Editorial: Why the lag on processing of business filings?

Published: Thursday, Mar. 7, 2013 - 12:00 am | Page 12A

If Texas can process an application to form a limited liability company in five days, even less if the registration application is filed online, why does it take California six weeks? In California, home to Silicon Valley, the most sophisticated collection of high-tech companies in the world, why can't the state process business filings online?

Why does a business owner in Los Angeles have to deliver papers to the secretary of state's office in Sacramento to get expedited over-the-counter service? Why doesn't the secretary of state have counter service in Los Angeles or Fresno or San Francisco?

California Secretary of State Debra Bowen blames state budget cuts for the many embarrassing shortcomings and backlogs in her office. Lack of money should not have been a problem. After all, the business portal side of Bowen's office – the place where entrepreneurs seeking to form corporations or limited liability companies or partnerships file their paperwork – is entirely fee-based. It's supposed to be self-supporting. The businesses pay for the cost of the operation.

In fact, California charges among the highest fees of any state in the nation for what appears to be perhaps the worst service, as a limited survey by The Bee's Jon Ortiz suggests.

In the depths of the recession, between 2008 and 2010, the governor and Legislature foolishly, and possibly illegally, borrowed more than $80 million in business filing fees to balance the state budget. The resulting staff shortages left thousands of business applications, many of them containing uncashed checks, sitting at the secretary of state's office for months waiting to be processed.

The delay means entrepreneurs wait for months to get their enterprises going, hire workers, provide services, sell products and pay taxes. "We were slowing things down so drastically," Bowen complains, "it was actually reducing revenues to the state."

Bowen arrived at the secretary of state's office six years ago, with a reputation as tech savvy. Indeed, her signature accomplishment in her 14 years as a state lawmaker was a bill that put legislative information online.

But on her watch, the processing of business filings at the secretary of state's office remains a labor-intensive, paper-driven operation, even slower and less efficient that it was when she arrived. Last August, Bowen finally issued a request for proposals for something called The California Business Connect Project. The project is supposed to "automate paper-based processes," allow businesses to file and request records online and pay fees online and have them processed in just one business day.

But the project won't be deployed for at least another three years – after Bowen has left office. Again, she blames the state, calling its IT procurement process time-consuming and cumbersome.

Unfriendly policies are frequently cited as the reason why certain California companies have chosen to move to other states. While our business climate might not be as bleak as some critics claim, the secretary of state's office could do much to improve the state's reputation by modernizing how it handles business filings.

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