California's Budget Woes: No One Ever Mentions Work Disincentives, Welfare Fraud, or Taxpayer Flight

Here we go again. The State of California's budget is again in crisis, facing a budget deficit of $16 billion, which is $6.8 billion higher than projected mere months ago. Governor Jerry Brown is browbeating residents to pass tax initiatives in November which include "a quarter-cent increase in the state sales tax for four years and a seven-year hike on incomes of $250,000 or more that will range from 1 to 3 percentage points."

The totally predictable problem (and, from all appearances, a bit contrived; the state's controller saw this coming several months ago, and was largely ignored) is that tax revenues aren't coming in as expected. Media treatment of the problem acts as if this all some kind of uncontrollable act of God which is a by-product of the recession and weak recovery.

Nice try, people; no sale. That cop-out doesn't explain why the formerly Golden State's situation is far worse than other states, some of which are actually faring quite well. No one in the press ever asks why California's enrollment in welfare programs is so high (it's hard to increase tax collections with an unemployment rate of 11.0%, and when so many people who could be working aren't). Rampant fraud and abuse occurring right under the government's nose gets little media attention. Finally, no one ever seems to look at the continuing exodus of productive people from the state, and why it's happening.

As of December 31, the number of Californians enrolled in Temporary Assistance for Needy Families was 1.412 million, meaning that a state with about 12% of the nation's population had just under one-third of those collecting traditional welfare. Somehow, Texas and Florida, with roughly two-thirds and one-half of California's population, respectively, had total enrollments in December of 99,000 and 112,000 respectively. In the past year, national enrollment in the food stamp program is up by 4.8%; in California, it's up by 8.5% (second page at link; to be fair, the proportion of Floridians and Texans on food stamps is higher than California's).

As to fraud and abuse, here is some of what CalWatchdog.com found in July 2011 (internal links are in original; bolds are mine):

Reported the Orange County Register, “California is nearly twice as big as New York state, but we have five times as many welfare cases. According to the Public Policy Institute of California, our state is one of the only nine that does not enforce the federal government’s five year lifetime limit on cash welfare assistance. The monthly cash check is almost  70 percent higher than the national average.”

The prevalence of welfare fraud is disheartening. ...... Besides the gross misuse of welfare benefits, recipients are not meeting their expected work requirements.  Out of a sample of 310 welfare cases, only five individuals participated in activities that moved their family toward self-sufficiency, according to a California Department of Social Services’s study in March 2011. Only 60 of the 310 cases participated in countable work activities.

While many welfare recipients are failing to pull their own weight, California Department of Public Social Services workers aren’t much better.  One worker, Trang Van Dinh, was found filing nearly 200 fraudulent tax returns, preying on those who were seeking help.   He used clients’ personal information to file false tax returns in 2009 and 2010.

... common sense would suggest that more fraud investigations would be taking place.  Instead, the number of investigations has actually decreased.  In July 2010, when the proposals were written, 6,092 investigation requests were accepted for the Food Stamp program.

By January 2011, the investigation requests went down to 5,437.  The number of pending investigations for CalWorks and Food Stamps were 117,745 in July 2010.  Six months later, 23,103 more cases were pending at the end of the month.

Rather than increase the number of welfare fraud investigations, it appears as if the Department of Social Services has failed to use new fraud detection measures and ensure that the taxpayers’ dollars are not going to waste.

A final outrage is that welfare recipients are allowed to use their Electronic Benefits Transfer (EBT) cards to buy booze and smokes.

... ... ...

... ... ...

Excuse me. I had to step away from the computer after than last sentence and what followed at the link, which is that as of when it was written, the state's legislature could not pass a bill banning those uses of EBT cards. I don't know how the state's taxpayers can stand it.

As to productive people fleeing the state, the link is from July 2011, but nothing has changed (internal links are in original):

The state of California is becoming legendary for creating the most anti-business climate in the country because of its high taxes, excessive regulations, forced unionism, and bloated public sector. For the second year in a row, a large group of America’s CEOs recently rated California as the worst state in the country to do business in an annual survey conducted by Chief Executive Magazine. California currently ranks No. 49 among U.S. states for “business tax climate” according to the Tax Foundation’s 2011 State Business Tax Climate Index, and it ranks No. 48 for “economic freedom” according to a recent study by the Mercatus Center.

It shouldn’t be any surprise then that companies are leaving the “Golden State” in record numbers this year (see chart below) for “golder pastures” and more business-friendly climates in other states. In just the last two years, the number of companies leaving California has accelerated more than five-fold, from one per week in 2009 to 5.4 per week this year, according to California relocation expert Joe Vranich.

Jerry Brown's latest bromides are the same ones which have been tried and have failed for at least two decades. A large of the reason why politicians like Brown continue to get away with taking the politically easy way out is that the establishment press lets them.

Cross-posted at BizzyBlog.com.