iHub initiative improves thestate’s national and global competitiveness by stimulatingpartnerships, economic development, and job creation

link and leverage assets such as research parks, technologyincubators, universities, and federal laboratories to providean innovation platform for startup companies, economicdevelopment organizations, business groups, and venturecapitalists. The state designated six initial iHub regions inearly 2010.

Access to capital is key to starting and growing newcompanies, and California remains a center for venturecapital (VC) investment. In 2010, California companiesreceived more than $11 billion, or 47.8 percent of all VCinvested in the U.S. Top sectors receiving VC funding

were software, biotechnology, energy, medical devices andtelecommunications. California is No. 1 in our rankingsof federal and academic research and development (R&D)intensity. The state is home to 40 federal labs and 30percent of the nation’s NASA centers. The University of

number of patents and the number of inventions reachingthe market. To help spur investments in the private sector,the state offers a 15–24 percent R&D tax credit tobusinesses.

A recent survey conducted by the California EmploymentDevelopment Department found that the state is leadingthe nation in the percentage of the labor force workingin green jobs; indeed, green-oriented jobs have grownfaster than other sectors of employment in the state since1995. The governor’s green jobs plan calls for building12,000 megawatts of localized electricity generation,building 8,000 megawatts of large-scale renewables (andthe necessary transmission lines), and developing morecogeneration projects to increase combined heat and powerproduction by 6,500 megawatts.

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Clusters in California

Largest Cluster: Business & Financial Services,2,646,918 jobs

Largest Growth Cluster: Business & FinancialServices, 424,029 new jobs since 2002

Most Competitive Cluster: Energy (Fossil &Renewable), 33,233 new or retained jobs due to statecompetitive advantage

Most Concentrated Cluster: Computer &Electronic Product Manufacturing, 2.15 times thenational concentration level