A recent George Will column highlighted some of the many problems plaguing California that have resulted from state government policies.
Having institutionalized envy in a steeply progressive income tax, California depends on 200,000 wealthy taxpayers for 25 percent of its revenue. The state ranks only behind liberal New York in the number of outward-bound moving vans. More people would flee if they could sell their houses. Between 1990 and 2007, the state lost 26 percent of its factory jobs and 35 percent of its high-tech manufacturing jobs. “Detroit, only with sunshine,” says Investor’s Business Daily. In Nevada (no personal or corporate income tax; sales taxes lower than California’s), a Las Vegas organization lures Californians with a talk titled “California Has Lost Its Mind and Las Vegas Is Providing Psychoanalysis.”
California has the lowest debt rating of any state, the fourth-highest unemployment rate (11.9 percent), and its job growth rate since 2000 is almost 20 percent below the national average. Some county and state public safety employees retire at 50 receiving at least 90 percent of their final year’s pay, forever. Taxpayers pour more than $3 billion a year into state employees’ pension funds, 10 times more than they did 10 years ago, and still there are large unfunded liabilities for which taxpayers are liable. More than 5,000 retired state employees’ annual pensions exceed $100,000. If public employees did not begin drawing pensions until age 65, California would save half a trillion dollars through 2030.
Between 1997 and 2007, the state work force, including public school employees, grew 24 percent, to almost 900,000. Government spending has grown 40 percent faster under Gov. Arnold Schwarzenegger than under his Democratic predecessor. Since 2005, state spending has increased twice as fast as inflation and population. Democrats blocked allowing online enrollment by parents of their children in state health programs because it might have endangered unionized clerical jobs. As the state prepares to release tens of thousands of felons from prison to comply with a court order and help balance the budget (in 2002 prison guards received a 37 percent raise), it has 19,000 illegal immigrants incarcerated.
It is not a very flattering portrait of the Golden State. Sadly, it is an accurate one, though. Oh, except for the unemployment statistic. According to the California Employment Development Department, new economic data show that the state’s unemployment rate has jumped from 11.9% in July to a modern record of 12.2% for August. This is quite a bit higher than the national average of 9.7%.
California’s punitive tax structure, its lagging job growth rate, the rate of outmigration, and the rapid and unsustainable growth of the public sector at the expense of the private-sector economy all speak to a disastrous business climate that is strangling the state. Sure, the state needs to make many more cuts to “right-size” its government and balance its budget, but it must also address its stifling business climate by reducing its tax burden and cutting copious amounts of regulations and job-killing red tape if it is to return to prosperity. This is even more important during a period of economic downturn or stagnation.