Simple Illustration of California’s Budget Dilemma

Loren Kaye
President of the California Foundation for Commerce and Education

Here’s why California has a hard time getting out of its budget straits:

The ratio of private sector workers in California to Medi-Cal recipients and government employees continues to fall. More non-wealth generators are being supported per wealth generator today than in the past. The same trend is evident nationally, but it’s worse in California. We can’t right our fiscal vessel (never mind the economy) without acknowledging and addressing this. We address this by (1) fixing the denominator – fewer welfare recipients and public employees, or (2) the numerator – more private sector workers creating wealth.

For the sake of our future, over the long term the public policy debate must move from one that frames policy solutions in terms of squeezing more taxes from productive Californians versus cutting our birthright universities and colleges, and instead focus on encouraging more private investment and wealth creation in California.


(N.b.: California Medicaid and employment populations, and federal Medicaid recipients, are from June of each year. Federal employment is annual. Medicaid recipients (Medi-Cal in California) is a proxy for welfare recipients. California government workers include federal workers in California.)

(Inspired by presentation to American Enterprise Institute by Gary Alexander, secretary of public welfare for Pennsylvania.)

Follow Loren on Twitter at @KayeLoren.

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