The Power of Education in California

Pulp Fiction UC Santa CruzJohn Ellis, president of the California Association of Scholars and a former professor at University of California, Santa Cruz, argues that the state university system in which he taught for nearly four decades helped ruin the state’s economy.

[W]hy is the California legislature so irresponsible, not to say goofy? Well, California is extremely rich in state university campuses: the UC and CSUC systems alone amount to 33 campuses, about a third of them mega-campuses of 30-35 thousand students, with another 10 around 20,000. The mega-campuses completely dominate the Assembly districts they are in, and their large concentrations of students and faculty skew the district electorate not just to the left, but to the devoutly politically correct but hopelessly unrealistic left. Virtually all of them routinely send Democrats to Sacramento. College towns with more modest sized campuses play their part too, but mega-campuses make their districts so one-sided that in the last election UC Berkeley’s Assembly seat had no election even though it was vacant: the Democratic nominee still ran unopposed. Where there is real competition between the parties the two sides keep each other honest and realistic, but when Assembly seats are so inevitably left that there is no contest, there is nothing to stop the side that has automatic electability from sliding into fantasy. Those districts provide the margin that allows an immature leftism that has lost contact with reality to control the state legislature and ruin the business climate of the state.

The irony here really cries out for attention: a large state university system needs a free market economy that hums along in top gear so that the revenue needed to support it can be generated. But California’s two unusually well developed state university systems provide enormous local voting power in many Assembly districts for a bitterly anti-capitalist ideology that sabotages the California economy. The campuses are shooting themselves in the foot. The power that those students and faculty chanted about is indeed theirs, and if they used it to elect sensible assemblymen and state senators their problems would be solved by the healthy business climate that would result. The votes that they actually cast are the source of their troubles.

I claim no expertise in California’s troubles and the polemical style here hurts Ellis’ credibility. But he’s no doubt right that the proliferation of large universities throughout the state creates a powerful lobby to continue funding said large universities. I saw a related phenomena in Alabama, where, thanks to George Wallace, there is a state-run community college within easy driving distance of everyone. And Alabama’s a very small state (4.3 million people) with decidedly lower per capita income than California.

Really, though, while Ellis’ argument is framed around higher education, he’s really complaining about California’s regulatory environment.

In 2007 Raymond Keating formulated a Small Business Survival Index, which is a composite of various aspects of the climate for business in a particular state: business and personal taxes, regulations, mandates, and so on. In that index California ranked 49 among the 50 states. Rhode Island ranked just above California, and its unemployment rate is 12.7. At the bottom of the Index is D.C., and its unemployment rate is 12.1.

In the component parts of the SBSI index, California ranks worst of 51 (including D.C.) on top personal tax rates, worst on top capital gains tax rates, 42 on corporate taxes, 43 on health insurance mandates, 46 on electric utility costs, 47 on workman’s compensation costs, rock bottom again on state gas taxes, 45 on state and local government five year spending trends, and 47 on state and local per capita government spending. It also ranks 49 among the states on the US Economic freedom index, and it has the highest state sales tax rate too: where some states have an income tax but no sales tax, and others have a sales tax but no income tax, California has both, AND it has the highest rates in both.

In short, California is a disaster for business. The state has piled up so many taxes, regulations and mandates that businesses are leaving the state.

What’s especially interesting to me is that they managed to do that despite a nearly crippling popular sovereignty constitution that seems to require a referendum for, well, anything.

I have several readers vastly more familiar with California politics than me, so maybe they’ll share some insights in the comments.

UPDATE (Dave Schuler): A quirk in how this post was created resulted in a problem in entering comments. I’ve corrected the problem and you should be able to comment now.

FILED UNDER: General, , , , ,
James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Dave Schuler says:

    Government and its handmaiden industries, which include education, healthcare, and defense, need a robust economy that’s not primarily funded via tax dollars in order to exist let alone prosper. That these things grow when times are good and grow when times are bad creates quite a dilemma.

  2. Jeffrey W. Baker says:

    Keating’s index is empirically disproven by the huge number of businesses started in California every year. Hardly any other state has such a wealth of new businesses. Where do you think Facebook, Tesla Motors, Bloom Energy, etc are located? And those are just the hugely famous examples. The whole state is crawling with entrepreneurship.

  3. Jeffrey W. Baker says:

    By the way, I wonder if you’ve noticed that “Show comments here” doesn’t work in Google Chrome (5.0, on Mac OS X). The browser complains that it “Refused to set unsafe header ‘Connection'”

    FYI.

  4. Jeffrey W. Baker says:

    Doesn’t work in Safari either, because you’re doing it wrong.

    http://www.w3.org/TR/XMLHttpRequest/#the-setrequestheader-method

  5. 11B40 says:

    Greetings:

    I tend to agree with Mr. Ellis’ analysis as one part of a very large problem. I think that there is some merit in looking at these large campuses as kind of a leftist colonialist plantation, not totally dissimilar to the English plantations in Ireland.

    On the other hand, the issue of things like “remedial” courses being taught on college campuses indicates to me that there are many levels to this problem onion.

    Back in the mid-nineties, I returned to college at Cal Poly. I had a required English Composition course to take and tried to talk my counselor out of my taking it. I showed her samples of my writing, but she replied. “We can’t let you graduate from Cal Poly without knowing how to write.” My answer was, “Well then, things have changed since I first went to college; back then you didn’t get into college if you didn’t know how to write.”

    Unfortunately, especially for the taxpayers of California, the state universities long ago subjugated their academic responsibilities to their social service desires. It’s been pretty much all downhill since then.

  6. Steve Plunk says:

    The problem is more than creating a lobby for more funding. The system has created a lobby hostile to the very entities that provide the funds, business.

    Go to any campus and observe the touchy feely atmosphere where the old ways are bad and the new ways are good. The old ways must be changed or destroyed through regulation. Currently there’s quite a debate going on with the California air quality agency concerning where good policy ends and bureaucratic nonsense begins. What good is a minor improvement in air quality if you put 100,000 people out of work?

    Leftist ideas run free on these campuses and indoctrinate generations of voters before they wise up in middle age. When those students protest tuition hikes they fail to connect those hikes with loss of revenue caused by their support of Dems and their policies in Sacramento.

    The public sector in general is failing to see how it is killing it’s sponsor, the private sector. Part of that is the belief the private sectors serves them rather than the other way around. Until the public sector receives a well deserved and overdue smack down we will continue to see this problem grow.

  7. Steve Verdon says:

    Keating’s index is empirically disproven by the huge number of businesses started in California every year.

    Seeing how it is an index for survivability and that business starts is not a component of the index, this doesn’t strike me as a very good rebuttal.

    Hardly any other state has such a wealth of new businesses.

    1. Control for population.
    2. How many of them survive and for how long?

    You haven’t disproven anything.

  8. Jeffrey W. Baker says:

    I love coming here to do your homework, Steve, so let me just jump right in:

    Number of small businesses established per capita in 2008
    California 4.5/1000
    Texas 3.6/1000

    Sources:
    http://www.sba.gov/advo/research/profiles/
    http://www.infoplease.com/ipa/A0004986.html

    HTH, HAND

  9. Jeffrey W. Baker says:

    In general I think it’s hilarious that anyone would seriously cite the SBSI as “research”. It doesn’t even attempt to actually measure small business survival rates among the states, it just adds up a bunch of Club For Growth talking points.

  10. Steve Plunk says:

    Jeffrey,

    I’m curious how those numbers would look today with California’s fortunes as they are. Start ups could be a faulty measure of regulatory climate since many of those regulations are not realized until after starting a business.

    As someone who does business in California I feel confident in my own assessment. Like Oregon they say they welcome business but in reality they only see a cash cow to be milked and regulated. What programs they have to help business are usually reserved for the politically connected or the “green” type of experimental businesses who without subsidies would never get off the ground.

    Regulations concerning air quality are especially troublesome in California and will make things very difficult in the near future.

  11. Duracomm says:

    What follows below is the fax/letter sent to dozens of surfboard manufacturers from Gordan ‘Grubby’ Clark, patriarch of the surfboard industry, explaining his decision to call it quits.

    For owning and operating Clark Foam I may be looking at very large fines, civil lawsuits, and even time in prison.

    I will not be saying more than is in this letter so I hope you read it carefully. I do not want to be answering questions about my decisions for the next few years.

    Effective immediately Clark Foam is ceasing production and sales of surfboard blanks.

    The way the government goes after places like Clark Foam is by an accumulation of laws, regulations, and subjective decisions they are allowed to use to express their intent.

    Essentially they remove your security, increase your risk or liability, and increase your costs. This makes the closing of Clark Foam and similar manufacturing and accumulation of issues and not a single issue.

    They simply grind away until you either quit or they find methods of bringing serious charges or fines that force you to close.

  12. nice strategy says:

    Having been faced with structural budget problems 8 years ago, a succession of political leaders have kicked the can down the road with borrowing and budget tricks and here we are with an (unsurprisingly) larger problem.

    The problem is compounded by the anti-democratic aspect of passing revenue bills in CA (requiring a 2/3 majority). Since no changes to revenue are possible with an obstructionist minority, Democrats will not agree to unilaterally cutting off their core constituencies and reward the minority for their complete intransigence. Witness the Governor’s obvious frustration with the Republicans in the legislature. No compromise is possible, and so we keep compounding the error in an ugly game of chicken. College students know they are caught in the middle of that ugly game.

    California has chosen to have a more generous social safety net, one that it may not be able to afford, but it also has higher expenses for reasons of geography (water infrastructure, earthquake building standards) and demographics (educating a large % of students for whom English is a 2nd language). Most people who actually live here find the trade-offs to be worthwhile given the weather and natural beauty of the State.

    The State is also hampered by an excess of democracy at the ballot box, in which a simple majority can approve all sorts of bond issues to pay for ideas that, taken one by one, sound great, but collectively never get paid for. The interest on that debt has to be paid, and it is starting to crowd out other aspects of the general budget. If only we had PAYGO at the ballot box.

    In any case, the proposition that CA college students are hostile to capitalism because they are unaware of having been brainwashed is idiotic and condescending. Economics is a required course in HS and the textbook I use with my supposedly liberal (but elitist upper middle class) students includes management as a “fixed cost” of production and labor as a “variable cost,” repeats the simplistic view of Adam Smith as the uber-capitalist, among other small biases. Overall, it is a very reasonable set of standards that are unmistakably pro-capitalist.

    Moreover, the high-achieving HS students I teach are simply not knee-jerk liberals who believe in large amounts of redistribution. They do tend to believe in equality of opportunity, however, and providing that equality is obviously expensive. Ultimately, however, they see themselves as being successful in the future and deserving of that success. They believe in meritocracy, which translates to hostility towards affirmative action, support of the 96 welfare reform, and support of education spending. Of course, it is in their self interest to do so.

    What John Ellis seems to be saying is that these students don’t understand their own long term self-interest. If true, then capitalism is in more trouble than I thought. But I don’t think it is true. I think today’s college students watched the Bush years in horror, and aren’t going to listen to a cranky conservative lecture them about how stupid they are to want to re-balance the political economy after the free-market ideologues trashed the country just in time for them to be getting ready to join the workforce.

  13. Jeffrey W. Baker says:

    “Regulations concerning air quality” are not “troublesome” in California. Quite the opposite. AB32 and regulation of diesel particulate emissions will not only greatly benefit the environment, which is a good in its own right, but also will and are driving the establishment of technology companies specializing in clean diesel and non-carbon power.

    Everybody bitched and moaned about it when California first started regulating smog and lead 30 years ago. Those people were, of course, stone cold morons. As shown in this UCB study from 2008, California energy and pollution laws have created 1.5 million net new jobs since 1977.

    http://www.nytimes.com/2008/10/20/business/20green.html?_r=1

  14. The Q says:

    Mr. Plunk,

    While I agree, to a very small extent, with your diatribe against some of the excesses of the public sector, I will bet a year’s salary you haven’t the slightest idea about how the AQMD actually operates and are completely ignorant with how policies are actually promulgated within the agency.

    Please quantify your fatuous claim of a “minor improvement with the concomitant loss of 100,000 jobs”? Which policy specifically are you referring?

    I have worked as a consultant to the Ministry of the Environment, a Japanese governmental cabinet level organization.

    I have accompanied many Japanese officials on trips to south coast AQMD headquarters in Diamond Bar.

    The Japanese come to California to study our environmental laws since they are the most stringent in the world.

    Many of Japan’s current pollution regulations regarding stationary and Hazardous Air Pollutants are based on our California model.

    Let me give you an example of the AQMD’s “bureaucratic nonsense”.

    In 1977, in the LA basin there were 177 1st stage smog alerts, virtually one every other day.

    From 1999 to 2009, a span of 10 years there has been ONE!!!!!!!!!!!!!!!!!

    One alert in TEN years M*&^F**&er!!!!!

    With millions more people and millions more cars present in Calif. since 1977.

    I won’t go into minute detail as to how this was accomplished, but it may surprise you anti government conservative free marketers out there that a lot of the innovation for pollution controls comes from the private sector.

    For example, if you have an invention for less polluting dry cleaner equipment, the AQMD will have you prove it to them by real world use.

    They will install the equipment in an actual dry cleaner and monitor its effectiveness.

    If, over time, this technology is proven effective, the AQMD will mandate its use.

    So, if you can build a better environmental mouse trap, prove its effectiveness over time, the terrible government will make you a very wealthy person by requiring its use in dry cleaners.

    This is a pretty elementary example, but I encourage you to go the the AQMD when they will have “inventor’s day” and all these garage tinkerers come out to demonstrate their crazy ideas.

    The AQMD will listen and if they think the invention has merit will actuall test the damn thing.

    The AQMD is not a government by fiat agency. They get extensive input from the private sector as to what the regulations will be.

    In fact, many liberals, me included think that the AQMD has gotten a little too cozy with private interests and have not pushed hard enough lately on ambient sources of air pollution.

    In short, I object to the shrill, superficial, oversimplification by the conservatives of anything “gubmint”.

    We heard this Sky is falling, get government out of business rant against the catalytic converter in the 80s, how it would add so much to the cost of a car etc..bullsh*t etc. destroy Detroit, bullsh*t, etc….

    Cars now are 90% cleaner than a car built in 1974 and that was mandated my friend.

    When I ran cross country at Pierce College in Woodland Hills in the 70s, sometimes coming over the Sepulveda pass into the valley, you couldn’t see 4 miles down the 405 the smog was so bad.

    Now, coming over that same pass, I can see the Mountains 30 miles away.

    Following conservative enviromental ideas, we would NEVER have had that change.

  15. The Q says:

    Mr. Plunk says:

    “As someone who does business in California I feel confident in my own assessment.”

    Translation: “I am a typically myopic conservative who will fit facts to reinforce my already preconceived notions and not dare confuse my ignorance with things like reality.

    I will steadfastly refuse to change my opinion if it contradicts the dogma and cant of the right wing kooks because after all I am a conservative.
    …which is defined as “resistant to change”.

  16. You know how to build a small business in California? Start with a large one. Thank you, I’ll be here all week.

    In short, I object to the shrill, superficial, oversimplification by the conservatives of anything “gubmint”.

    Meanwhile, in short, I object to the shrill, superficial, oversimplification of conservatives by advocates of anything “gubmint.”

  17. agorabum says:

    A discussion of California finance with no mention of Prop 13 (which has forbidden any real adjustments in property tax since 1979)…
    All those taxes since Prop 13 were all approved by a majority of the voters as well.
    It is the California Constitution that is dysfunctional, caused mainly by the anti-tax brigade and term limits that leave California’s state government under the control of lobbyists.
    Blaming college students for the errors of their elders seems fairly backwards.

  18. Steve Verdon says:

    What a stunning rebuke Jeffery. Of course, pointing to one example is about as impressive as farting and belching at the same time.

    And I love the appeal to a study that isn’t linked in your link.

    Please link the study, and here I’ll help you out.

    http://are.berkeley.edu/~dwrh/

  19. Duracomm says:

    agorabum,

    Prop 13 limits are reset every time the property is sold.

    In spite all of the whining about prop 13 California is an excruciatingly high tax state.

    California’s budget problem is caused by too much spending not too little revenue.

  20. The Q says:

    Duracomm,

    That is true for residential property (resetting each time its sold) but for commercial property, the situation is much murkier as “changing ownership” can be quite problematic.

    For example “30 years ago in San Francisco, commercial property owners contributed the majority of property taxes, 59%, and residential property owners contributed 41%. Today, we see the reverse: commercial property owners contributed just 43% of property taxes in 2008 while residential property owners contributed 57%. (SF Chronicle 5/21/09)

  21. Duracomm says:

    The Q,

    The tax split between residential and commercial real estate provides no information on the total tax revenue is.

    The total tax revenue is what matters.

    I’m happy to see a contrary cite but I think total tax revenue has increased significantly.

    The problem is california government spending has outrun the increase in revenue.

  22. Steve Plunk says:

    Being an Oregon resident I don’t attend AQMD meetings but have read quite enough about their operations to state my opinion. There is conflict within California that they have now gone too far and have passed any reasonable measure in a game of diminishing returns.

    Feel free to interpret my words as you see fit Q. If you’re going to make up other people’s minds for them be my guest. I feel confident with what I say as I see California’s grand experiment in progressive thinking sink the state. All those great ideas aren’t working so well.

    There comes a point when the arrogance of government and it’s supporters reach too far. Sure we need some government interventions but there’s no excuse for what California is doing. The people have said no more taxes yet the government class won’t stop the spending. The people want jobs yet the government runs the business away. The proof is there.

    So liberals can keep wishing for rainbows and unicorns all they want while this myopic conservative can see reality hitting California in the head. It’s failed. Face it.

  23. Rick DeMent says:

    The conclusions drawn from the list is stupid frankly.

    From the list:

    Finally, it should not be surprising that job growth has come in much faster in the states in the top half versus those in the bottom half on the “Small Business Survival Index 2007.

    Yet states in the top half of the list include:
    Michigan
    S.Dakota
    S.C.
    Alabama
    Mississippi

    All job creation powerhouses (smirk) Hell MI is # 6.

    And a bunch of other states that have been clobbered by the housing meltdown like AZ and NV.
    Also in the top 25 are states that enjoy State Government supported on the back of external revenue source (oil in the case of TX and AK and tourism in the case of FL which I imagine is responsible for their making it in the top half)

    so I think either the metrics that make up the list are suspect or the conclusions are or both.

  24. Steve Verdon says:

    Yet states in the top half of the list include:
    Michigan
    S.Dakota
    S.C.
    Alabama
    Mississippi

    All job creation powerhouses (smirk) Hell MI is # 6.

    Considering that is 6 out of 25 that kinda proves the point doesn’t it.

    And a bunch of other states that have been clobbered by the housing meltdown like AZ and NV.
    Also in the top 25 are states that enjoy State Government supported on the back of external revenue source (oil in the case of TX and AK and tourism in the case of FL which I imagine is responsible for their making it in the top half)

    Uhhmmm how can oil be external since it is in the ground in the state?

    Tourism I can kind of see, but not sure what that means. Tourism business don’t benefit from having a business friendly environment?

    so I think….

    Not so sure about that.

  25. Duracomm says:

    Rick DeMent said,

    Also in the top 25 are states that enjoy State Government supported on the back of external revenue source (oil in the case of TX and AK

    California has lots of oil. The California politicians won’t let the state get any benefit from it.

    Another example of why California has a budget disaster.

    In January, the commission voted 2-1 to deny the drilling in controversial decisions that divided many in the environmental community.

    That decision involved negotiations between Environmental Defense Center and the Texas oil company, Plains Exploration Petroleum.

    The two agreed that PXP would be allowed to drill at Platform Irene, located off Vandenberg Air Force Base, where the platform sits in federal waters.

    As a condition of the drilling, however, PXP would have to cease work at Irene in 2022, as well as at three other platforms, and pump $2 billion in royalties into state coffers.

  26. Duracomm says:

    Link for article above

    California stops production

  27. Chris says:

    I cannot believe this professor thinks that students register to vote in their college districts. Berkeley as a city is ar more left-leaning than the university students. Moreover the city is constantly harassing the university and the students; situations that I doubt would happen if the 30000 students weilded ad much power in these electoral districts as this guy says. Most students register to vote using their parents’ address.