California Pays Its Way, and Then Some

During a House hearing this spring on a major federal funding issue, one powerful East Coast committee head groused, “Well, why don’t we just back up another truck to the Capitol so we can fill it with money and send it out to California!”

For decades, members of Congress have complained about being shortchanged by the Golden State. They love to invoke images of California as a nation-sized leech, sapping vital tax dollars from their constituents. Their refrain--sung loudly in stump speeches, press releases and floor statements--became so common that it was given a name: “ABC,” or Anywhere but California.

ABC makes for good legislative theater. Too bad its basic tenet simply is dead wrong. It’s true that the dollars make a giant sucking sound as they move between California and Washington. But contrary to what many Eastern lawmakers would have us believe, the flow of those dollars is eastbound, not west. We give, we don’t get.

California is firmly ensconced as a donor state. Since 1986, we have paid more in federal taxes than we’ve received back in federal spending. The era of huge defense contract checks pouring into California, giving the state a tidy surplus on its federal balance sheet, ended during Ronald Reagan’s first presidential term.

Post-Cold War the world is a very different place, and the budgetary relationship between California and Washington is likewise very different. As we have for 10 straight years, California taxpayers in 1996 sent more money to the IRS than came our way in services, payments and contracts. Last year’s donation to the well-being of the other 49 states was $9.8 billion. With 12% of the nation’s population, we received 11.6% of federal spending and paid 12.3% of federal taxes. For every dollar we paid in taxes, we received 94 cents back.

Beginning in 1987, California’s deficits climbed to $14 billion in 1991, fell to $5 billion in 1994 and rebounded to $10 billion in 1996. But one thing remains consistent: California has underwritten federally funded activities in the other 49 states during every year since 1987.

Even factoring in more than $10 billion in federal disaster relief payments for floods and earthquakes, California still could not shake its donor state status.

Some negative federal cash-flow is to be expected. Our relatively young population (just 10.6% of Californians are over 65, compared to 12% nationwide) reduces some payments. And the fact that, despite a debilitating recession, Californians’ incomes remain above the national average means that we pay a bit more than the norm under a progressive income tax structure.

Depending on individual attitudes, our donor-state status could be viewed as a reasonable cost of participation in the federal structure or as an unreasonable and burdensome infringement on Californians’ right to self-determination on how our money is spent.

But one point should be clear: The ABC canard should become a thing of the past. We gave and we continue to give year after year. California was left to grab its own bootstraps to lift itself out of its worst recession in half a century; there was no philanthropic federal boost. Images of California plunder evoked by rust-belt politicians and their wily speech writers are at best misleading and at worst outright fraudulent.

However, those politicians should be careful what specters they raise. A new factor in California’s federal funding equation may yet convert their contrived bogeyman illusion into foreboding reality.

That factor is unity. For decades unable to agree that the sky is blue, California’s behemoth congressional delegation has begun to selectively exhibit the kind of cohesion that makes Texans and New Yorkers very anxious. This year the delegation has shown bipartisan solidarity on issues such as electric utility restructuring, transportation funds, Medicaid, drug enforcement and criminal alien incarceration. Under the able stewardship of its leaders, Republican Jerry Lewis and Democrat Lucille Roybal-Allard, and the activities of the state’s numerous well-placed stalwarts, the delegation is proving that it can marshal its formidable capacity when the interests of its constituents are at stake.

Perhaps it’s time to make room for a little more truck parking at the Capitol.

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The Return on the Calif. Dollar

California’s share of the U.S. tax burden and what it gets in return from Washington:

Source: U.S. Census Bureau, The Tax Foundation, The California Institute