For the past decade, the soaring stock prices and nosebleed valuations of Silicon Valley’s IPOs and unicorns has been a boon for California, helping create a record budget surplus of almost $22 billion.

Yet this bonanza has occurred just as the state’s overall job creation, once among the country’s leaders, has slowed to a more middle of the road status, well below the rates for key competitors such as Nevada, Arizona, Washington State and Texas. On a GDP basis, according to the most recent federal data, Texas by the last quarter of 2018 was growing nearly three times as fast.

Slower growth could expose California even more to its growing, and unhealthy, dependence on the relatively small, in terms of employment, tech sector.

Most other sectors that have constituted the state’s once remarkable economic diversity — agriculture, manufacturing, engineering, aerospace, energy and construction — generally are growing slowly or falling behind the national average.

High income jobs are particularly skewed. Over the past decade higher wage business and technical services jobs in the Bay Area increased by 34%, while the state overall saw an increase of 19% in those jobs.

The budget vulnerability

When the stock market is booming and technology company valuations are soaring (like today), the Bay Area (defined as the 9 counties around San Francisco and Silicon Valley) contribute as much as 40% of the total income tax revenues of the state. California’s income taxes are the nation’s highest and account the largest part of the budget; half comes from those making over $500,000 annually, much of it from capital gains. In 2016, according to the Franchise Tax Board, the Bay Area contributed 38% of the $63.7 billion total income tax base, almost twice its share of overall population.

But if the stock market drops for tech issues, as occurred between 2000 and 2002, the Bay Area’s contribution to state coffers drops, down more than $9 billion a year in that period. This constituted 75% of the loss in state revenue; the region’s share of total state taxes dropped to 31% in 2002 from 44% in 2000.

The implication is clear. And a serious tech stock market decline is not inconceivable. Some mega money losing IPOs have proved wobbly and tech firms face growing threats in terms of regulation and slowing sales. Looking at previous tech-driven declines, the state could lose as much as $12 to $15 billion a year in the next tech recession, wiping out two-thirds of the state’s 2019 surplus. Since other areas of the state would be likely to suffer in a tech pullback as well, the overall impact could move California from a surplus to a deficit very quickly.

Jobs vulnerability

The employment story parallels the budget impact. Overall California has seen below average job growth in the past 10 years. The state’s 12% increase in jobs was driven largely by an almost 20% growth in the Bay Area while the rest of the state’s lower growth was only 9%.

So, what happens if Silicon Valley companies see a serious dip in stock market value? In the tech wreck of 2000, we saw the net destruction of 174,101 jobs in the state of California from 2001 to 2003. Overall, the state saw a 1.2% decline in its jobs base while business and professional services jobs dropped 6.1% drop in the state’s base and 16.2% in the Bay Area.

If we were to see a similar meltdown in stock prices in the next year or two, that could translate into the loss of 201,000 jobs overall and 78,000 higher paying jobs in the business and professional services sector. This comes as competition grows from out-of-state technology and business professional services employers. San Francisco and San Jose continue to see growth, but Raleigh, Charlotte, Seattle, Austin, Nashville and a dozen other markets are growing just as fast, if not faster. Los Angeles and all southern California continues to lag well far behind.

Needed: a new economic perspective

When Gov. Newsom describes California as “the envy of the world” he can rest assured that every region would like more of Silicon Valley’s billions. Yet he would be less correct in talking about the rest of the economy, such as manufacturing, which has underperformed both the nation, and well behind such competitors as Nevada and Arizona.

The state’s other big blue-collar industry — construction — remains below past peaks and now faces a weaker housing market. Despite all the bloviating from Sacramento, housing construction has been slowing; California’s rate of new housing permits has fallen behind the national average, making construction workers’ economic prospects even dimmer. Moves to gut the remnants of the fossil fuel industry, a high wage, heavily unionized employer could leave many workers facing the prospect of unemployment.

This won’t have much impact on the Bay Area’s tech sector — also the source of much Democratic Party funding — since they source their energy elsewhere in server farms in other states or by employing coal-driven Chinese factories. But high costs will continue to drive many other business service firms that employ middle skilled workers — most recently Mitsubishi — out of the state.

What California needs to do is design a policy agenda that depends not just a handful of celebrated geographically concentrated quasi-monopolies but one that encourages growth across the broad range of industries that support communities across the state. This would include measures to lessen regulations on the state’s struggling interior and the basic industries that have thrived there, invest in basic infrastructure while freeing up land on the periphery for affordable housing. This is the best way to reduce our dangerous dependence on a handful of firms clustered in one part of the state and create opportunities for most Californians.

This piece originally appeared on The Orange County Register.