Cal-Tax Research Bulletin


July
1996


California Spending
A Comparison of State and Local Spending Priorities

Highlights

  • California state and local governments devote much greater resources to health and welfare spending than other western states.
  • California's education spending is low compared to other states.
  • California spending is high in public safety categories.
  • State and local spending has grown steadily since the early 1980s and surpasses the pre-Proposition 13 "peak."

Introduction

Cal-Tax has published comparative government spending data each year for two decades. In previous years, the report has been included in the Taxing and Spending series. This year, the tax burden report was published separately (Taxing California, May 15, 1996), and this bulletin takes a more in-depth look at spending than in prior years. This report was prepared by Cal-Tax Research Director Stephen Kroes.

Pie Chart: How California Spends
Figure 1

A Potpourri of Priorities

Figure 1 shows, in broad terms, how California's state and local governments spend public funds. The largest single spending category is K-12 education, followed closely by health and welfare, each of which consume about one-fifth of total spending. This data is from fiscal year 1992-93, the latest federal data that allows state-to-state comparison.

Figure 2 uses the same data to compare California's spending priorities with other states. California's most significant difference from other states is in education spending, where the average other state spends 24% of total state and local budgets on K-12 schooling compared to California's 20.4%.

Another area in which California falls significantly below other states is highway spending. In fact, California ranks last among the states in highway spending per $1,000 of personal income, as shown in Table 3 on page four.

In contrast, California's governments spend more than average on each of the public safety categories, including police, fire, and corrections. Tables 2 and 3 on pages three and four show that California's public safety categories rank in the top five states when measured in either per capita terms or per $1,000 of personal income.


Comparing Spending to Other States

Figure 2

Comparison to Western States

Because western states share many geographic, social, and political characteristics, it useful to compare California with each of the western states. Table 1 makes that comparison by showing each western state's spending priorities as reflected in the percent of total spending allocated to each major program area.

Compared to other western states, California's highest spending priority is on health and welfare programs. California's spending on fire protection also ranks at the top among western states, although it is one of the smallest categories, at 2.6% of state and local spending. The other public safety categories also rank high against western states.

California ranks last among the 10 western states in spending on K-12 education and on highways. California also is relatively low in spending on higher education, parks, recreation, and natural resources, libraries, and interest expense.



Table 1


Figure 3

The Long-Term View

A common myth about public finance in California is the belief that government is spending less money than before Proposition 13, the landmark tax reduction initiative passed in 1978.

Figure 3 shows state and local spending as a percent of personal income - one of the most widely used ratios for comparing to other states and for making historical trend comparisons. The graph shows that, by the late 1980s,

California spending had rebounded to surpass its pre-Proposition 13 peak. The growth trend continued until the latest year in the chart, which shows a decrease because of the deepening recession that gripped California in 1992-93.


The Big Tables

The tables listed at right show detailed totals and rankings on all states for major spending categories, on a per capita basis and per $1,000 of personal income.

Caution should be used when comparing California's spending per $1,000 of personal income to other states, especially when comparing with lower-income states. Because

Spending
Per Capita
Spending
Per $1,000
Personal Income
Education
Health & Welfare
Public Safety
Other Spending
Education
Health & Welfare
Public Safety
Other Spending
Total Spending (Per Capita and Per $1,000)
their tax bases are much smaller than California, lower-income states naturally exert greater effort per dollar of personal income just to provide basic levels of service. See the Taxing California (May 15, 1996) and How (Not) to Measure Tax Burden (March 1, 1996) research bulletins for more information on that topic.


Sources

State and local spending figures were obtained from the U.S. Department of Commerce, Bureau of the Census. These are the figures annually published in the Census Bureau's Government Finances series of reports. All calculations of spending per capita and per $1,000 personal income were made by Cal-Tax.

Population as of July 1, 1993 was obtained from the Census Bureau. Fiscal year personal income figures were calculated from quarterly data published by the U.S. Department of Commerce, Bureau of Economic Analysis.


© Copyright 1996, California Taxpayers' Association. All rights reserved.