As the Legislature begins the last few weeks of deliberations on the state’s 2014-15 budget priorities, what should the business community be watching for? Education, of course, remains a priority. Whether it is K-12 or higher education, the quality of our schools is crucial to a future workforce that keeps us competitive in a global economy. Another item is Medi-Cal reimbursement rates, which, if not adequate, can cause a cost shift to responsible employers who provide health care. Not so obvious, however, is an appropriate level of funding for California’s courts, a cornerstone of our constitution and democracy.
A fully funded judicial system is essential because it promotes the economic success of our state.
Our form of democracy is essential to a strong economy that is built on innovation and entrepreneurship. Citizens and business owners rely on and expect the courts to be there for them to protect their constitutional rights and fairly resolve disputes. Our system of justice guarantees that future returns to private investments are accepted and promises of future payments are made.
Businesses are more willing to expand their sphere of contracts if they know a fully funded, robust judiciary is there to enforce contracts. In turn, investors are willing to finance growth and job creation if they have rules developed by a transparent Legislature, implemented fairly by an executive branch that is held accountable by the voters and a trustworthy judiciary. At the end of the day, the core values of our democracy, including an independent judiciary that is a positive check on government, create the certainty and confidence employers need to invest in our economy and to create jobs.
While companies may not really think about the role of the courts until they are embroiled in a dispute, a fully funded court system is critically important to business operations. Companies large and small need to have disputes resolved quickly so they can get back to doing what they do best – creating and selling products and services.
Delays in the legal system can cost companies thousands – sometimes millions – of dollars, which can easily break operational budgets. Legal disputes that drag on endlessly tie up capital and force employers to cut costs in areas like payroll and health care. It creates more costs and more uncertainty in an environment where our priority must be keeping employer costs as low as possible so they can create jobs.
An underfunded court system is also a productivity killer for a company’s employees, who need a functioning court system every bit as much as do their employers. Custody matters, divorces, probate, property issues and other conflicts need to be adjudicated in a timely manner so that the process does not contribute even more stress to already stressful situations. Without speedy resolution, these issues drain productivity and disrupt an employee’s personal and professional life.
Risk takers are heavily dependent on a robust and independent judiciary.
First, such firms are often built around their novel ideas because they lack the physical resources possessed by established firms. Intellectual property is their most valuable asset, and its protections a key driver of entrepreneurship.
Second, pursuing a novel idea often requires substantial amounts of money that is difficult for new firms to generate internally. Investors are willing to finance these firms only if they feel they are well protected from opportunistic behaviors by firms. Therefore, legal protection of investors is essential for nurturing entrepreneurship.
Over the last five years, many important state programs have suffered reductions. Right now, the state budget is again in the headlines. It is critical to remember that when the state sets its blueprint for funding priorities, it must heavily weigh the adverse consequences to the fundamentals of democracy by limiting access to justice. The courts are different from statutory government programs. They are central to our freedom.
Allan Zaremberg is president and CEO of the California Chamber of Commerce.