Report: CA economic outlook grim, but actual performance not so bad

money budgetCalifornia again sits near the bottom of a state-by-state comparison of economic competitiveness, but its economic performance has been more middle-of-the-road, according to an annual study by the right-leaning American Legislative Exchange Council.

Judging by 15 policy measures, all of which are influenced by the state legislature, ALEC analysts determined that California ranked 46th in terms of its economic outlook.

The 15 measures include: top marginal personal income tax rate (13.30 percent, ranks 50), top marginal corporate tax rate (8.84 percent, ranks 40), sales tax burden ($24.24 per $1,000 of personal income, ranks 30).

Other measures, which are considered negative by the report but others might argue are good things, are the state’s relatively high minimum wage of $10 per hour (the legislature just approved a gradual increase to $15 per hour) and California not being a right-to-work state.

“This is certainly some pretty troubling findings for most hard-working California taxpayers,” said Jonathan Williams, vice president for the Center for State Fiscal Reform at the American Legislative Exchange Council.

“We chose those 15 (measures) because they’re things that legislators control and are also things that we know, based on academic research, things that lead to greater amounts of economic growth if you get them right,” Williams continued.

It wasn’t all negative, though. The state ranked high — 6th overall — for having one of the lowest rates of public employees as part of the workforce (nearly 452 public employees per 10,000 of the population).

Since 2009, California’s economic outlook peaked at 38. In 2016, the state ranks 46th, down two spots from last year. The only states with lower rankings are: Connecticut, New Jersey, Vermont and New York. Utah has topped the list since 2009.

Economic Performance

While the report casts a grim projection, actual performance has been much higher. California ranks 31 in economic performance, which measures gross domestic product, absolute domestic migration and non-farm payroll employment.

Between 2004 and 2014, California has seen GDP rise 40.3 percent (cumulatively), ranking 22. GDP is the monetary value of all the finished goods and services produced in the state over a period of time.

Non-farm payroll employment has cumulatively grown 6.8 percent over the same 10-year period, ranking 19th.

Absolute domestic migration

Williams said economic performance had a high domestic migration rate not pulled it down. California has seen a cumulative loss of more than 1.2 million people between 2005 and 2014, ranking 49th. This measures excludes births, deaths and foreign immigration.

Texas has seen a cumulative gain of more than 1.3 million Americans over that time, while Florida has overall taken in around 835,000 new, American residents. They rank first and second, respectively.

“Americans continue to vote with their feet in favor of states with better economic opportunity,” Williams said. “It is clear California has been on the losing end of this competition for jobs and human capital.”

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