Californians Have Little to Show for All That Government Spending

Even after all this year’s budget drama, the burden from total state expenditures remains at the exceptionally high level of 9.0 percent. Excluding the surge following the covid-19 spending binge, a burden of 9.0 percent of income typically presages a coming budget crisis, it was not (and is not) a sign that the Governor and legislature have passed an affordable budget. California’s excessive spending is also evident when compared to other states. The U.S. Census Bureau maintains data on the fiscal position of state and local governments.[1] Whether a program is considered state or local spending will differ between the states, which is why it is important to include both state and local government finances when comparing expenditure burdens across the states. Compared to other states, total California’s state and local spending per capita in 2021 (the latest data available) is 39.4 percent larger; relative to the income of all residents, spending is 16.7 percent larger. Bringing California’s state and local spending relative to income or population in line with the national average would require a 14 percent (based on personal income) or 28 percent (based on per capita) reduction in total state and local spending. Perhaps all this higher spending could be justified if Californians received better government services relative to most other states. Unfortunately, the reality is precisely the opposite. From a broader perspective, California’s fiscal position and tax competitiveness are consistently ranked near the bottom compared to the other states. For example,    

• According to S. News & World Report’s assessment of state fiscal stability, California’s government is the 9^th most unstable.[2]
• According to Truth in Accounting fiscal transparency in California is the 3^rd Additionally, California is in the 9^th worst financial position compared to the other states.[3]
• ALEC’s 17^th Annual publication Rich States, Poor States ranks California as having the 4^th worst economic policy environment.[4]
• The Tax Foundation ranks California’s business tax climate as the 3^rd worst in the country due to the state’s excessively high marginal tax rates.[5]

Perhaps more important for residents, Californians also receive some of the worst state and local government services compared to most other states. For example, California’s education outcomes are way below average,[6] the state’s crime rates are much higher than the national average,[7] and the share of California road miles that are ranked as “poor” is one of the highest in the country.[8] Identifying the connection between California’s high-spending/low-yielding government programs is essential. Whether it is homelessness or low education outcomes, the Sacramento solution is always to throw more money at the problem without ever asking how much is currently being spent or whether those expenditures are effective. Asking these questions elicits reform possibilities that enable the government to spend less money while improving outcomes for residents. Toward this goal, the next several Spending Watch pieces will dig into these questions. The analyses will leverage the U.S. Census government expenditure data to identify the relative levels of spending in California by programmatic area (e.g. healthcare, income support, education, law enforcement, etc.) and connect the amount of spending to the resulting quality of the programmatic services. The resulting information will provide a pathway to address the impending budget crisis by identifying where Californians are getting good value from their state and local government and where reforms are most desperately needed.  

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  [1] “Annual Survey of State and Local Government Finances” U.S. Census Bureau, https://www.census.gov/programs-surveys/gov-finances.html. [2] “Best States: Fiscal Stability” U.S. News & World Report, https://www.usnews.com/news/best-states/rankings/fiscal-stability. [3] “The State’s Financial Transparency Score 2024” Truth in Accounting, https://www.truthinaccounting.org/library/doclib/Financial-Transparency-Score-2024.pdf; “Financial State of the States 2023” Truth in Accounting, https://www.truthinaccounting.org/library/doclib/FSOS-Booklet-2023.pdf. [4] Laffer AB, Moore S, and Williams J “Rich States Poor States’ ALEC, https://www.richstatespoorstates.org/app/uploads/2024/04/2024-17th-RSPS-State-Pages_WEB.pdf. [5] Walczak J, Yushkov A, Loughead K “2024 State Business Tax Climate Index” Tax Foundation, October 24, 2023, https://taxfoundation.org/research/all/state/2024-state-business-tax-climate-index/. [6] “The Nation’s Report Card” https://www.nationsreportcard.gov/profiles/stateprofile?sfj=NP&chort=1&sub=MAT&sj=&st=MN&year=2022R3. [7] “Violent Crime Rate: 2022” https://projects.csgjusticecenter.org/tools-for-states-to-address-crime/50-state-crime-data/. [8] “Which states have the best — and worst — road quality?” USA Facts, January 9, 2024, https://usafacts.org/articles/which-states-have-the-best-and-worst-road-quality/.