Economists from UCSB and UCLA took on the challenge Thursday afternoon of answering a complicated question: Why did California’s population decrease for the first time in history this year?
The decrease from January 2020 to January 2021 was a 0.5% decrease, meaning a little more than 182,000 fewer California residents than the previous year.
For 10 years straight in California, more domestic residents have left the state than come in, and it’s happened for five years straight in Santa Barbara, UCSB economics professor Dr. Peter Rupert said.
However, Santa Barbara’s population went down even more this year than the state’s did. From January 2020 to January 2021, the county’s population saw a 2.1% decrease.
Dr. Rupert said people must keep in mind the declining birth rate, reductions in immigration and an increase in excess deaths from COVID-19. However, Dr. Lee Ohanion, an economics professor at UCLA and the director of the Ettinger Family Program in Macroeconomics Research at the university, said it could be for other reasons, too.
He gave a presentation comparing economic and government policy outcomes in California over the years, starting in the 1960s and 70s up to now, in another webinar installment of Dr. Rupert’s Economic Forecast Project.
“This is really going to be a story about a growing disconnect between what is expected of the government in terms of accountability and also a disconnect between the priorities of government and the priorities of its citizens,” Dr. Ohanion said to start off his presentation.
The economist cited the unprecedented amount of growth the state saw in 1960, when the state’s population went from 2% of the U.S. population to 9% of it, from 2 million to 16 million. The population was young, with half of its residents under 24 years of age, meaning relatively few taxpayers who managed to build schools, hospitals, roads and invest in water infrastructure and utilities.
Dr. Ohanion said they were able to accomplish those feats because in the 1960s, capital investment was about 25% of the state budget. Now that investment is about 4% of the budget.
The economics professor rattled off statistics about the state’s current infrastructure, technology and housing needs, along with poverty assistance.
Regarding infrastructure — in light of the national infrastructure package continuing to be tied up in Congress — California received a D+ grade on its infrastructure from the American Society of Civil Engineers. There are 1,680 dams in risky condition statewide; one of every 18 bridges in the state (around 6%) is structurally deficient; and the Society of Automobile Insurance estimated that the deficient roads in the state cost California drivers $27 billion (14% of last year’s complete state government budget) annually in repairs and insurance premiums.
In Los Angeles, Dr. Ohanion said, nearly 50% of all city sidewalks are not just cracked, but broken. The city faces 400 personal injury litigation cases per year solely from fall injuries that occur on its sidewalks.
“The most important function of the government is to protect … These are basic functions that just aren’t getting done, and these numbers are alarming,” Dr. Ohanion said.
Many of California’s major water pipes are cast iron with a lifespan of 55 years, and they’re 60 years old or older. Most of the California Water project — the most recent major water investment — ended in the early to mid 1970s. Twelve million people later, the state’s water capacity is roughly unchanged, the economist said.
Nine of the 10 biggest fires in the state by acreage have occurred in just the last decade as well.
One of the biggest issues locally in Santa Barbara and statewide — housing — was also discussed.
California is: 49th in construction and affordability; 50% higher in living costs than the national average; home to 10 of the 11 most expensive housing metro areas in the U.S.; and home to 10 of 12 of the most expensive rental markets.
The state has the seventh highest electricity costs and the nation’s highest gasoline prices.
“When you look at those numbers, it’s perhaps less surprising that 38% of Californians live in poverty as defined by the Bureau of the Census or near poverty,” Dr. Ohanion said. “At least 25% of the country’s homeless are in California.
“Fourteen million Californians are on Medicaid … If we just call those 14 million Calfiornains on Medicaid — very low-income people — their own state, they would be the fifth largest state in the United States.”
The economist then attempted to answer the question of how it became this way. He first cited the politicization of the environmental movement, which was borne out of environmental disasters. He said corporate greed led the charge for politicians to ramp up business regulations, labor regulations and more government spending to “do whatever it takes.”
Dr. Ohanion pointed out that the California Environmental Quality Act was signed into law by Gov. Ronald Reagan in 1970, adopting “all feasible measures to mitigate environmental impacts of development.”
“I don’t say this in a partisan vision,” the economist added. “… Development is naturally going to have environmental impacts …This really paved the way to begin abandoning fiscal discipline and efficiency of government.”
He said the weaponization and politicization of that act put California in this situation.
The repeated response of raising income, corporate and sales taxes is overall, he said, why Toyota, Jamba Juice, Nestle, Dole, Charles Schwab and many more large corporations, along with millionaires and billionaires such as podcasters and Elon Musk, left the state.
This is also why, he said, when the income tax was raised to the highest in the country — 13.3% — the California Legislative Analyst’s Office was off by 60% on its estimation of additional tax revenue, because so many high-income residents left.
Dr. Rupert asked Dr. Ohanion what residents and leaders of Santa Barbara can do locally. Dr. Ohanion’s response was to address one of the city’s biggest hurdles — incentivizing housing development.
“Santa Barbara can make it easier and less costly to build housing,” he said. However, homes are Santa Barbara residents’ biggest assets now, and they tend to not have many other assets.
“Housing was never meant to be an investment. But it’s become that. So now we have people — and I understand this — trying to protect their investments by saying, ‘You know what, I don’t want a high rise apartment three blocks down the street for me, because it’s going to damage my property value,’” Dr. Ohanion said. “So this is now the headwind that California has to push up against.”
Overall, he concluded that Santa Barbara will always be a tourist centric location with highly-skilled medical, legal, financial and technological professionals, but it will probably not get a lot bigger, and “almost certainly remain extremely unaffordable for young people and for people with small incomes.”
Overall, the economist said that California isn’t alone, and many other states received bad infrastructure grades and have other problems.
“The whole point of today’s presentation was that we’ve lost sight of what the true priorities of good government are, which is protecting us,” he said. “That’s way, way far down on the priority list. If it hadn’t been, we wouldn’t be looking at these D+, and D roads and bridges today.”