California ailing
I’ve been puzzling for some time over how California–home to arguably the most innovative and dynamic economic ecosystem on the planet–can be experiencing fiscal meltdown. The usual suspects are excessive social spending and political institutions that render the state “ungovernable”, but I haven’t seen evidence sufficiently compelling to convict them. A recent analysis by the San Jose Mercury News suggests that the problems may be more serious: it appears that the social fabric of the state is fraying, with costly consequences. From the article:
Republican Gov. Arnold Schwarzenegger … and the Democratic-controlled Legislature have spent money well beyond the rate of inflation and California’s population growth — $10.2 billion more. California’s general fund … has grown 34.9 percent … over that same period, population growth and inflation together grew by only 21.5 percent. If state spending had grown only at that rate, it would have reached $92.7 billion last year. Instead, Schwarzenegger and the Legislature spent $10.2 billion more.
… where did that “extra” $10.2 billion of state spending above the rate of inflation and population growth go? The Mercury News found:
The state prison system received the biggest share, about $4.1 billion of it. Corrections spending has increased fivefold since 1994. At $13 billion last year, it now exceeds spending on higher education. Tough laws and voter-approved ballot measures have increased the prison population 82 percent over the past 20 years. Meanwhile, former Gov. Gray Davis gave the powerful prison guards union a 30 percent raise from 2003 to 2008, increasing payroll costs.
I’m not an expert on crime, but clearly such a dramatic increase in the prison population–to the point where state spending on the prison system exceeds investments in higher education–indicates a sick society. Further, the Mercury News analysis helps exonerate one of the usual suspects:
general fund spending on K-12 schools and social services, like welfare, actually grew less than the rate of inflation and population growth.
Needless to say, an elevated prison population also incurs indirect costs: prisoners are more or less removed from the labor force and the tax base, and resources expended on caring for and securing them could be invested in productive assets instead. It’s not clear how this problem can be solved.