To: California critics
From: Columnist with a trusty spreadsheet
Re: Quarter-billion-dollar temper tantrum
The voters — all sides acting within state law — have spoken. The costly recall attempt of Gov. Gavin Newsom failed badly, and Californians get to fight a similar battle next year!
I’ll let others pontificate on the social issues and political tactics behind the vote while I ponder dollars and cents. My analysis is simple: Don’t bet against California.
In my three-and-a-half decades as a state resident, the California economy has proven its resiliency with a surprising willingness to reinvent itself. It survived the savings and loan collapse, big hits to the aerospace industry, an electricity crisis, the dot-com technology crash, the mortgage meltdown and to, a large degree, the pandemic.
Yes, it’s a different business scene today, with plenty of scars to show for the ups and downs. There are challenges ahead, too. And we’re no longer the sleekest engine among the states — but still an economic giant.
But the never-ending noise from California’s doom-and-gloom crowd is tiresome. If winning statewide elections is a goal, perhaps “California will collapse soon” or “It’s not like it used to be” aren’t great messages.
Let me offer 13 “talking points” to consider …
1. Big picture: Forget the fifth-largest economy-in-the-world platitude. Look at the state’s growth in gross domestic product, the broadest measure of business output. California’s economy grew at a 4.7% annual rate in the past quarter-century compared with 4% U.S. growth. And more recently, California’s economy expanded at 3.9% annually in the last five years vs. 2.9% nationally.
2. Hiring: Executives may complain about California’s business climate, but hiring patterns suggest those comments are more a wish list than reality. In the past 10 years — including the economic hit of the pandemic era — California has added 2 million jobs, the biggest hiring spree in the nation. On a percentage basis, the 14% gain ranked 14th best.
3. Government bankruptcy: The state has, again, paid its bills amid a pandemic — and then some. Its biggest earners did very well in the downturn, boosting income taxes receipts. The result is a budget surplus of unfathomable hugeness. And for those thinking the state’s pension funds might collapse, CalPERS reports a 21% investment gain for its latest fiscal year. That pushed assets to 82% of required funding — up from 71% a year ago.
4. Corporate exits: It often takes significant incentives to get companies to leave California. Take pro football’s Raiders, who left Oakland for Las Vegas — lured with $750 million in Nevada government giveaways. Contrast that to the Rams, who left St. Louis for Los Angeles. Owner Stan Kroenke got zero tax dollars and instead put $5 billion of private cash into SoFi Stadium and surrounding development.
5. Corporate exits, part 2: Aren’t these handouts “crony capitalism?” For example, Walt Disney Co. is transferring 2,000 Imagineer jobs from Burbank to Orlando. Its announcement took a swipe at California’s business climate but didn’t mention a key motivation: Disney’s in line for $500 million in tax breaks tied to the relocation.
6. Congress: California lost a seat in the U.S. House of Representatives because its population didn’t grow fast enough. Yes, growth. In the 10-year span used to determine congressional representation, California added 2.2 million residents — 10% of all U.S. growth and the third-largest gain. Its sub-par 6% growth — yes, growth — was the culprit.
7. People exits: There is no exodus. In the latest 10 years of census migration data, California had the nation’s lowest share of its residents moving to another state. Look at it this way: There’s a 1.6% chance-a-year that your family member, neighbor, or co-worker became an ex-Californian. By 2019, California had fallen to third-best with 1.7% of residents departing.
8. Home prices: California homes appreciated 20% in the year ending in June, according to a federal home price index — 11th best among the states. Over five years, California home values gained 52% — 17th best among the states. If there was any mass exodus, it certainly isn’t showing in how much people will pay up to live here.
9. Poverty: Yes, California’s bottom ranking in 2020 shows 6 million of us live in poverty — a 15.4% share of the population. And that isn’t acceptable. But since 2012, California’s poverty count has fallen 2.9 million — the largest improvement among the states. It’s a 33% decline in the poverty count. The share of impoverished residents dipped 8.4 percentage points — tied with Arizona for the largest improvement.
10. Train to nowhere: Nowhere? Did you know that California’s Central Valley has 4.3 million residents? If it was a state, it would be the 27th most populous. Is it a huge problem that the state’s bullet train project — approved in 2008 when Newsom was San Francisco’s mayor — first helps a region that’s often ignored by a coast-centric power structure?
11. Start-up cash: We may be better at starting companies and keeping them. Look at what investors offered this state’s entrepreneurs. California companies took in $84 billion of venture capital last year — key funding for fledgling firms. That was half of the nation’s take and up 119% from 2016 — a bigger gain than Texas or Florida.
12. Taxes: When WalletHub looked at tax burden by state — collections vs. incomes — California ranked 10th highest. The state was fourth-highest for income tax burden but 19th lowest for property tax and 17th lowest for sales and excise taxes. The recent tax bite feels larger since 2017, when then-President Trump signed into law a $10,000 limit for deductions for state and local taxes. That hurt many California taxpayers.
13. Gas taxes: Just a reminder. In 2017, a state gas tax-hike was signed into law by then-Gov. Jerry Brown. It included an automatic, annual cost of living adjustment. In 2018, a ballot initiative to repeal the tax failed. So this summer’s gas tax increase — by the way, sixth-tenths of one penny per gallon — isn’t on Newsom. It’s your neighbor’s fault!
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
