Companies are rapidly leaving California, study finds; Here’s where they are going

SAN FRANCISCO (KRON) — California-based companies are moving out of the state at an accelerating rate this year, a report by the Hoover Institution at Stanford University found.

The report, published in August 2021, said California already lost a total of 74 headquarters just in the first six months of the year.

Compare that to the 62 total companies that were known to have relocated from California in the entirety of 2020, and it’s no wonder why the Hoover Institution is calling it a “serious loss.

Oracle and Hewlett-Packard are among the Fortune 500 tech companies to move their respective headquarters out of California, both opting for Texas.

Silicon Valley Losses

Researchers used data not just from the beginning of the pandemic but data all the way back to 2018 to illustrate the three-year exodus.

From January 2018 to June 2021, the San Francisco Bay Area accounted for five of the 10 California counties that saw the most company departures.

Startup hotspot San Francisco ranked high on the list — second only to Los Angeles — with 47 total companies lost in that three-year period.

Other Bay Area counties that took major hits included: Santa Clara County, at #4, which had lost 28 companies; Alameda County, at #5, with 20 lost companies; San Mateo County, at #7, losing 13 companies; and Contra Costa County, at #9, with a loss of six companies.

According to the Hoover Institution, these Bay Area migrations “reflect high-tech companies […] opting for less expensive locations not only to control business costs but to lure workers who want to avoid living in ultra-expensive Silicon Valley or San Francisco.”

Where are they moving to?

Mostly, Texas.

The Lone Star state gained 114 of the known 265 California companies that relocated their headquarters between January 2018 to June 2021. But Texas has been a prime relocation option for at least a decade, the report said.

Per the Hoover Institution, Tennessee was the most attractive location after Texas. However, the state gained only 25 businesses, compared to the 114 that found a home in Texas.

Some of the companies that left California for Texas in 2021 can be found in the California Policy Center’s “book of exoduses.”

Nearby Western states round out the top five relocation destinations: Arizona, Nevada and Colorado. Researchers partially credit their ranking to convenient, short flights from California.

Why California is seen as ‘bad for business’

The report cited a 2021 survey by Chief Executive magazine, in which CEOs in the U.S. revealed what they value most when choosing a site for their headquarters, respectively:

• Tax policy
• Regulatory climate
• Talent availability

Texas ranked as the absolute best for business, and California ranked as the absolute worst for business out of all 50 states in this CEO survey.

High taxes in California take a lot of the blame. The Hoover Institution quotes the Tax Foundation for an explanation:

“If taxes take a larger portion of profits, that cost is passed along to consumers (through higher prices), employees (through lower wages or fewer jobs), or shareholders (through lower dividends or share value), or some combination of the above. Thus, a state with lower tax costs will be more attractive to business investment and more likely to experience economic growth.”

Jared Walczak and Janelle Cammenga of the Tax Foundation

The report also says California is the most highly regulated state in the country. This makes it difficult for businesses to comply with all the rules enforced by its 518 state agencies, boards and commissions.

Read the full Hoover Institution report for more reasons attributed to why companies are moving out of California.