Posted by: theoptimisticconservative | April 30, 2012

California by the numbers

The weekend produced a spate of dang-this-is-bad articles on the economic situation in California.  Steven Greenhut’s for the Orange County Register is entitled “California to middle class: drop dead.”  At The Daily Beast, Joel Kotkin laments that “As California Collapses, Obama Follows its Lead.”  (H/t – and a “Read it, people!” shout-out – to Ed Driscoll at PJM.)

But what does all this look like in terms of numbers?  What’s the how much and where and whom of the Golden State collapse?  Perhaps the most interesting and telling thing is that it really is as bad as it looks.  And the reasons are pretty much what you’d expect.  Here’s the California story, in numbers.

According to a March 2012 report, 855,000 is how many private-sector jobs California has lost since the recession started four years ago. (H/t: California Political News & Views.)  The state today enjoys an unemployment rate of 11%, compared with the official national average of 8.3%

Texas, by contrast, has added 139,800 jobs, posting the biggest absolute gain among the 50 states.  (California’s is the biggest absolute loss.)  Texas’ unemployment rate is 7.1%.  Number 3 on the job-growth list? The District of Columbia, with 21,000 added private-sector jobs.  Government is big business.

But we were talking about California.  How does California rank in terms of the average state and local tax burden? According to the Tax Foundation, in 2009, California had the 6th heaviest tax burden in the nation, at 10.6%.   (New Jersey was #1, followed by New York at #2.)  That’s the in-state tax burden, of course.  Federal taxes are on top of that.

Of course, business climate comprises more than the average individual tax burden.  The Tax Foundation looks at five forms of taxation – corporate tax, individual income tax, sales tax, property tax, and unemployment insurance tax – to index the business climates of the 50 states.  By this combined measure, the Tax Foundation ranks California 48th in business climate.  (New York is 49th, and New Jersey 50th.)

State regulatory environment? George Mason University’s Mercatus Center ranks the Golden State 48th in the nation.  New Jersey and New York are numbers 49 and 50, respectively.

How about other business costs?  California had the 5th highest state premium ranking for worker compensation insurance costs in 2010 (although the state’s position improved slightly in 2011 due to other states raising their state premiums).

California ranks 7th highest in electric utility costs, with Hawaii being the highest, followed by Connecticut and Alaska.

According to the Small Business & Entrepreneurship Council, California has the third-highest per-gallon gasoline tax (Connecticut and New York are #1 and #2) and by far the highest tax on diesel, at 52.5 cents per gallon. (Some numbers below also come from the SB&EC report.)

California perennially has the second-highest gasoline prices at the pump (Hawaii is #1), although the state has regularly been ranked 3rd or 4th in oil production in recent years.  (In the past week the statewide average was $4.15 for a gallon of regular, down from $4.36 a month ago.)  In spite of having the third largest oil and gas reserves of any state in the nation, California is ranked dead last among all US jurisdictions for global oil investment.  The fact that California hasn’t issued a new offshore drilling permit for over 30 years is undoubtedly a factor, as is the fact that the Monterey Shale Oil Field, which holds 64% of all the recoverable shale oil in the United States, is hamstrung by lawsuits, a typical condition in the state for both drilling and refining operations.

In spite of the state’s natural bounty, California produces only 37% of its statewide oil consumption.  The rest comes from other states and countries, at added expense.

In terms of the employer burden of health-insurance mandates, California is 9th among the 50 states and the District of Columbia.  (Rhode Island, Maryland, and Minnesota have the highest burdens.)

Meanwhile, California ranks 4th highest in state and local government spending per capita.  The District of Columbia is the highest, followed by Alaska, Wyoming, and New York.

Ah, yes, state spending.  California has by far the largest debt of any US state, at around $612 billion with state and local debt and pension liabilities included.  In terms of raw numbers, New York posts a pathetic second place with only $305 billion.  The size of California’s population allows the Golden State to slip to only 7th place in terms of per capita state and local debt.  The District of Columbia walks off with another prize in this category, having on the books 85% more debt per capita than the 50-state average.

The California debt spiral is due in part to the steep decline in state tax revenues.  The 22% year-on-year decline observed in February 2012 doesn’t tell the whole story either; California had already posted dramatic revenue losses in business and property taxes between 2007 and 2010.  Business-tax revenues dropped 18% in that period, and property-tax revenues fell 30% due to the real estate market crash.

Let’s talk population trends.  Many readers are familiar with the arresting Golden State statistics cited by a Wall Street Journal article in March:

From the mid-1980s to 2005, California’s population grew by 10 million, while Medicaid recipients soared by seven million; tax filers paying income taxes rose by just 150,000; and the prison population swelled by 115,000.

The net gain in tax filers includes the author:  I was added as a tax-paying filer to the California income tax rolls in 2004.  Apparently there are another 149,999 of us, and I’m thinking we need a T-shirt.  (And yes, alert readers, I understand that this was a net gain, reflecting both additions to and subtractions from the tax rolls over time.  Just having some fun with these sad little numbers.)

California also has the distinction of having 12% of the US population and 33% of the nation’s welfare recipients.  Governor Jerry’s Brown’s 2012-13 budget proposal includes $100 billion for health and human services, which, on an annualized basis, is more than all the state and local spending in 27 of the 50 states.

In California, meanwhile, the tax code is steeply progressive.  Prior to the recession, the state got 45% of its income tax revenues from the top 1% of filers.  As the Wall Street Journal pointed out last year, the incomes of filers in that top 1% — which in California starts at $490,000 – are more volatile than the incomes of other filers.  California, New York, Connecticut, and Illinois are some of the states most dependent for revenue on the top 1%, and they have opened up the biggest state deficits during the recession.

How many businesses are leaving California?  In 2011, 254 businesses left California, or an average of 5 per week.  202 left in 2010, 51 in 2009.  Even “green” businesses are leaving California.  The business environment is that overregulated, and costs are that high.  A business saves, on average, between 20% and 40% on costs by moving out of California.  (Even the lower figure is astounding for a move within the same nation.)

But according to a 2011 report, 2500 employers ceased operations in California between 2007 and 2011.  The great majority of them simply went out of business.  (I can certainly vouch for the observability of that trend in my area of Southern California.  Besides small businesses closing – I can’t seem to keep a dry cleaner for longer than 6 months – we’ve had a number of big chain businesses pull out, leaving gigantic empty stores and parking lots.  The last time I stocked up on household supplies at the local Wal-Mart, there were no greeters at the doors.  An ominous portent.)  How did California’s real GDP growth rank in 2011?  34th in the United States.

As of January 2012, which state had the highest average mortgage debt per household?  California, with $313,000.   California has had the second highest foreclosure rate of any state throughout the recession (Nevada has the highest).  In terms of the state’s percentage of underwater mortgages, California ranks only 6th (Nevada, again, is #1).  But that’s a little deceiving, since the value of the underwater mortgages in California is over $544 billion. That sum represents nearly 30% of total mortgage debt in California, which is $1.94 trillion – or 22% of all mortgage debt in the United States.

Well, but which state had the highest tuition hike for its state university system in 2011?  That would be California, with a tuition jump of 21%.  (This hike mitigated somewhat the advantage of in-state tuition for those here illegally, which California offers along with 11 other states.)

Oh, and California has far and away the most endangered animal species, with 111.  No other state comes close.  Hawaii has California beat on endangered plant species, however, with 273 to the Golden State’s 178.

J.E. Dyer’s articles have appeared at Hot Air’s Green Room, Commentary’s “contentions,Patheos, and The Weekly Standard online.


Responses

  1. I’m surprised no one has started a charity to help folks get to the states with the highest welfare payouts.

    • that’s not California’s real problem. It’s all them Okies, by gum.

      (and Pennsy is #10 on the list)

      • I wasn’t concerned about California’s problem when I made the suggestion. I was concerned about the poor, being unjustly sentenced to a life on lesser welfare than California and other generous states are eager to pay, due to lack of bus fare.

        • bus fare?????

          you squishy old lib’rill,
          since when is crawling too good fer ’em?

  2. Like Detroit, they voted themselves into their present situation.

  3. Might it be that the number of endangered species has something to do with the overall number of different species in a state, which in turn is related to the diversity of habitats in that state? For example, Alaska has only one endangered species – the clear-spectacled lesser palin, well known for its shrill call with which it draws attention to itself. Rumour has it that it has migrated south where it gorges on a diet of Fox and other carrion.

    We can presume that the rigor of your statistical analysis of the Californian flora and fauna is matched by that of the other stats you mangle.

  4. With offshore reserves and new ability to produce the vast oil shale (much larger potential than Bakken) the need for revenue may, just may, grease the skids for California to approve the drilling and hydraulic fracturing required to access it.

    Of course, Hawaii will always be the highest gasoline cost. It has no reserves and its refineries can only process light sweet crude, thus cannot use Alaskan which is sour. It is less expensive, in Hawaii, to receive crude oil from Saudi Arabian that it is to receive crude from North Dakota or the Gulf of Mexico.

    CalOSHA and CalEPA regs, at least in the early 1990’s, were not really worse than anywhere else, on paper, it is just the way that they enforce the regs and interpret them which was the problem, at least back then.

  5. Here’s some facts about unemployment in CA:

    The last time that CA’s unemployment rate was below the national average, Barack Obama had just been elected president…of the Harvard Law Review.

    The last time that CA’s unemployment rate was below the national average, George Bush had not yet invaded Iraq. HW Bush, that is.

    The last time that CA’s unemployment rate was below the national average, the Soviet Union existed, while the Internet did not.

    The last time that CA’s unemployment rate was below the national average was in early 1990-about twenty two years ago, by far the longest such streak of any state. (Oregon is second, at about fifteen years). To me, that is the most damning indictment of CA’s economic policies-the state has not been able to get to even average unemployment for over two decades.

  6. I’ve lived in California continuously since 1976. I’m permanently moving out of the state in another week. California’s natural beauty, geologic diversity and climate are without peer. A paradise that, if not paved over into a parking lot, certainly has been ruined by too many people and the natural consequences of an entitlement mentality, so far impossible to dislodge from Sacramento.

    The California dream, exemplified by Hollywood’s ‘beautiful’ empty people, never was real. Merely an illusion to sooth the public, which it’s still busily doing and will keep doing, until the merry go round stops.

    Welcome to the Hotel California
    Such a lovely place (Such a lovely place)
    Such a lovely face
    They’re livin’ it up at the Hotel California
    What a nice surprise (what a nice surprise)
    Bring your alibis

    Mirrors on the ceiling,
    The pink champagne on ice
    And she said “We are all just prisoners here, of our own device”
    And in the master’s chambers,
    They gathered for the feast
    They stab it with their steely knives,
    But they just can’t kill the beast

    “We have met the enemy and he is us” Pogo

    • My absolute favorite song and album of the Rock Era. The #1 Song and Album of my Senior year in High School…Hayfield in the Fairfax County section of Alexandria.

      The final stanza…

      The last thing I remember,
      Was running for the door.
      I had to find my way back
      To the place I was before.
      “Relax”, said the night man
      You can check out any time you like
      But you can lever leave…

      Suicide or the asylum… humm…

      The Joe Walsh and Don Felder nail an interplay of the most haunting guitar solo and its fugue echo of the Rock Era… as the music fades away.

      It was one of those self-fulfilling prophesies. The entire album from “Hotel California” to “Wasted Time” on the A side, and then The symponic reprise of “Wasted Time” to “The Last Resort” on the B side..

      And you can see them there,
      On Sunday morning
      They stand up and sing about
      what it’s like up there
      They call it paradise
      I don’t know why
      You call someplace paradise,
      kiss it goodbye

      I am sure that Henley and Frey where commenting on how American Society pollutes everything that it touches… How absolutely ironic is that the Americans to whom they referred were themselves… and the world that they would destroy was their own delusion.

      I used to semi-jokingly say that we should give California back to Mexico .. (at least the coastal part, anyway…). I am really not to sure that they would take it, now.

      Funny, I just listened to the whole album on my Sony Walkman as my music brain break this evening.

      r/John – TMF

      • when you….
        turn up the Eagles.
        the neighbors are listening?

        • but yeah, it is a great song and really good album

      • Actually the line is:

        I had to find the passage back to the place I’d been before.

        I had to find my way back (the metre was off… and the ghosts of the Class of ’77 would be so ashamed…)

        Fleetwood Mac’s “Rumors” beat out “Hotel California” for album of the year in 1976/77. It was annoying and chirpy… and the girls loved it, and they guys all had hot pants for Stevie Nicks… so it received album of the year.

        Boston (The self titled first album)
        Toys in the Attic – Aerosmith
        Sound Track to Star Wars
        Dreamboat Annie – Heart

        were all miles above Fleetwood Mac… but Mick Fleetwood did retire in Alexandria… at least at last notice.

        -sorry.. needed to talk about music.. much less dreary topic.

        • I do believe that Steely Dan’s Aja was released in ’77….. might be just a hair or so better than Iggles.

  7. I’ve been reading Prof. Levinson’s book on the Constitution in which he analyzes the foundational assumptions of our republic. He wants us to reexamine our government structure, both state and federal. He favorably makes the point that California and a few others states are more direct democracies than our federal government. For me, the analysis stops there. All I can think is “exactly” and be thankful that the Founding Fathers had more sense than the drafters of the California Constitution.
    If a government can break California, a brilliant gem of fertile land, natural resources, trade ports, and astounding beauty, then just imagine what that kind of government could do to a less gifted state like Oklahoma.

    • @ election time, democrats are wont to break out the trope that direct election of the President would be a good thing and easily accomplished through the Internet.

      The columnist George Will pointed out that eliminating the electoral college would in effect disenfranchise everybody between the east and west coasts. A formula for directly threatening social cohesion. The tyranny of the majority is exactly what the bill of rights was designed to address.

  8. And speaking of endangered species, Opticon, can we mention the American Southwestern Turtledove? It seems that its habitat has been taken over by the Migrant Brown Mockingbird which is coming up from Mexico in droves lately.

    This aggresive species is eating everything in their path and cause enormous predation to most of the local, more naive species. Oddly enough, the Migrant Brown Mockingbird seem to stay in the areas they take over long after their initial migration. This is due, it seems, to the extensive food supply provided by federally protected farms and California public lands which apparently provide a perfectly safe habitat for this imported species.

    In other areas, Arizona, for instance, some local authorities have tried to control the expanding Brown Mockingbird populations but have met with stiff resistance from the federal government who misteriously oppose any sort of control aimed at this numerous species.

    rafa

  9. California has a democratic/republican form of state government under the US federal government. How could things possibly be any better?

  10. MartyH, AHLondon — welcome. Apologies for the delay in your responses posting. There’s a one-time “approval” of new commenters to keep down the spam. Your comments will post automatically from now on, so join the fray.

    Your points are well taken, MartyH. California — like Michigan — has been posting worse numbers than the country as a whole for a long time now. Some economists have traced the start of the trend to the sharp jump in centralized development planning and land-use restrictions in California in the 1970s, which has driven real estate prices upward much faster than in 48 other states for the past 40 years. (Hawaii is always an outlier, for obvious reasons.)

    There have been a lot of additions to the regulatoru environment since then, but for me, the point tends to be the cumulative impact of multiple regulatory regimes. You can try to remake people and the economy a little bit, and folks will adjust. Expand your renovation program, and you start forcing people into discouraging tradeoffs, like the choice between scary towering mortgage debt and living as a renter for your entire life because you really CAN’T afford to buy a home in the state you work in, where you and your family have roots,

    Go full-bore with regulating every aspect of life, and it all starts to fall completely apart. People can choose not to participate anymore, and they do. There’s also the point that big lobbies in California don’t want anything new to be produced or created, and congratulations to them: they’re getting their wish.

    • Hi-

      Thanks for the welcome. I am generally a lurker, and so rarely post on sites that I read. A year or so ago I wondered when the last time was that CA’s unemployment was lower than the national average and was stunned to find out that it was in 1990. During the Eighties, CA unemployment tracked the national unemployment rate very closely, and the aggregate unemployment rate was lower than the national average. Since 1990, CA has the highest aggregate unemployment of any state, and the divergence from the rest of the nation seems to be increasing. Wasteful spending like the stem cell initiative (a poke in G. Bush’s eye), high speed rail, and the re-affirmation of AB 32 (a poke in Valero’s eye) will only accelerate the trend.

      CA has myriad, foundational problems. The state has a dysfunctional water allocation system that leaves productive land fallow. The state is anti-energy, despite cheap energy being a requirement for modern society. The legislature is captive to special interests; the initiative process is overused and misused. It’s going to take a major overhaul in order for CA to regain its previous luster.

  11. According to the April 28-29 edition of the Wall Street Jounal:

    California is another place where businesses have come to view three years of budget uncertainty and huge pension liabilities (not to mention the state’s already high taxes and complex regulatory regime) as an inducement to migrate elsewhere. The state and its municipalities already face unfunded pension bills that now top $500 billion, according to studies by Stanford University’s Joe Nation, and several of the state’s cities, including Stockton in the Central Valley, face the prospect of insolvency.

    Executives at Stasis Engineering, a formerly Sonoma, Calif.-based auto design firm that left the state for West Virginia in the midst of an unfolding budget crisis in 2009, told the Press Democrat newspaper that the “budgetary bedlam gripping Sacramento” seemed to portend, as the paper characterized the company’s concerns, “a future filled with tax increases and service cuts.” More recently, in December 2011, Ron Mittelstaedt, the chief executive of Waste Connections, a recycling company formerly based in Folsom, Calif., told the press that the state’s “structural [budget] mess” was a contributing factor in its decision to relocate to Texas.

    Meanwhile, Oakland Tribune columnist Daniel Borenstein notes that his city has levied what he calls a “hidden pension tax” on property owners for decades to pay off a municipal pension fund that went bust in 1976. Today, the average Oakland home with an assessed value of $266,267 pays an additional $419 a year in property taxes to finance the benefits of the defunct system, Mr. Borenstein estimates, while a home assessed at $1 million pays an added $1,575 in taxes.

  12. Chuck:

    Everybody knows that anyone owning a house worth $1MM can afford and should “pay his fair share”…Even when it is being earmarked to pay for the unfair shares of a mismanaged and now defunct municipal pension fund.

    I smell union favoritism.

    Also, government is the only entity that can so arrogantly correct any amount of mismanagement by levying additional charges to its “customers”. I would like to see Wallmart or Apple do that little trick of prestidigitation.

    rafa

    • the reason that the government can do that, Rafa, is because free-market capitalism assures the government that it can .
      American consumers place a high value on US citizenship and residence and don’t respond to tax increases by leaving the country.

      • free market capitalism assures the government that it can ‘correct’ any amount of mismanagement by levying additional charges to its “customers”…?

        I think not, though that is the power that an insufficient understanding of our Constitution has led too…

        As long as bureaucrats, politicians and the media can escape accountability for their actions, the dog and pony show will continue.

        • Bingo, Mr. Britain.

          rafa


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