How To Slow, Reverse The California Exodus

An unwritten rule of journalism says, “if it bleeds, it leads.” When it comes to the exodus from the Golden State, this rule isn’t being applied.

California had been the dream destination for generations and became the most populous state in 1964. But California’s share of the U.S. population peaked in 2003 and fell below 12 percent as of 2020 for the first time since 1998.

The total population is finally being impacted because the contributions from births and international migration cannot offset California’s loss of domestic residents. As we document in the new Pacific Research Institute study “California Migrating,” the state has been losing more domestic residents to other states than it gained from those moving in since 2010, according to IRS data.

This domestic migration away from California is attributed to quality of life and economic concerns. Rising crime, urban blight, and growing inconveniences, such as worst-in-the-nation traffic, erode the state’s quality of life.

From an economic perspective, residents face steep housing costs, high-priced energy, expensive cost of living, and high taxes. Extortionate taxes and unaffordable housing costs alone turn California’s 14 percent average income premium compared to other states into a nearly 20 percent net income deficit.

Businesses have also given up on California. Since 2008, thousands relocated either fully or partially elsewhere.

Many that have left include “high-profile companies” such as Hewlett- Packard, whose founding is recognized as the birth of Silicon Valley; Tesla; SpaceX; and Charles Schwab, which was started in San Francisco 50 years ago. Mitsubishi, Nissan North America, Toyota Motors North America, Oracle, Palantir Technologies, and Jacobs Engineering are also on the list.

These relocations don’t happen in a vacuum and produce real-world consequences. When successful companies flee, the state loses high-paying jobs, which creates “a huge problem” for the state says Lee Ohanian, UCLA economics professor and Hoover Institution senior fellow.

Four years ago, the Pacific Research Institute commissioned a poll of 200 technology, manufacturing, clean tech, and energy industry executives. They overwhelmingly cited the state’s anti-business climate and high cost of living as reasons for leaving or not expanding their operations in California.

As people and businesses leave, economic opportunities dry up, threatening California’s future and making it harder for policymakers to address long-term structural problems, such as the state’s unfunded public-employee pensions or the needed investments into roads, highways, and bridges.

The good news is that since public policy is driving the exodus, public policy can reverse it.

To make housing affordable, the state should reform the California Environmental Quality Act (CEQA). California Senate Bill 9 and 10, recently signed into law, do allow for more housing, those zoning reforms are still limited. Comprehensively reforming CEQA will help make a dent in the state housing supply deficit.

Addressing California’s energy poverty problem requires repealing the state’s energy and global warming policies. California cities should stop banning natural gas and ratepayers shouldn’t be on the hook for infrastructure upgrades from energy monopolies such as PG&E, which woefully endanger residents and mismanage equipment. Gas and electricity should be affordable and reliable in California with more competition for consumers.

Spending changes should address the state’s short-term and long-term budget imbalances. Short-term reforms should tie General Fund spending closer to the average annual economic growth of the state to reduce the boom-and-bust volatility of state budgets. Long-term budget imbalances such as unfunded pensions and outdated infrastructure should be addressed as well, while tax reform should improve the incentive to work and save in California and reduce the volatility of state revenues.

Quality of life problems should be addressed by repealing recent criminal justice reforms, such as Prop. 47, that undermine the safety and security of residents.

State leaders should leverage private charities to help sustainably address the homelessness crisis, with a focus on addressing the root causes of the problem.

Californians do not need to resign themselves to a future of growing economic hardship, declining quality of life, and a rising outmigration of people and businesses. These adverse trends are a direct result of misguided government policies and can be reversed by implementing the right reforms.

Fundamental policy reforms also give reporters an opportunity to, once again, violate the “if it bleeds, it leads” mantra. But this time to report on California’s resurgence.

Wayne Winegarden is a senior fellow in business and economics at the Pacific Research Institute.  Kerry Jackson is a fellow with PRI’s Center for California Reform.  They are the authors of the new study “California Migrating,” which can be downloaded at www.pacificresearch.org.

This article was originally published by the Pacific Research Institute.

Comments

  1. The question arises: Do we really gain or loose from the loss of high tech and other large companies? Those companies have controlled California for many years (with the support of the legislature). The result, which is showing up more every day, is that the state is now composed of the elites – and everyone else. The middle class is being forced to move out because they are the only group capable of standing up to the elites. Now the companies are leaving because the restrictions,costs and laws have changed in ways that affect them directly. They are heading to states where they may very well do the same thing over a span of several years. The result of loosing the elite and middle class will result in government taking control, which is very evident today. Government wants a compliant population that they can control. At present the control is money in the form of what might be called welfare, social equity, bribes, handouts, etc. That will go downhill rapidly as the money leaves and the costs of these services increases beyond the capability of the government to provide them. Reality will set in – stand by for that!!

  2. Tar and feather a$$hole Newsom and elect moderate/conservative legislators would be the first GOOD step.

  3. The litany of “shoulds” Winegarden lays out would be the obvious and pursued paths if the state (and national) goals were the generation of individual wealth and low tax and, unrestricted free markets. These are not the goals of current state “leadership”. Their goals are communist ideology based, which requires tight central planning on all social and economic levels (control) with a focus on “equal” outcome as opposed to equal opportunity. People who prefer freedom will move to states that encourage freedom and, they are for the most part the producers, not the “takers”. This exodus will continue until the goals of the state change.

  4. I find it amusing that CEQA is being used as a cause. It was created to stop urban density and when the Democrats found it stopped illegals from housing they changed it. CEQA used to demand adequate roads and circulation. That changed too so the Radicalized Democrat Party can FORCE you into government transportation.

    As long as the people elect the Socialist Radicals now in office there will be an influx of illegals and those looking for the WELFARE STATE the Democrats have created in the past 40 years.

    I have a tenant that said two months ago she did not want to work and with the bonus unemployment she wasn’t going to. Her live-in avoided going back to work as long as he could.

    Democrats have done great job in disconnecting the increased cost of the Socialist Welfare State and massive increases in the cost of living in the entire State.

    It is intentional….They create a dependency class and then say if you don’t vote for us we will cut off you supply. Gee isn’t that what drug dealers do?

  5. With the failed recall of Newsom it is evident tax payers must hit bottom before they realize his ilk are screwing them. California has officially entered the decent into failure.

  6. Another article stating the obvious that has been expressed here many times. The opportunity to begin the change was just rejected by the people of California. They like it as it is and every family or business that leaves reinforces the power of the one party State. The Democrats have nothing to worry about.

    • TheRandyGuy says

      Absolutely correct. The voters have eliminated any Republican challenge to Democrat dominance, and Democrats know full well they can pass any law they want and Republicans will not replace them. I’m leaving for the same reasons as everyone else: I’m a conservative, I despise liberalism, my house is worth more than twice what I paid for it (and we have a very small mortgage), I’m tired of all the BS associated with running my own business (regulations, taxes, permits, etc.), the cost of living is unjustifiably too high, and being surrounded with people who don’t speak English is irritating. So, we leave and go back to where I grew up, East Tennessee. I will gladly sell my house to the poor fool happy to buy it (average sale time in San Jose is 5 days) and won’t look back.

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