How California's budget blunders led to my divorce from the Golden State
Over the weekend California Governor Jerry Brown announced the grim news that the Golden State’s budget deficit had almost doubled to $16 billion – more than 17 percent of the new budget year’s $92.6 billion spending plan.
Immediately, protesters descended on the state Capitol to demand more welfare spending in a state that already hosts one-third of all of America’s welfare recipients.
As a California state lawmaker for six years, this cycle is all too familiar. The liberals who run California tax more, spend more, regulate more, and drive up the cost of doing business, and then are shocked when tax revenue plunges as productive taxpayers leave the state.
For 13 years, before being elected in 2004, I worked as an executive in California’s once-vibrant aerospace industry.
Last September, Northrup Grumman, the last major aerospace company headquartered in California, picked up its operations and tax base and moved to Virginia.
Three months later, I left too, heading to low-tax, liberty-loving Texas.
My divorce from California was long in the making: call it a case of irreconcilable differences. I constantly warned that the nation’s biggest state was spending too much, that its meddlesome regulatory climate was choking off job creation, and that its “green” energy policies were driving out manufacturing. I was called a nag and ignored.
Concerned for my family’s financial viability, we packed up and left for greener pastures.
California and Texas are strikingly similar in many respects. They both feature large, diverse, and youthful populations. They both border Mexico and have long coastlines. And both are blessed with abundant natural resources. Where they differ is in their philosophies of government.
Beginning with their attitudes towards oil and gas exploration, California obstructs traditional energy production, preferring instead to subsidize expensive solar projects that produce costly electricity. Meanwhile, Texas has added more jobs in the oil and gas fields in the past year, 36,400, than are employed in California’s entire solar sector, 33,000.
As a share of its economic output, California spends about 46 percent more on state and local government than does Texas.
Having more government employees means more bureaucrats to write regulations. California itself commissioned a study showing that its regulatory morass costs the average small business in the state $134,122 in compliance costs every year.
Texas’ bureaucracy, excluding teachers, is 22 percent smaller as a portion of the population than is California’s, with every Texan paying about $467 a year for government retiree benefits, compared to California’s $1,105 in pension costs. Sky-high benefits for bureaucrats may soon cause the bankruptcy of Stockton, California’s 13th-largest city.
California has more government paper-pushers but Texas has 17 percent more teachers per capita, with educational outcomes favoring the Lone Star State. In fact, Texas K-12 schools perform consistently above the national average across age, racial, and subject matter areas, while California schools perform well below the national average.
To support its bloated government, California asks more of its taxpayers who pay 10.6 percent of their income to state and local government, above the U.S. average of 9.8 percent. Texans pay only 7.9 percent.
But California’s political leaders aren’t satisfied with 10.6 percent—they want more and they’re going to the voters this November with a massive $9 billion sales and income tax hike that, if approved, would set California’s income tax rates at a national-high of 13.3 percent, 2.3 percent higher than the top marginal rate charged by President Obama’s home state of Hawaii.
What Governor Brown doesn’t dare mention about his proposed tax hike is that half of the new taxes he wants to raise would fund government employee pensions.
But as California seeks to hike tax rates, its tax base is fleeing to lower-tax states. According to the U.S. Census, California lost about 300,000 jobs between 2000 and March of this year, while Texas gained about 1.2 million jobs.
Providing a powerful confirmation as to why the jobs are leaving California, Chief Executive magazine has ranked California the worst state in which to do business since it started its ranking eight years ago. Meanwhile, Texas has ranked number one for all eight years. Rather than attack the root causes of California’s job losses, California’s liberals attacked the magazine.
The Tax Foundation ranks Texas, with no income tax, as the 9th-best business tax climate in America. California ranks 48th, ahead of only New York and New Jersey.
California’s big-government, entitlement state model, aided by the nation’s best weather, is collapsing. California, ever the trendsetting state, appears to presage President Obama’s ideal vision of America by a few years.
Meanwhile Texas frees job creators to do what they do best through low taxes, less regulation, and a reasonable lawsuit climate – perhaps pointing the way to an alternative vision of a once and future America.
Chuck DeVore served in the California State Assembly from 2004 to 2010. He is a Senior Fellow for Fiscal Policy at the Texas Public Policy Foundation where his writings may be seen here. You can follow the Foundation on Twitter @TPPF and on Facebook.