california breaking up?

http://www.breakingviews.com/2009/05/21/California%20break-up.aspx

breakingviews.com

21 May 2009 03:47

California breakup?

By Martin Hutchinson

California breakup: California's ballot results highlight a simple fact: Californians like electing big-spending state representatives but hate paying the bills when they come due. This natural voter preference is universal, but is exacerbated by a wealthy polity of 37m inhabitants that is not fully self-governing, but subject to a distant central authority in Washington. Its discontents cannot be removed through restricting the right of referendum, which would further alienate voters from their government. More radical surgery is needed: splitting the state into more accountable government units.

The principal advantage of a federalist system is its ability to devolve local tax, spending and regulatory functions to government units small enough to respond to the wishes of local electorates who pay the bills. Policies thereby vary considerably across the federation, being tailored to the wishes of relatively modest electorates who share substantial lifestyle and economic interests. National governments are restrained from excess by their responsibility for maintaining plausible fiscal and monetary policies in a world where bailouts do not exist (the US and even California being too large for an IMF bailout.)

America's Founding Fathers understood this. The US government never defaulted on its debt, in spite of several wars and the abolition (twice, in 1816 and 1836) of the central bank. State governments were initially less careful; of the 28 states existing in the depression of the 1840s, five (Michigan, Mississippi, Arkansas, Louisiana and Florida) repudiated their debts completely while four more (Maryland, Pennsylvania, Indiana and Illinois) stopped paying interest for several years. A second wave of defaults came in the 1880s, when eight Southern states repudiated debts that had been assumed under the post-Civil War Reconstruction.

California in 1850 had a population of only 93,000, so its state government was fully accountable to its people, even though its vast size made communications difficult. Today California's population at 37m is 50% larger than that of Texas, the second most populous state. Each of its 80 state legislators represents around 460,000 people and its electoral districts are gerrymandered along party lines.

Ethnically, economically and in terms of lifestyle California is more diverse than most countries (the largest EU country, Germany, has twice the population of California but 20% less land mass). State-wide public sector personnel structures and pay scales that are appropriate for high-cost coastal areas produce overpaid and under-employed state employees in rural areas, imposing regulations that may be poorly matched with those areas' more traditional lifestyles and wishes. These higher costs result in conservative rural areas appearing to be subsidised by the liberal coasts (in terms of receiving more from the state budget than they pay) but in reality their excess "receipts" consist of salaries they should not need to pay and unnecessary services.

California's budgetary spending tends to grow more rapidly than its economy because it is to some extent a "free lunch"-- the increasing share of federal grants in state revenues allows the state government the luxury of using political pressure in Washington to cover budget gaps.

In 2007, California had only the sixth largest per capita tax burden of the 50 US states, the twelfth largest per capita spending burden and the 23rd largest per capita debt. It was also the seventh richest state per capita. Thus its budget problems should be economically manageable if its political systems functioned well. However the referendum process, introduced by the Progressive governor Hiram Johnson in 1911, allows the electorate to repudiate tax increases imposed by the state government to balance the state budget (which is itself a constitutional requirement). This happened in 1978, when Proposition 13 capped a rapidly rising property tax, and it happened again on May 19.

Removing the referendum possibility without reforming state government would help solve California's current budget problem. However it would dangerously reduce the state government's legitimacy and accountability, alienating voters further. More representative government might be achieved by quintupling the number of state representatives from 80 to 400, thus reducing each representative's constituents from 460,000 to 92,000. However that would be very expensive, and would not solve the problem of coastal urban communities imposing costs and regulations on rural areas.

A more radical alternative would be to break up California into new states whose populations were more typical of other US states; splitting California into four could create states similar in size to Michigan, Georgia and North Carolina, for example. According to Article 4 Section 3 of the US constitution, such a split can be carried out with from the state legislature (which by the California constitution would require a two thirds majority) and Congress – in practice, a state constitutional convention would presumably be an appropriate mechanism.

A possible split of California into four states, each of which would be regionally coherent might be:

* San Diego/ Orange County /Inland Empire: 5 counties, population 10.4m in 2008, about 45% of Hispanic origin. Strong military presence; socially conservative and economically moderate. Politics maybe similar to New Mexico.
* Greater Los Angeles: 3 counties (Los Angeles, Ventura, Santa Barbara) population 11m, about 45% of Hispanic origin. Urban, with both ghettos and substantial wealthy Hollywood and media population. Socially and economically very liberal.
* San Francisco/ Sacramento/ Santa Cruz / Silicon Valley: 13 counties, population 9.9m. Socially liberal but highly educated and market-oriented, with global-leading tech sector. Politics maybe similar to Massachusetts
* Northern/Central valley: 37 counties, population 5.4m. Rural, vast area, lower costs. Conservative politics similar to Kansas.

Such a split would create four states with coherent boundaries, populations and economic bases. It would remove the bizarre current anomaly whereby the liberal big-spending coastal communities both subsidize the more conservative farm areas and impose unnecessary costs on them. The rural state could achieve substantial cost savings from lower salary scales for teachers and other state and local employees and a less complex bureaucracy and regulatory system.

Politically, three of the four states should quickly arrive at a satisfactory political and budgetary balance, with the amount and mix of state services provided differing substantially between them, but all remaining within the current US range of policy mixes.

The fourth new state, Los Angeles, would probably arrive at a political/economic policy balance well outside the current US norm. However its residents would retain the entire responsibility for finding a workable match between state sector growth and private sector viability without subjecting the entire state to their experiments.

In terms of national politics, a split should have little effect. As four states, California would have six extra Congressional seats, but Democrat gains from this would be balanced by the decennial redistricting process being less subject to manipulation in smaller states. The four states would have eight Senators instead of two, but the split would generally be around 5-3 Democrat, leaving the current balance unchanged.

California has become too diverse, culturally and economically, to work well within the constraints of its 1850 status and its modern democracy-on-steroids. Breaking it up on an amicable basis could create three highly successful and well managed medium-sized states of different types and one laboratory for the left.

martin.hutchinson@breakingviews.com

Copyright © breakingviews 2009

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