June 5 (Bloomberg) -- Whenever a free-market research or business group releases a “best and worst” list of states, my eye goes straight to the bottom: To see whether California is last or was edged out for the lowest rank by one of the other mismanaged liberal bastions. Illinois seems to exist to boost the self-esteem of Californians.
I can raise a glass of zinfandel to California’s great victory in the Mercatus Center’s recent “Freedom in the 50 States” study. The state didn’t place last. That distinction went to New York, thanks to its highest-in-the-nation tax rates and entrepreneur-crushing economic regulations. I owe an apology to residents of the Land of Lincoln.
For all the study’s detail about tax rates and regulation, this information jumps out as the most telling about New York: “9.0 percent of the state’s 2000 population, on net, left the state for another state between 2000 and 2011, the highest such figure in the nation.” Moving is the surest sign of dissatisfaction, especially when people relocate from a state that has long been an economic and cultural magnet.
Californians talk incessantly about high-tailing it to Texas or Nevada, yet New Yorkers flee at about double our rate. Migration numbers aside, I would still rank the Golden State as the Most Hopeless State. There are other studies that bolster that case, including Chief Executive magazine’s “2013 Best and Worst States for Business” that places California dead last, with New York in 49th place.
The magazine ranks states based on three categories: taxation and regulation, workforce quality, and living environment. Even with its natural advantages in the last category and high ranking in the second one, California still flopped because its officials have adopted a punitive environment in the first category. That takes some doing.
In terms of zaniness, California and its cities can probably put New York to shame. San Franciscans ban McDonald’s Happy Meals and plastic bags even as they debate bizarre “freedoms,” such as the right to walk around in public naked. After much bad publicity, a state assembly committee recently rejected a “homeless bill of rights” that would have, until amended, established a constitutional right to “engage in life sustaining activities that must be carried out in public spaces.” In other words, it would have established a right to urinate in public.
On substantial regulatory, government and economic issues, New York and California are in a dead heat. Both are union-dominated states where public services are overly costly, taxes are too high, and government-imposed edicts and bureaucracies meddle everywhere.
The Mercatus study summed up California’s regulatory problems: “Government interference in the land market is rife, as California’s zoning laws are among the toughest in the country, and the state is one of just four to authorize rent control, while eminent domain abuse has seen only token reform. Labor laws impose many costs on employers, from the minimum wage and a universal workers’ compensation mandate to short-term disability insurance and paid family leave.”
The study noted the prevalence of health-care mandates that substantially increase the cost of insurance coverage. As California Health Line notes, “The list of mandates is a long one, including requirements to cover autism treatment, some reconstructive surgery and prosthetic devices for a laryngectomy.”
The Institute for Justice, another free-market research group, slams California for its endless list of professions that require licenses, including tree trimmers, funeral attendants and dental assistants. California also imposes far costlier and more burdensome licensing rules than other states.
New York is regulation-happy, also. But New Yorkers don’t have to deal with the cap-and-trade system that requires greenhouse-gas-producing industries to either substantially lower carbon-dioxide emissions or bid for “pollution” allowances in a convoluted government-created exchange.
New Yorkers don’t have to deal with a coastal commission that exerts so much bureaucratic control over development decisions that property owners are routinely denied their rights and are subject to rulings over minuscule issues, such as the color of house paint and the type of fencing that can be used.
And California’s debt levels, which crush public services and lead to demands for higher taxes, are worse than New York’s, by some accounts. A new California Public Policy Center report found that “the outstanding debt owed by California’s state and local governments, using responsible actuarial assumptions, is almost certainly in excess of $1.0 trillion.”
Yes, choosing between New York and California as the best or worst state in terms of market-oriented public policy is like choosing between Minnesota and North Dakota when looking for the warmest winter. What really matters is the hope for change. Both states need significant reform, but New York is more likely to achieve it because its Democratic leaders face more political competition -- the Republican Party has at least some legislative power -- and they are less utopian in their efforts to boss everyone around.
Sadly, Democratic officials in California are energized by their newfound power after last year’s election and think that the state is a model for the rest of the nation. The budget rebound has convinced Governor Jerry Brown and legislators that California is on the right track and its only real problems -- notably an obstructionist Republican minority -- are history.
California has a more powerful initiative system, but legislators are working to rein in this system to further consolidate their power and keep pesky voters at bay.
I would never live in New York or any other place where palm trees don’t grow outdoors. But that reinforces another reason California deserves the “worst in the nation” moniker. California officials know that most of us will put up with just about anything rather than leave. New Yorkers have shown that they aren’t so easily seduced.
(Steven Greenhut is vice president of the Franklin Center for Government and Public Integrity. He is based in Sacramento.)
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