Bestinau got that-
News flash: California hasn’t gone bankrupt. Again.
It’s been a quarter of a century since I became a business columnist for the Orange County Register—and now for the Southern California News Group. One economic theme that has baffled me for the past 25 years is how many times — and how many people — could argue that California is on the brink of financial ruin.
The warnings appeared in government reports, academic studies and private sector white papers, not to mention brash political remarks. Taxes too high. Too much regulation. Too much debt. Too many people and companies are leaving.
Essentially, the critics say the state and its corporations couldn’t afford everything from immigrants to clean air and water, to helping the needy, to paying decent wages to workers.
And yes, since 1997, the state has been in close contact with monetary collapse — from the dot-com crash to the bursting of the mortgage bubble to the corporate chill of the pandemic. During the Great Recession, the state briefly issued IOUs to pay some bills. Nevertheless, solvency prevailed.
I’m not saying that California is perfect or that it sometimes doesn’t need a healthy reality check. Note that the state government’s budget has grown to $196 billion in 25 years, from $67 billion. That’s a tripling of over 77% inflation and 22% population growth.
Of course, the state’s critics can add value to economic policy debates. And past performance is just that — history, not guarantees.
But the doom-and-gloom arguments have grown tiresome. The logic is faulty. The math suspect. The anecdotes are individual stories, not trends.
It’s pretty clear that voters aren’t buying pessimism, as those calling for “change” don’t seem to be winning the election. Republicans don’t even have a major candidate to run against Gavin Newsom this fall.
Gosh, when I became a columnist in 1997, Republican Pete Wilson was still governor — for part of 16 straight years, the GOP held the state’s highest office. Arnold Schwarzenegger was the only state leader since the GOP — and many would say he wasn’t quite a Republican.
So with California’s economy on track to recover from the coronavirus — and the state budget awash with billions of excess cash — I’ll be honoring my journalism birthday with 25 reasons California didn’t go bankrupt…
25. Pacific: Not just a tourist attraction, in the west there is the dynamic Asian economy uniquely linked to Californian corporations with $60 billion a year in state products exported to China, Japan and Co.
24. Productivity: California’s public companies generate $1.4 million in revenue per employee — a tenfold increase in 25 years, Bloomberg reports. Total production of American companies has doubled in 25 years.
23. Logistics: Business success can be linked to quick, efficient moves. California has three of the busiest US ports (Los Angeles, Long Beach and Oakland) and two of the seven largest department stores (LA and the Inland Empire).
22. Resistance: Flexibility is important. Also add to it. If California could survive the slow 1990s, the deep Great Recession and the pause of the pandemic, let’s politely say it has “crisis management” skills.
21. Financing: When Wall Street shut down Gold Rush funds in the 1800s, Californians were forced to master creative money management. That skill fits the state’s risk-taking mindset.
20. Pro worker: California routinely ranks last in CEO surveys of the “best” place to do business. I translate that into the meaning of ‘best’ place for employees – and that is important in the age of ‘Great Resignation’.
19. Taxes: A typical Californian has a combined state and local tax burden that ranks ninth in the nation, according to WalletHub. That’s the price of paradise – and the government’s cash flow.
18. ingenuity: California consistently created the next big thing. From 1963 to 2001, the state was home to 15% of US patents issued. That share grew to 26% in 2002-2015.
17. Hollywood: Another globally recognized landmark. And it’s more than a cultural frame of mind, the California film industry is estimated to employ 700,000 people on a $70 billion payroll.
16. Safety net: California’s aid to the needy is actually “mid-range” — 22nd-lowest level of health uninsured, 27th-lowest unemployment benefits, and 13th-lowest food stamp use.
15. To invest: Will the giant Calpers pension fund earn enough to pay its bills? Well, the portfolio has increased in value by 13% last year – and has averaged 7% per year for the past 20 years.
14. Budget reform: Several measures — by lawmakers and voters — have somewhat curtailed the state government’s ability to spend money. Most notable is the pension reform that should ultimately lower taxpayers’ taxes.
13. Jobs: In the state they supposedly hate, bosses added 4.3 million workers to the nation’s largest job market in 25 years. That’s 34% growth versus 23% in the rest of the country.
12. Factories: Making stuff still employs 1.3 million Golden Staters – No. 1 in the US Yes, that’s less than 500,000 since 1997, but the 28% drop is comparable to a 27% drop nationwide. And California factory wages are $106,000 – 46% more than US factory wages.
11. diversity: Different cultures and points of view make an economy richer. There is a 70% chance that any two Californians will be of different racial backgrounds, the second highest diversity rate in the country.
10. Weather: A huge competitive advantage that is not just a lure, but allows more business to be done. You know, less “rainouts”!
9. Central Valley: If it were a state, it would be the 27th most populous. And it gives the state plenty of room to grow. Oh, and agriculture helps feed the nation.
8. Tourism: Nation’s most visited state. That rings cash registers — think tax revenue on the $97 billion in visitor spending last year — and shows off the Golden State to outsiders.
7. GDP: Long the country’s largest economy—and one of the world’s largest—California’s business output has grown at an annual rate of 2.6% above inflation since 2005, compared to 1.7% for the U.S.
6. Property: Thanks Prop. 13 there are low property tax rates. But rising median home prices went from $168,000 to $771,000 in 25 years, helping property owners — and government cash flow.
5. immigration friendly: You have to add world class thinking and heavy lifters to keep an economy going. California had 2.9 million foreign immigrants in the past decade, the most in the nation.
4. Scholarship: Wall Street’s Dow Jones index crossed 7,000 in March 1997. Today, it is in the 35,000 range. Tech’s Nasdaq Index is up 12 times. These upswings drive capital gains — the key to California’s high income tax collections.
3. Higher class: Taxing the rich – the state’s income tax tactic – requires a wealthy class. California had 173 billionaires last year, more than New York (118), Florida (68) and Texas (64), according to Forbes.
2. Silicone Valley: If some businesses move, the state still has the world’s ultimate business creation machine. About one-eighth of the country’s tech workers are in the Bay Area, a region that continues to be the country’s top draw for seed money.
1. pay slips: California’s per capita income of $76,000 is the nation’s fourth-highest — and it’s up 180% in 25 years from a national growth rate of 144%.
PS: Maybe you are not convinced. Well, the three major credit rating agencies—S&P, Moody’s, and Fitch—all now rate California higher than the state’s financial fitness numbers in the spring of 1997.
Jonathan Lansner is a business columnist for the Southern California News Group. He can be reached at firstname.lastname@example.org