Now the state should look at needs of schools and infrastructure
California is soaring toward one of those mega-figured statistical plateaus that seem relatively common for the nation’s largest state. Even so, this one is a bit of a stunner: During 1997, the state Department of Finance estimates, the value of California’s output of goods and services will exceed $1 trillion. That is $1,000,000,000,000.
Finance Department economist Ted Gibson says it is inevitable, as was California’s population increase to more than 30 million in the early 1990s, as is the climb past 40 million early in the next century.
If California were a nation, it would rank seventh in the world in domestic product, just behind Britain and just ahead of China. The state’s economic product is more than double that of the Russian Federation. (The United States is No. 1 at a forecast $8.9 trillion this year). Even more impressive, perhaps, California’s economy ranks ahead of the whole of Eastern Europe and the Middle East. The figure equals that of the South American continent and is more than twice that of Africa.
The $1-trillion figure was touted in the economic forecast section of the new state budget and highlighted by Gov. Pete Wilson in his discussion of the state’s economic recovery. But even with the good news, Wilson argues that California needs to cut business taxes again to compete with other states.
What is more pertinent than the $1-trillion figure, though, is the change occurring within the California economy. For example, economist Gibson says, the state appears to have emerged from the radical transition of the defense-aerospace industry in the wake of the Cold War.
Defense-aerospace employment, which peaked at 390,000 in 1988, bottomed out at 161,000 last February, according to state figures. Employment in this sector was on the rise throughout the last nine months of 1996. And the pending takeover of McDonnell-Douglas by the Seattle-based Boeing Co. is expected to add even more jobs in California.
The other major feature is the growth of employment in high-technology services and manufacturing and in the entertainment industry. The nature of these fields continues to evolve as new products and attendant software come on the market. Gibson predicts California will remain at the forefront of research and development in new technologies.
In his budget, the governor argues for additional business tax cuts of 10% during the coming two years, on top of the 5% reduction this past year. Others are dubious about the ability of such relatively modest reductions to drive major economic decisions in a $1-trillion economy. Corporate income taxes may be higher than in most other states, but they are offset by lower property taxes here, this argument holds. In a number of national studies, California’s overall tax burden ranks No. 20 or lower among the 50 states.
More critical is the level of investment in schools, transportation systems and other facilities important to businesses as they scout for new locations. Wilson proposed a $200-million bond issue to create a bank for infrastructure and economic development to help local governments and businesses pay for roads, sewers and other facilities. That’s a start--a very modest start. Measured against a trillion-dollar economy and a growing backlog in such programs, $200 million falls far short of the state’s needs.
