Texas vs. California, Revisited

by Chuck DeVore
Another way of looking at the issue

It appears I struck a nerve a couple of weeks ago with “Texas vs. California: Why so many people are moving from the Golden State to the Lone Star State.”

My point was simple: California is often a trendsetter in the realm of left-wing policymaking, while Texas legislators keep their government small. The results speak for themselves. But for those who didn’t find the article convincing, here’s another way of looking at the issue.

During my six years of service in the California state assembly, I was on the budget committee and the revenue and taxation committee. I’m a numbers guy. Numbers say everything about a government and its values. Follow the money and you can figure out whether elected officials view themselves as the center of the universe, or whether they think the government exists to protect liberty.

Simply comparing dollars to dollars is a good place to start. By this yardstick, the average state spent $9,412 of each citizen’ s money for state and local government operations in 2008, according to the U.S. Census Bureau. California spent $11,302 per person, or 120 percent of the national average. Meanwhile, Texas spent $7,756 per capita, or 82 percent of the national average.

But the same dollar amounts can mean different things in different states. While Texans’ incomes are growing faster — they jumped 37 percent from 2000 to 2010 in Texas, compared with 31 percent for incomes in California — Californians still make more money on average. Also, the cost of living in California is 42 percent higher than it is in Texas. In other words, Californians make more money, but then need to spend more money on basic necessities such as food and housing.

So, a better way to compare public-sector spending is to look at what proportion of the states’ economies are spent on state and local government. Across America, spending on local and state governments made up 19.8 percent of the average state’s economy in 2008. California spent 22.5 percent, compared with Texas’s 15.4 percent. Simply put, Californians spend 46 percent more of their income on their government than do Texans.

Comparing major categories of spending really brings home the difference.

The average state spends 5.7 percent of its economy on education. Neither California (at 5.6 percent) nor Texas (5.4 percent) deviates far from the average. But Texas stretches its spending much further, employing 17 percent more educators per capita than does California, with its strong teachers’ unions and highly paid teachers.

Welfare spending shows a shocking contrast, with California spending 5 percent of its economy on wealth-transfer programs, compared with the national average of 4.6 percent and Texas’s 3.1 percent.

California also spends more than Texas on law enforcement and prisons, 1.5 percent to 0.9 percent, as well as parks, recreation, and natural resources, 0.7 percent to 0.3 percent. 

Mass transit and other state and locally run utilities constitute 1.4 percent of the average state’s economy. California spends 1.9 percent here, Texas, 1.2 percent. California’s proposed high-speed-rail system will significantly grow this outlay. By comparison, heavily urbanized New York, with its mass-transit systems and extensive network of government-run toll roads, outlays 2.2 percent of its economy towards government-run utilities.

Texas manages to spend more in one category than does California: roads. Though Texas has diverted as much as $1.2 billion from its highway fund lately, it still manages to spend 1.2 percent of its economy on highways, compared with California’s outlay of 0.9 percent. The national average is 1.1 percent. California used to spend far more on its roads, but cut back in the 1970s, the last time Jerry Brown was governor — he suggested then that if you build road and water infrastructure, they will come. California stopped building but they came anyway. 

The spending category showing the largest divergence between California and Texas should come as no surprise to anyone following the impending bankruptcy of Stockton, California’s 13th-largest city: spending for government-employee benefits. Nationwide, states spend an average of 1.6 percent of their economy in this area. California spends 2.2 percent of its economy — $1,105 for every person in the state — to keep government employees comfortable in their golden years. Texas spends 0.9 percent of its economy for this purpose — $467 for each man, woman, and child in the state. While most Texas civil servants don’t have collective-bargaining rights, they experience about one-third the job-turnover rate of private employees, showing that the State of Texas is seen as a good employer.

Last month, Texas added 27,900 jobs. The official unemployment rate is 7.1 percent in Texas, compared with 8.3 percent nationally. California added 4,000 jobs and has an official unemployment rate of 10.9 percent.

California’s model of government-led prosperity, aided by the nation’s best weather, appears to be in serious jeopardy. Texas’s model of freeing jobs creators to do what they do best through low taxes, less regulation, and a better lawsuit climate is looking stronger by the month.

— Chuck DeVore served in the California state assembly from 2004 to 2010 and is a senior visiting scholar for fiscal policy at the Texas Public Policy Foundation.