What Is Really Driving California’s Budget Woes? : Demographics: There are more and more retirees, more and more children, but those who make the economy go round are fewer and fewer.

Pete Wilson has bad political luck: Vast changes in the profile of California’s population in the 1980s have given him a set of problems that would challenge any governor’s leadership talent, let alone his composure. By bringing attention to how foreign immigration strains California’s ability to deliver services, for example, Wilson hit on what will probably be a prominent theme in state politics in the ‘90s. For this he was roundly condemned for playing David Duke politics. Too bad.

For the huge influx of immigrants is but one of many demographic changes that need more airing, not less. In the past decade, at least 6 million new people--probably more, because the 1990 Census did not count everyone--called California home. About 40%, or between 2 million and 3 million, of this growth was due to foreign immigration.

As significant as these demographic changes have been, they are not what is at the heart of the problem--to wit, the age differential. California is growing older and younger at the same time. Its retired population is booming; the ranks of its youth are growing at an unprecedented rate. The population in the middle--those who drive the economy--is declining.

To illustrate the point, Californians can be divided into three groups: “earners,” “spenders” and “users.”

“Earners” are between age 18 and 64, the working population. They are declining, in percentage terms, because California’s huge population growth occurred between 1945 and 1965, the baby-boom years. Parents of the baby boomers--and soon the boomers themselves--are leaving the work force, while the entering class from the baby-bust years (1965-1980) possess fewer skills than the middle-class workers leaving it.

Thus, the sudden concern over the quality of California’s workers. Demographics have created a new cloud in the business climate: adequate numbers of properly educated new workers.

“Spenders” are the retired Californians, who live on Social Security and their pensions. Generally, they are a positive contributor to the economy because they spend money, and government services they tend to use are federally sponsored, like Medicare. But large numbers of retirees are leaving California and taking their pension dollars--and sales taxes--earned in California with them.

Throughout the 1980s, with the economy growing, California gained more domestic migrants than it lost. As in past decades, the domestic migrants generated economic activity and contributed to California’s wealth. If more people in this taxpaying “spender” group leave, our fiscal problems will only get worse.

The third group are mostly under age 18, the “users” of such public services as schools, child care and welfare. Growth in this category represents the extent of the immigrant influx.

Demographically, California’s Anglo and African-American populations are nearly the same. Both groups have lived here since the postwar years. The Latino and Asian populations, now constituting some 35% of California’s total, generally arrived later. They have higher birthrates and larger families.

This difference is most dramatic when age is factored in. Anglos account for 61% of the population older than 18, but only 46% of those younger. Forty-five percent of the under-18 population are Latino and Asian.

Which brings us back to California’s fiscal straits stemming from these demographic changes. A growing “user” class translates into greater need for social services at a time when the “earners” who pay for them through taxes are dwindling. Demographics are driving spending up and the revenue flow down.

Wilson’s determination to focus the debate here needs to be understood not as a value judgment on immigration but as a response to a reality. This will require several steps, none easy.

--The federal government must share some cost because it helped to create the problem. It is difficult to think of anything worse for California than the 1986 Immigration Reform and Control Act. The law allowed illegal immigrants living in the United States before 1982 to become legal. Virtually all seasonal agricultural workers were offered legal status, too. More than half these immigrants ended up in California. The number of seasonal agricultural workers who became legal in the state exceeded expectations fivefold.

The million and a half who have become legal in California have family reunification rights beginning this decade. As a result, an additional 5 million immigrants with residency rights are expected in California during the next 15 years, further swamping the “user” class.

The state’s congressional delegation has yet to confront the impact of federal immigration policies on California. Nor has it complained about Congress’ refusal to follow through on its commitment to fund immigration assistance programs, which are part of the ’86 immigration bill.

--Schools will have to concentrate on English proficiency, which will speed up the assimilation of people from other cultures into California’s mainstream. Most immigrants to America assimilate within two generations. We cannot wait that long.

Some estimate 90% of the net growth in the work force will be non-Anglo, the result of large numbers of Anglos retiring and being replaced by children of the immigrant and non-Anglo population. If politicians fail to act, California could become a miniature South Africa, where masses of poorly educated immigrants support a population of white retirees.

We cannot abide such a wall of separation in our society. Wilson has sounded the alarm bells that need to be rung. Now it is time to hear them.