The Reverse Gold Rush: Is the California Dream Fading Away?

A U.C. Berkeley Institute of Government Studies poll from September 2019 revealed that over half of California’s voters, across all income and ethnic demographics, have now considered leaving. According to the poll, 46% of those considering moving were older conservatives deeply concerned over the state’s increasingly progressive political culture, and 71% of those moving were concerned about the high cost of housing.

U.S. Census Bureau numbers show that the middle-and-lower classes are leaving California at an even higher rate than the wealthy. The Manhattan Institute reported in July 2020 that due to declining blue-collar jobs and expensive consumer costs for electricity and housing (the highest in the nation,) “since 1990, Los Angeles’ Black share of the population has dropped in half… A recent poll found that 58 percent of African Americans express interest in leaving the state; 45 percent of Asians and Latinos are also considering moving out.”

Sentiment towards leaving California has only increased during the COVID-19 crisis, as the state’s stay-at-home policies have been markedly more severe than neighboring states, resulting in severe job losses and business failures, children learning from home well into a second school year and a widespread feeling of deep distrust of the state and local government.

Among many other concerns on the minds of urban and suburban communities include traffic congestion and overcrowding, public safety concerns that were exacerbated by the social unrest of the summer, the defund-the-police movement, the early release of violent prisoners from state prisons and county jails and sharply rising homicide rates in Los Angeles (even though overall crime has decreased).

It’s a difficult time in the United States. New York City and Chicago are among many major population centers still troubled by political violence and racial strife, as well as the still-uncontrolled pandemic that has kept families locked in their homes with no clear end in sight.

Unfortunately, California is suffering not only from all these well-known issues but also from a long list of additional maladies.

Exodus

Over the decade of 2007 to 2016, approximately one million more Californians left the state than new residents arrived. In the past few years, the flight has accelerated. In 2018, almost 700,000 Californians moved away, mostly to states west of the Mississippi River, such as Arizona, Nevada and, especially, Texas. The rush of residents departing the San Francisco Bay Area in 2018 reportedly jacked up area U-haul moving costs some 16 times more to leave than to arrive from other states.

But it’s not just families that are moving. By the thousands, large and small businesses are departing at an accelerating pace. Famously, the Bay Area has now lost Fortune 500 companies like McKesson and Charles Schwab Corp., and prominent tech companies, such as Google, Tesla, Oracle, Hewlett Packard and Apple are sending significant operations to Salt Lake City, Utah and Austin, Texas, among other cities.

But it’s not just families that are moving. By the thousands, large and small businesses are departing at an accelerating pace.

Southern California has also seen a long line of departing firms, from Nestle USA to Toyota Motors, N.A., plus thousands of light manufacturing, retail and restaurant establishments, as well as the sustained movement of Hollywood production to other locations.

The flight from the dense, metropolitan areas of Southern and Northern California has been matched in the mid-state agricultural region and the large rural (but often neglected) “north state,” which have suffered from drought and public policies that challenged local economies in ways last seen during the 1930s.

The Rise and Fall of the Golden Dream

California 1.0 was the state of the Eureka discovery and the rise of the fifth-largest economy in the world, a beacon of attraction for dreamers of the good life in a great climate.

Starting with the mid-nineteenth-century Gold Rush, California grew into the twentieth-century national leader in agriculture, aviation, biotechnology, national defense, entertainment, fashion, soft manufacturing, textiles, information technology and tourism. Entrepreneurs from Europe and Asia (and even Brooklyn) brought their passions — not to mention baseball’s archrival Dodgers and Giants — to the Golden State.

California’s iconic landmarks include:

• The West Coast ports of Long Beach/Los Angeles and Oakland/San Francisco and the sophisticated infrastructure of the U.S. Navy’s Pacific Fleet in San Diego as well as other military installations and bases.
• Silicon Valley’s venture-capital ecosystem and the University of California’s long-admired campuses
• Orange County’s Disneyland and Hollywood’s studios
• Sun-drenched beaches along the Pacific ocean and lush vineyards producing world-class wineries
• The fruit and salad bowl of the world in the state’s fertile Central Valley region
• A “Beach Boys” culture and very livable middle-class cities
• Colorful business storefronts like Randy’s Donuts and Bob’s Big Boy dotting suburbia

California’s infrastructure successes included the invention of the clover-leaf exchanges within a massive new freeway system. For decades, one could cruise the boulevards of Los Angeles or the streets of San Francisco, or enjoy drives along the majestic Pacific Coast on uncrowded highways with smooth roads.

For decades, one could cruise the boulevards of Los Angeles or the streets of San Francisco.

And California’s rich political and social history gave space to a wide variety of democratic experimentation and grassroots passions. The political left can point to the progressive era of reform early in the twentieth century; the agricultural worker’s rights movement of Cesar Chavez; the 1960’s free speech movement at U.C. Berkeley; and the modern push for marriage equality in San Francisco. The political right admires the legacy of national GOP political leaders, such as California’s first U.S. Senator and abolitionist John C. Fremont, and Presidents Richard Nixon and Ronald Reagan, as well as being the base for the national tax revolt movement, which began with 1978’s Proposition 13’s People’s Initiative to Limit Property Taxation.

Unfortunately, California 2.0 has revealed a hard fall from that glory, the consequences of overgrowth, aggressive tax-and-spend policies, anti-business regulations, and recent dominance by one party in politics. The reality of California now includes declining downtowns and suburban freeway off-ramps full of homeless, junkies, graffiti and even a growing crisis of typhus and tuberculosis disease.

Leaving California

There are seven reasons for the accelerated outmigration of Californians.

1. Government Performance

California’s COVID-19 management has been by far the most aggressive in its mandates and threats of fines, causing unemployment to rise faster than the national average during the coronavirus recession. Schools, religious institutions, beaches, gyms, shopping malls, theaters, parks, business districts — all have cycled through various stages of lockdown for months on end. One in eight Americans reside in California, yet the state has one in every five newly jobless citizens due to the COVID-19 lockdowns.

And although these aggressive policies initially kept cases down, they have not worked in the long term. California has surged into the epicenter of the disease, closing in on three million COVID-19 cases, 30,000 deaths and the second-highest infection rate of any state. California is now reporting more than 40,000 new cases a day (almost as much as the entire United Kingdom is reporting), with more than 400 new deaths each day.

Hospitals, especially in the southern part of the state, are badly overcrowded. Intensive care units in Southern California and the San Joaquin Valley are beyond full, with patient beds sitting in makeshift tents or hallways. Ambulances are left waiting for hours. In the Bay Area, a stay-at-home order was extended because of low hospital capacity in the region. Heroic health care workers are past the point of acceptable workloads.

Heroic health care workers are past the point of acceptable workloads.

California, simply unprepared for the number of ICU beds it would need in a pandemic, also ranks at the very bottom in testing and has been unusually slow to deliver immunizations via vaccines.

Further, reports reveal that California has paid out nearly $10 billion in phony coronavirus unemployment claims, mostly from foreign crime gangs, before fraud controls were established in October. These fraudulent claims comprised almost 10% of the $113 billion in unemployment claims the state has paid.

The Howard Jarvis Taxpayers Association documents a severe lack of accountability by those entrusted with taxpayer dollars. Waste arising directly from the state’s pandemic response ranged from a “$1 billion mask deal that was criticized by representatives from both parties to a San Francisco program distributing free alcohol, cigarettes, and drugs to the homeless” to help with addiction management.

The state also took the $330 million meant for distressed homeowners and $242 million granted to the Department of Motor Vehicles (to prepare for REAL ID after years of warning) and directed it to the general fund. The Cal State University system raised student tuition and lobbied for more aid despite the $1 billion it holds in reserves for Pell grants and as a “hedge against economic uncertainty.”

2. High Cost for Families and Businesses

California is simply too expensive for middle-and-low-class families, with housing, electricity and gas costs far above the national average. And California taxpayers face the nation’s highest cumulative annual burden from state income taxes, capital gains taxes, real property taxes, sales and excise taxes and gas taxes. Due in large part to the high cost of living, California has 12% of the nation’s population but 33% of the nation’s welfare cases.

And yet, the state government in Sacramento has not been shy about proposing a range of new taxes, including increased gas taxes, a “vehicle miles driven” tax — that would disproportionately impact those who drive far to work or whose job is on the road — and increased taxes on companies to pay for more programs for the 150,000-plus homeless in the state.

In 2019 California’s Democratic Governor, Gavin Newsom, signed a law requiring companies like Amazon and eBay to collect sales taxes on behalf of small online retailers. It thereby punished not only consumers at home but the tens of thousands of small businesses affected by the taxes.

According to Chief Executive Magazine’s survey of 550 CEOs nationwide, California has ranked for two decades at the very bottom of the 50 states due to the lack of tort law reform, tax policies, workforce quality, education resources, employee cost and quality of living.

3. Electricity, Water and Fire Policy

If there was a competition for bad environmental policies, California would win the green medal.

If there was a competition for bad environmental policies, California would win the green medal.

Heavy regulation on the local mining, timber, fishing and agricultural industries has impoverished rural California, resulting in massive human suffering. Meanwhile, poor grid management and the restrictions on using nuclear power and the antipathy toward fuel-based energy have caused Californians to suffer (some have even died) during heat waves, when California’s stressed electric grid could not keep up with demand.

The repeated wildfires are at least partially the fault of poor forest management. California prevents “brush-clearing” of overgrowth, which creates the conditions for explosive and dangerous fires. Billions of dollars have been spent in fighting these fires, and thousands of families have lost their homes to record-breaking fire damage.

The state’s water management programs are also flawed. California’s water supply system was originally designed for about 18 million people, but there are now 40 million residents plus visitors in the state today. Water is in short supply due to population growth, frequent droughts and pumping restrictions due to environmental regulations. Limitations on rancher and farmer groundwater rights have driven up food costs. The state has consistently failed to develop an effective state-of-the-art water desalination program at the Pacific Ocean. Officials have not only failed to capture rainwater or build new dams, but they also allow wasted rainwater to flow into the ocean.

4. Impact of Immigration

California has one-quarter of our nation’s illegal immigrants. Many are hard-working and seeking economic opportunity. But billions of dollars a year of their income are not recycled into the state but rather are sent in remittances out of California to foreign countries.

While some illegal immigrants self-deport back home during difficult economic times, in California, many do not. Housing capacity has therefore been severely limited for both illegal immigrants and the homeless, who compete for scarce affordable housing with the poorest legal citizens.

The costs of such immigration have been well documented and rise into the billions of dollars annually for benefits such as Medi-Cal health care, public education, a California driver’s license, access to free legal assistance with immigration lawyers and protection from U.S. Immigration and Customs Enforcement. This all subsidizes a permanent poverty class of cheap labor in California.

5. Changing Crime Policies

California’s law-and-order policy battles have featured important efforts to assure crime victims’ rights but also a reluctance by elected officials to build enough prison capacity. California has pursued several reforms to that end:

After a U.S. Supreme Court ruling that California’s overcrowded prison system needed reform, the passage of former Governor Jerry Brown’s AB 109 in 2011 transferred responsibility of future “non-violent, non-serious, and non-sex” offenders to county jails, not state prisons. Those who were released were supervised by county parole.

California Proposition 47, which passed in 2014, reduced a host of felonies to misdemeanors, including personal use of illegal drugs, forgery, writing a bad check, and other thefts under $950 (even for repeat offenders); a felony conviction was allowed “if [the] person has [a] previous conviction for crimes such as rape, murder, or child molestation or is [a] registered sex offender.”

California Proposition 57, passed in 2016, gave early release for non-violent offenders, but the initiative failed to define who qualified as a “non-violent” offender. Hundreds of thousands of drug-addicted offenders on the streets are failing to receive mental health or drug treatment, and many are violent and merit incarceration.

Hundreds of thousands of drug-addicted offenders on the streets are failing to receive mental health or drug treatment, and many are violent and merit incarceration.

Governor Gavin Newsom signed a moratorium on executions on California’s death row, sparing murderers and rapists. Some two dozen convicts who have exhausted their appeals and were eligible for execution will remain in prison for life. Marc Klaas, the father of 12-year old Polly Klaas, who was brutally raped and murdered in 1993, has called the lack of executions worse than re-victimization for the families.

California suffered some of the worst riots in the nation during the summer of 2020, and the defund the police movement has champions throughout the big cities. Former San Francisco D.A. Gascon, who was elected the new D.A. in Los Angeles, has been slammed for suggesting sentencing policies that critics charge will wreak havoc on crime victims and their constitutional rights. Meanwhile, California has some of the nation’s strictest gun control laws.

6. Poor Education

Though California spends more on public education than any other state, and more per pupil than many, year after year, California ranks near the very bottom in academic achievement in fourth and eighth-grade math and reading scores and in high school literacy and graduation rates.

In Los Angeles Unified, taxpayers annually spend over a billion dollars to educate 650,000 students and pay the salaries of over 70,000 faculty and staff. Twenty-two percent of students don’t graduate on time. But the public teacher’s unions have strangled reforms, such as merit-based retention of talented younger teachers rather than always prioritizing those with the most seniority, often against the wishes of parents and students who desire more school choice and competition.

Unfortunately, instead of improving student educational results, the state has been busy pushing a new agenda that has been criticized for promoting divisive politics. For instance, only after a sustained campaign of objection by Jewish groups did the governor’s office pause the latest K-12 Draft Ethnic Studies Curriculum, which included an anti-Semitic trope and a lesson on the Boycott, Divestment and Sanctions movement.

7. Public Union Advocacy

While students were stuck at home all fall due to the COVID-19 pandemic, the California Teachers Assn., one of the state’s most politically powerful labor unions, contributed more than $20 million to the campaign in favor of Proposition 15’s tax hikes on businesses. Because union officials take dues from teachers, they are able to endorse and fund propositions and the campaigns of elected officials who are committed to spending public funds on the union’s agenda.

In Orange County, State Senator John Moorlach, though supportive of many of the goals of law enforcement, was targeted with a smear campaign as “anti-science” by the political operation of the California Correction Police Officers Association because he has been critical of overspending on public pensions, a pillar of correctional officers’ benefits package. Moorlach also sought to uncover how pension benefit obligations are going to break public sector budgets.

After Moorlach was defeated in 2020, he noted that “Unions usually focus on one word, and that is ‘more’ … I certainly put a target on my back by being a taxpayer representative.”

David Crane, the President of Govern for California, sent a letter out to the public in disgust at the abuse of power by public employee unions, pointing out that “For all its progressive talk, no state engages in greater fiscal oppression than California. The $10 billion you divert to compensation and benefits for prison employees is 5x the amount you give state courts and 2.5x the amounts you give UC and CSU.”

Recall, Reform & Realignment

Lately, many of the frustrations surrounding policies in California have been directed at its governor. Governor Gavin Newsom has admittedly been dealt some bad cards. Since taking office in 2019, he has faced wildfires, a worsening pandemic, economic recession, street riots, an accelerating outflow of companies and a deeply dispirited public.

Unfortunately, Newsom has not played his cards well. He has issued inconsistent stop-and-start lockdown orders and mandatory curfews that many disobey and struggled in court with litigants over restrictions on church worship services. And his political blunder — attending a fancy dinner with his lobbyist friend, sans masks — made national news and tarnished him as a hypocrite and elitist.

Perhaps the upset of working-class Californians was best expressed by the viral video made by the exasperated owner of the Sherman Oaks restaurant/bar, Pineapple Hill Saloon & Grill, who spent some $80,000 to comply with rules to create an outdoor eating area for customers. She was still shut down even though a Hollywood T.V. production craft services dining area a few feet away was allowed to remain open.

Many citizens have had enough. In the November 2020 election, voters statewide rejected Proposition 15, which sought to boost taxes on commercial property; Proposition 16, which sought to reverse the prohibition on government institutions from using affirmative action in public employment, contracting and education hiring; Proposition 21, which would have expanded local rent control statewide; and Proposition 25, which would have ended cash bail for those awaiting trial. Voters also approved Proposition 22, which exempts some “gig economy” workers from California’s AB 5 law, which targeted them.

In 2003, California Governor Gray Davis was the second U.S. governor ever to be recalled by voters. Frustrated by his handling of an electricity crisis and rising consumer costs, by government dysfunction and by the power of public employee unions, voters replaced him with Arnold Schwarzenegger.

In 2021, California is likely headed toward the recall vote of another Governor. If some 1.5 million petitions are signed and approved by the March 10, 2021 deadline, the recall election will take place in August, with just two questions on the ballot: Shall the voters recall Governor Gavin Newsom, and who shall be his replacement? Former San Diego Mayor Kevin Falconer, a moderate Republican, is among the names floated for appearing on the ballot. 1.1 million signatures have been collected to date.

In 2021, California is likely headed toward the recall vote of another Governor.

The recall vote, in essence, reflects the challenge of the next century for California. The reality is that the overwhelming size and power of California’s government, featuring a supermajority in the legislature controlled by special interests, lobbyists and public employee unions, has crushed the spirit of fair competition and self-rule.

An antidote to this decline may be more civic engagement to shape the sunnier, safer and more successful California 3.0 that citizens desire. Pepperdine’s Public Engagement Institute, for example, strives to promote civic literacy and participation in volunteerism and town hall meetings.

California’s voters appear to be fighting back. Underneath the capitol dome in Sacramento, millions of Californians are itching to vote for change. And, in a reverse Gold Rush, many have already been voting with their feet.

Larry Greenfield is a Fellow of The Claremont Institute for the Study of Statesmanship & Political Philosophy.