Why is California Burning? Because It’s Importing Poverty

By Linda Thom

09/02/2009

California finally has a budget deal, through accounting maneuvers and budget cuts (including the release of convicted felons). But California’s budget is toast — whether or not the economy turns around.

The cause: Millions of low-income, unskilled immigrants (not just illegals) with lots of children have moved in. And lots of high- and middle- income Americans have moved out. [Golden State losing folks as old Dust Bowl beckons, By Phillip Reese, June 14, 2009]

Immigration’s highest cost is the public education of the immigrants' children. That falls on state and local taxpayers — not on federal taxpayers. Therefore, states with the largest number of immigrant and immigrant-

Overall, in twenty years, the increase in Hispanic and Asian/Pacific Islander children in the U.S. made up three quarters of the enrollment increase for U.S schools.

In California in the same period, enrollment of White and Black children declined by 1.4 million. But enrollment of Hispanic and Asian students increased by 2.5 million students. Therefore, the increase in Hispanic and Asian students in California made up 132 percent of California’s enrollment increase (and an incredible 28 percent of the enrollment increase for the entire country).

In most of the country, K-12 education is funded by local governments. But in California, K-12 education is funded directly by the state government. Reason: In 1978, voters passed Proposition 13 which capped assessed property values and limited the rate at which property taxes could rise. When a property sells, the assessed valuation rises to the sales price and the rate of growth is then capped again. This is not as much as a problem as opponents claim, because most properties have changed hands.

Of course, elite opinion dislikes voters interfering in government’s taxation plans . The London Economist reflected this consensus recently when it disparaged California’s initiative system as "the crack cocaine of democracy".

But California voters will overturn Prop. 13 when pigs fly. And Proposition 13 is not the problem anyway. The state of California raises quite enough money through its increased income taxes.

The tax burden that California imposes on its citizen is probably in the top quartile for the U.S. (Those interested in more detail can visit the website of the Tax Foundation in Washington, D.C. California has a very high and progressive income tax, perhaps the highest in the nation.

The top marginal income tax rate of 9.55% starts at incomes over $47,055, which is a very low level by U.S. standards. (There is a higher tax bracket on incomes over $1 million, but it is dedicated to mental health funding. An initiative to divert that to the state general fund failed in May.)

Government budgets are made up of revenue and expenditures, just like budgets for everyone else. If income is low or expenses too high, that is a problem. On an individual level, we respond by trying to increase income and cut expenses to balance our budgets.

Right now, California’s income is indeed too low and expenses are indeed too high. It has to do the same. But it won’t.

California needs a two-thirds legislative majority to increase taxes, which means the Republican minority can still block new taxes. But In 1988, California voters passed Proposition 98, which guarantees school funding at 40 percent of the state general fund. And, behind that, the powerful California Teachers Union stands ready to fight any and all any cuts in education spenders a.k.a. teachers' salaries.

As every parent knows, children are a joy (mostly) but they are very expensive. The same can be said for the public cost of educating them. We care about our kids, but educating them is very expensive. We cannot put them up for adoption to other states.

We could, however, stop importing them from other countries.

So, how does this all work out in California?

In fiscal year 2007-2008 — the latest available — income taxes ($55.7 billion) and sales taxes ($27.1 billion) made up 81 percent of the general fund tax revenue ($102 billion) in California. The state sales tax does not apply to food and services, and there are dozens of little tax scams such as an exemption for Gallo Wines. As required by Proposition 98, 40 percent of expenditures went to K-12 education ($41.billion). (Governor Schwarzenegger tried to suspend Proposition 98 but failed. And that would only be "kicking the can down the road" as the Terminator likes to say, because the immigrant poverty population continues to grow.)

Tax revenue is down. But when (and if) it goes up, the problem will not be fixed — because new poor people (and their children) arrive every day.

Since 1986, California added almost two million students, all (and more than all) because of immigration — see above. State tax revenue did not raise enough to cover the costs of the added children. Consequently, the California state budget deficit is $26 billion.

Like the old woman who lived in the shoe, she had so many children she didn’t know what to do, immigrants (illegal and legal) simply do not pay enough in taxes to support their public costs. Education is the poster student for this basic fiscal truth. But it extends to all transfer programs.

According to California Franchise Tax Board figures for 2005, California income tax-payers earning over $70,000 claimed only 31 percent of dependents but paid 85 percent of income taxes collected. (www.ftb.ca.gov). The top 1 percent of taxpayers generated 47.5% of income taxes.

In contrast, the bottom 80% of taxpayers in California had 76% of all dependents but generated only 11.2% of state income tax revenue.

And that’s not counting the many California residents with dependents who do not file taxes because their incomes are too low — or they are being paid off the books.

According to California state department of education figures, half (49.7%) of students participate in the federal lunch program. That means they are poor. Half (51.5%) of California students attend schools which get Compensatory Education funding (Federal Title 1 and State Impact Assistance Grant) for underachieving, low income students. Half of California’s students are Hispanic and 11 percent are Asian/Pacific Islander. Of the English-language learners, 85 percent are Hispanic and of the Hispanic students 43% are non-English speaking.

California has 58 counties. The counties with the lowest adjusted gross incomes are:

• <!-#58 Imperial with a median AGI of $22,962;

• <!-#57 Tulare — median $24,774;

• 56 #56Colusa — median $26,188.

Here are education numbers as they appear on state’s education website:

But the legislators are talking only about tax revenues — not about all the poor immigrants.

California is toast.

Linda Thom is a retiree and refugee from California. She formerly worked as an officer for a major bank and as a budget analyst for the County Administrator of Santa Barbara

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