More Companies Flee to Texas
The Lone Star State continues to profit from the corporate exodus from California as the list of big-name businesses moving to Texas grows. Fleeing California’s highly-regulated environment, a number of companies have announced they’re moving to Texas for the state’s dynamic, growth-friendly economy.
Last week, the Los Angeles Area Chamber of Commerce released a study on California’s economic standing. “We wanted to look at why California-based businesses continue to leave and whether the state was doing enough to stem the flow of business outbound migration,” the Chamber’s president Maria Salinas told CalMatters.
According to the report, despite California’s long history as a massive economy with the largest GDP of any state in the nation, “accelerating” migration of businesses and individuals from California means the state has lost its competitive edge.
The latest in an ever-growing list of corporate exoduses is Ruiz Foods, which announced last month that they would relocate the company’s headquarters entirely from Dinuba in California’s Central Valley to Frisco, Texas. The minority- and family-owned business is the largest frozen Mexican food manufacturer in the nation, and will be bringing 125 jobs to Frisco.
This comes just a year after Ruiz Foods opened a new regional headquarters in Frisco, and despite Ruiz’s announcement at that time that the company planned to keep their Dinuba base. Texas Governor Greg Abbott celebrated the company’s 2022 decision to open regional headquarters in Frisco, lauding Texas as “the number one destination for economic opportunity in America.”
Then, Ruiz Foods announced in May that they had decided to move their full corporate headquarters to Texas. Clint Oliver, CEO of the Central Valley Business Federation, wasn’t surprised by the move. “The regulatory and business environment in the state of California isn’t exactly one that is conducive to getting companies to stay,” Oliver said.
Ruiz Foods isn’t the only major food manufacturer to leave California for Texas. Cacique Foods announced last month that the family-owned Hispanic foods company is relocating its headquarters from Monrovia, California to Irving, Texas. Additionally, Cacique Foods is opening a 200,000 square-foot dairy processing facility in Amarillo.
The company said they’ve found an “exceptional work environment for the growing Cacique family” in Texas that will allow for “improve[d] efficiencies.”
But it’s not just food manufacturers that are making the move to Texas. Diverse industries are leaving California for the Lone Star State.
In April, paint manufacturer and retail giant Kelly-Moore announced they’re moving their corporate headquarters from San Carlos, California to Irving by the end of 2024. The Mayor of Irving, Rick Stopfer, applauded the move, calling Irving the “Headquarters of Headquarters.”
“We continue to look to attract corporate headquarters who can benefit from our pro-business policies,” Stopfer said. To secure the jobs and economic boost Kelly-Moore’s relocation will bring, the Irving City Council approved a $75,000 economic development grant for the paint company.
Irving’s pro-business, pro-growth strategy seems to be working. The Dallas Morning News reports that Irving has “added more than 21,000 jobs from relocating or expanding employers” in the last five years alone.
Also this year, Landsea Homes, a top home developer in California, Texas, Arizona and Florida, announced their corporate headquarters will be relocating from Newport Beach in Southern California to Dallas. CEO John Ho cited Dallas’ business- and tax-friendly environment as a major factor in the company’s relocation.
Ho explained the company, which brought in $1.4 billion in home sales last year, was looking “to grow in markets that we thought were high-growth markets, [and] that included Texas and Florida.” He noted that a lower cost of living in Texas compared to U.S. coastal regions is an asset for Landsea’s long-term success. Landsea will be a major player in Dallas and in Texas’ economic development at large.
Texas ranks second in the nation for year-over-year total non-farm job growth (which includes service-providing and goods-producing jobs), at 3.8 percent, while California ranks 21st with 2.2 percent growth, according to the Seidman Research Institute at the University of Arizona.
Though California has seen some modest job growth, California’s leaders cannot afford to ignore the exodus of companies from the Golden State. Citing the Los Angeles Area Chamber of Commerce report, Dan Walters writes in CalMatters that the “prevailing attitude is that California will always be an economic powerhouse no matter what expenses and regulations are imposed on employers.” But the whirlwind of business leaving the state since the pandemic is a wake up call no one can ignore.
What can be done to curb (or better still, reverse) the current trend?
The Los Angeles Area Chamber of Commerce report recommends several actions. The authors ask the state to compete for workers and companies by defining innovative strategies for attracting and retaining them. The authors note that addressing the state’s high cost of living is an essential part of this step.
Additionally, the authors ask the state to lower the barriers to entrepreneurship in California, with the purpose of allowing its “homegrown talent” to thrive. The report centers on a regional approach to economic health in the state, rather than a “one-state,” one-size-fits-all approach to business in California. Sacramento should be willing to scale back statewide, burdensome laws and regulations in favor of allowing regional flexibility and innovation within the state.
California is losing the national competition to attract residents, workers, and businesses. Meanwhile, low barriers to entry and incentives by local and state leaders in Texas are paying off. California’s leaders would be wise to take a page from the Lone Star State’s book and reassess their high-tax, high-regulation strategies before the damage is irreversible.
Sheridan Swanson is the Research Manager at California Policy Center.