Cali's Budget Crunch Commentators Avoid Looking at the Welfare Rolls

Barely four years after California's historic recall of sitting Governor Gray Davis and Arnold Schwarzenegger's landslide election to replace him, the Golden State is, again, in a budget crunch of its own making.

Oh, it's not as bad as the Gray days -- yet. The $35 billion budget deficit Davis papered over long enough to win reelection in 2002 over Bill Simon, with the help of the state's ignorant and non-inquisitive news media, is 2-1/2 times higher than the $14 billion gap the state is facing over the next 18 months.

The state's Old Media, as would be expected, is moaning about cuts that might have to be made, obsessing over the possibility that "universal health care" might be derailed, and of course giving visibility to anyone and everyone who thinks even more taxes will solve the problem.

As has been the case for well over a decade, nobody that I know of in California's Old Media is considering the idea that the state is paying the price for failing to sufficiently go along with the rest of the country in aggressively reducing welfare rolls. But the numbers support the idea that if the state had done what the rest of the country has "somehow" done without visible suffering, it would be in a much better situation.

(A table and graphs illustrating the situation are after the jump.)

Welfare reform was passed in 1996, and became effective in 1997. During the first six years of reform, welfare rolls came down in California at pretty close to the same rate as the rest of the nation. By the end of 2002, the number of families on TANF, or Temporary Assistance for Needy Family Families (the new name for the deservedly stigmatized AFDC, Aid for Families with Dependent Children) was down 47% in the Golden State, compared to 52% for the rest of the country, and total caseload was down 55%, compared to 57% for the rest of the US.

But those percentage declines mask a huge problem: The state's welfare rolls have for decades been twice as high, as a percentage of the population, as the rest of the country.

Despite having so much room for improvement, on Schwarzenegger's watch, welfare rolls in California have gone up (you read that right), while the rest of the country has continued to enjoy significant declines.

Here are the raw numbers on recipients and families on welfare in California and the rest of the country since 2002:

The welfare situation in California is so bad that, rather than spend 4,000 words on it, I'll provide four pictures (graphs) worth 1,000 each (:-->):

(Source Data: Office of Family Assistance Caseload Data by year; Census Bureau data for population estimates. Most data is available as web pages; the rest is in Excel-downloadable format.)

Taking the graphs one at a time:

• Though the percentage of the population on welfare in the Golden State has fallen from an unfathomable 7.7% at the time Welfare Reform was passed to about 2.9% in at the end of 2006, that percentage is still more than double that of the rest of the US.
• In fact, while welfare caseloads in the rest of the US have dropped almost 30% in the past 4-1/2 years, California's caseload has gone up about 4%.
• As a result, though it has only about 12% of the total US population, California's share of the total US welfare caseload has risen from 22% in 2002 to almost 30% today. The rest of the country is paying a heavy price for the state's failure to trim its welfare rolls.
• Part of the reason for the caseload increase is that there are more welfare recipients per family in California, and that number has crept upward in the past couple of years. This would seem to indicate that California welfare mothers are bearing more children that those in the rest of the US.

One might think that immigration, illegal or otherwise, could explain California's out-of-whack welfare rolls. But if that's the case, it's because the state is allowing it to happen, not because it has to happen. The immigrant-heavy states of Arizona, Texas, and Florida do not have welfare populations that are at all out of line with the rest of the country.

I'm not close enough to the situation in Sacramento to recommend a policy fix, but I can rough out a few estimates:

• If California's welfare caseload reflected the rest of the country, it would have over 300,000 fewer families on welfare, and a lower caseload of about 700,000 fewer individuals.
• If those 300,000 fewer families stopped collecting a conservatively estimated $15,000 a year each in benefits, taxpayers (state and federal) would be saving $4.5 billion a year in welfare costs, even before considering the reductions that could be achieved in the state's social-services bureaucracy.
• If those 300,000 fewer families each had one additional adult in the workforce adding an estimated $30,000 yearly in value to the economy, the state's annual economic output would be $9 billion higher. That higher output, plus the additional spending by the now-employed, would be generating a great deal of revenue to the state's treasury.
• The turnaround just described would not alone close the budget gap noted earlier. But if the state had gotten its act together on TANF several years ago, while cutting the social-services bureaucracy proportionately, the multi-year impact might come pretty close.

Arnold Schwarzenegger was very fortunate during his first few years of handling California's finances. The economic growth created by the Bush tax cuts came at just the right time. The state also benefited greatly from a number of onetime windfalls, such as the hundreds of millions of dollars founders and insiders at Google coughed up when their stock options and restricted stock were cashed in.

Unfortunately, it appears that the good fortune enabled the state to avoid serious expenditure reform in welfare, and surely other areas, that should have been more aggressively undertaken when Schwarzenegger took office. Now the party's over.

Will California's Old Media ever cover the big problems the state still has with welfare and other items on the expenditure side of the ledger?

Cross-posted at BizzyBlog.com.