Politicians are rolling in tax revenue, but they can’t seem to solve basic issues like housing and energy.
This should be the best of times in California. A vigorous national economy is providing record numbers of jobs and robust growth in tax revenue. But far from flourishing, California is increasingly beset by social and economic problems, from homeless encampments to rubbish-strewn streets to blackouts.
“California is what America is going to look like,” Gov. Gavin Newsom boasted in a TV interview recently. The state, he said, “is America’s coming attraction.” The rest of the country can be forgiven for finding Mr. Newsom’s vision of the future less than attractive. High costs have strapped local governments in the Golden State, housing is often unaffordable, and gasoline and electricity are more expensive than elsewhere. Mr. Newsom’s first budget devotes billions of dollars to these problems, but much of the spending merely offsets problems the state itself has created. What should be a golden age of prosperity for California is turning into an age of anxiety with infectious-disease outbreaks and long nights without electricity.
California’s problems aren’t due to a lack of resources. Mr. Newsom’s budget, enacted in June, is a record $215 billion. Fueled by growing tax collections on California’s wealthy, state spending has increased $59 billion since 2014. The state’s personal income tax alone is projected to yield $102.8 billion this year, a nearly $28 billion increase in five years. That sounds like plenty of money, but it disappears fast in the Golden State. Sacramento spends more than $60 billion from its general fund on K-12 education alone, and $36 billion in state funds on Medi-Cal, as the state calls its version of Medicaid, which subsidizes health care for low- and moderate-income residents, including some illegal immigrants.
Steven Malanga is the George M. Yeager Fellow at the Manhattan Institute and a senior editor at City Journal.
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