NCPA - National Center for Policy Analysis


February 23, 2009

California may still seem to be the dreamy land of movie stars and swimming pools, beautiful beaches and endless summer.  But the reality -- and perhaps the future -- of the nation's largest state looks gritty, where past extravagance has collided with economic recession and the collapse of home values to push it into bankruptcy, says USA Today.

The state stepped away from the brink of financial ruin when the state Legislature ended months of deadlock and paralysis -- which had shut down road projects and held up tax refund checks -- by agreeing to a budget plan that increases taxes, cuts spending and borrows money to plug a $42 billion deficit by mid-2010.


  • In Vallejo, a city of 115,000 people, 1,700 homes are in foreclosure or owned by banks.
  • The highest foreclosure rate in the United States -- 9.5 percent last year -- was in the California city of Stockton, which Forbes magazine declared as America's "most miserable city."

Signs of decline abound, from potholed streets to public school classrooms that are among the nation's most crowded, to neighborhoods emptied of residents by the mortgage foreclosure crisis:

  • Median home values in Southern California dropped 35 percent in the past year, and California has the lowest S&P bond rating of all 50 states.
  • In each of four years prior to June 2008, more people left California than moved in from other states, a reversal of a decades-long trend in which the state took in more than it lost.
  • Those leaving point to an unemployment rate that hit 9.3 percent in December, up from 5.9 percent a year earlier and fourth-highest in the nation, and taxes on income, sales and gas that are among the highest in the nation.

Mark Baldassare, president and CEO of Public Policy Institute of California, says the problem in the the state itself.

Source: William M. Welch, "In California's Meltdown, Misery has a Long Reach," USA Today, February 20, 2009.

For text:


Browse more articles on Tax and Spending Issues