No matter how it is measured, California state and local government spending is at an all-time high. Total general spending of the state, counties, cities, special districts, school districts and other agencies amounted to $145 billion in 1994-95, up 5 percent from the $137 billion total in 1993-94, according to the most recent data available from the federal Census Bureau. This translates to about $4,600 per capita and 19.5 percent of California personal income.

Figure 1 shows how the ratio of spending as a percent of personal income has changed over time. Passage of tax-cutting Proposition 13 in 1978 reduced spending in the late 1970s and early 1980s, but the trend has been upward since 1983-84, with a recession-caused leveling off in the 1990s. It is worth noting that not all of the decline of the early 1980s was caused by Proposition 13 - the graph shows that other states were also experiencing declines at that time because of a national recession.

Ranking the States
Besides looking at California's own spending history, it is useful to rank California spending against other states. However, simple rankings can often be deceiving. Some analysts complain about per capita rankings because regional differences in costs of living and incomes make it difficult to understand what a given level of spending means in terms of services provided or burden on taxpayers. Some prefer to use rankings based on spending per $1,000 of personal income to compensate for those differences.

However, as explained in the September 1998 Cal-Tax Digest article ("Taxing California"), rankings based on personal income ratios are inherently skewed, showing most high-income states ranking very low in spending and low-income states ranking high. States with a small economic base (many of which are also sparsely populated) must by necessity exert a greater tax effort (higher tax rates and higher spending in proportion to income) simply to provide basic infrastructure and services such as schools, highways, prisons, health and welfare. High-income states, like California, are not forced to exert the same kind of tax effort to provide those services and facilities. Indeed, a smaller percentage of income can yield an even greater level of public services if the economic base is large.

For proper comparison, states must be grouped with others of similar income levels. Therefore, the tables and graphs that follow compare California spending only to other high-income states.

Besides looking at California's own spending history, it is useful to rank California spending against other states. However, simple rankings can often be deceiving.

California's Spending Priorities
Figure 2 shows major spending categories, in order from greatest spending to lowest. California's top spending priorities, in terms of dollars spent, are K-12 education, welfare, and health-related programs. Figure 3 shows that these three categories total 46 percent of all state and local spending in California.

Another way to view priorities is to compare spending ratios to other states. The tables on page 4 show how California compares to other high-income states in major spending categories. California ranks very high compared to these states in all public safety categories - police, fire, corrections, and the court system. California also ranks high in welfare, health and hospitals, housing and community development, natural resources, and financial administration.

In the education-related categories, California is low in elementary and secondary (K-12) spending, but about average in higher education and libraries. However, these figures are before significant increases in funding for K-12 education, including class-size reduction, were approved in recent years. California ranks extremely low in highway spending. In fact, California's highway spending is not only the lowest of the high-income states, but it is also the lowest of all 50 states. It is encouraging to note that California ranks low in spending on interest on general debt.

Sources:
Spending figures for this analysis are from "State and Local Government Finance Estimates" provided by the U.S. Department of Commerce, Bureau of the Census. The data can be found online http://www.census.gov/govs/www/estimate.html). Personal income figures were calculated on a fiscal year basis from quarterly data obtained from the U.S. Department of Commerce, Bureau of Economic Analysis. The data are available at: http://www.bea.doc.gov.

The spending data included in this report does not include such things as spending by government-owned utilities, funds paid out by government insurance funds, such as workers' compensation, or government employee retirement systems.