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.