news-record.com

There are definitely different narratives about California, a state blessed with so many riches but which also has fallen into a desperate financial condition. Why?

A letter writer today blames "30 years of relentless tax-cutting."

She cites the damage done to the state's university system. As a result of that decline, she implies, California no longer will be generating jobs in high-tech industries.

Another narrative is that California remains a high-tax state, and that this and an oppressive regulatory climate actually are driving out industry.

Neither of those narratives is true, although I think the second has more basis in fact.

A recent report from the Public Policy Institute of California addresses some of the issues. I've selected a few key statements:

* "California consistently scores poorly on business climate rankings. These rankings, however, focus primarily on tax and regulatory costs, which are only one part of the business climate. The business climate should instead be defined to include all costs and benefits that businesses face from locating in California. The business climate also should take into account the skill level of the workforce, the availability of capital and support for new business, and the amenities that make California an attractive place to live."

* "In fiscal year 2005–2006, the latest year for which comprehensive data are available, California’s state and local governments collected $237 billion, or $6,528 per capita, from taxes, fees, charges, and other miscellaneous sources. By this measure, California had the tenth-highest revenue burden in the nation. However, as a high-income state, California also has a large tax base. When state and local general revenues are expressed as share of economic activity or personal income, California’s ranking drops to 18th nationally."

* "Many of California’s public programs have larger caseloads, or workloads, because of demographics—in particular, more school-age children and low-income families. Also, the state has also made policy decisions to expand program eligibility and use in some areas—health and social services and higher education, for example. In addition, California pays some public employees—such as those in K–12 education, public safety, and administration—more generously than other states do."

* "Rhetoric aside, California loses very few jobs to other states. Businesses rarely move either out of or into California and, on balance, the state loses only 11,000 jobs annually as a result of relocation—that’s just 0.06 percent of California’s 18 million jobs. Far more jobs are created and destoyed as a result of business expansion, contraction, formation, and closure than because of relocation. Business relocations, although highly visible, are a misleading guide to the overall performance of the California economy. The employment growth rate, which takes into account job creation and destruction for all reasons—not just relocation—is a much better measure of the state’s economy."

* "Even before this decade’s real estate bubble, housing in California was much more expensive than in the nation as a whole. And although housing prices have fallen more in California than in the nation during this recession, housing remains far more expensive in California, especially in its coastal cities. At the end of 2008, the average U.S. home was worth $192,000; in metropolitan Los Angeles, the average home was worth over $400,000, and in the Bay Area, over $500,000, according to Zillow. Expensive real estate makes it harder for some businesses to locate in California and attract workers, pushing growth out of state. The growing gap between high house prices on the coast and rapidly falling prices inland could accelerate the movement of businesses and households inland."

There's lots more, including a section about dealing with climate change. California is a leader in that initiative, which means it's undertaking very costly measures to try to mitigate what the report's authors think will be very damaging effects. Whether such expenditures net any real benefit, or worsen California's economic woes, will play out over many years.