How the Campuses Helped Ruin California’s Economy

[This article is reprinted from]

All across the country there were demonstrations on March 4 by students (and some faculty) against cuts in higher education funding, but inevitably attention focused on California, where the modern genre originated in 1964. I joined the University of California faculty in 1966 and so have watched a good many of them, but have never seen one less impressive that this year’s. In 1964 there was focus and clarity. This one was brain-dead. The former idealism and sense of purpose had degenerated into a self-serving demand for more money at a time when both state and university are broke, and one in eight California workers is unemployed. The elite intellectuals of the university community might have been expected to offer us insight into how this problem arose, and realistic measures for dealing with it. But all that was on offer was this: get more money and give it to us. Californians witnessing this must have wondered whether the money they were already providing was well spent where there was so little evidence of productive thought.

The content vacuum with filled with the standby language of past demonstrations, and so there was much talk of “the struggle,” and of “oppression,” and—of course—of racism. “We are all students of color now” said Berkeley’s Professor Ananya Roy, and a student proclaimed that this crisis represented “structural racism.” (Why not global warming too?) Berkeley’s Chancellor Birgeneau called the demonstrations “the best of our tradition of effective civil action.” Neither Chancellors nor demonstrations are what they used to be. The nostalgia for the good old days surfaced again in efforts to shut the campus down by blocking the entrance of UC Berkeley and UC Santa Cruz. It didn’t seem to occur to anyone that the old “shut it down” cry was somewhat misplaced when keeping it fully open was what the present demonstration was about, but then this was not an occasion when anyone seemed to have any idea of what they were trying to achieve.

One group at UCLA stumbled into the truth, though it was a truth they did not understand. At Bruin Plaza a crowd chanted “Who’s got the power? We’ve got the power.” In its context this was just another slogan of a mindless day, but the reality is that those people do indeed have the power, and routinely use it in a way that makes them the author of their own troubles. Let me explain.

Unemployment in California is still rising. It just went up from 12.3 to 12.5%, nearly three points above an already bad national average. This horrendous figure is the source of California’s budget problem. The huge loss of tax revenue is compounded by greatly increased unemployment outlays. If we look at the few other states that have unemployment figures well above the national average, there are obvious explanations. Michigan is at 14.6 because employment in its major industry (automobiles) has collapsed. Nevada, at 13.0, is dependent on discretionary cash at a time when there isn’t any. But California is too big to be dominated by one industry, and its plight can only be explained by the state’s having grossly mismanaged its affairs.

In 2007 Raymond Keating formulated a Small Business Survival Index, which is a composite of various aspects of the climate for business in a particular state: business and personal taxes, regulations, mandates, and so on. In that index California ranked 49 among the 50 states. Rhode Island ranked just above California, and its unemployment rate is 12.7. At the bottom of the Index is D.C., and its unemployment rate is 12.1.

In the component parts of the SBSI index, California ranks worst of 51 (including D.C.) on top personal tax rates, worst on top capital gains tax rates, 42 on corporate taxes, 43 on health insurance mandates, 46 on electric utility costs, 47 on workman’s compensation costs, rock bottom again on state gas taxes, 45 on state and local government five year spending trends, and 47 on state and local per capita government spending. It also ranks 49 among the states on the US Economic freedom index, and it has the highest state sales tax rate too: where some states have an income tax but no sales tax, and others have a sales tax but no income tax, California has both, AND it has the highest rates in both.

In short, California is a disaster for business. The state has piled up so many taxes, regulations and mandates that businesses are leaving the state. Just this week I learned that a spare part order for my Lennox fireplace is delayed because Lennox is moving this division of its business to Tennessee. Wealthy individuals are also fleeing the state to avoid the country’s highest tax bracket. When both wealth and wealth creation leave the state, tax revenues leave with them.

How has this happened? As everyone knows by now, California has a dysfunctional legislature. Already in 2003—well before the current national crisis, and when the national unemployment rate was only 5.9%—California was bankrupt, and spending was so out of control that a Governor was recalled. The legislature enacts every politically correct whim that comes into its head, loading on one mandate and regulation after another. Cap and Trade could not pass nationally, but the California legislature proudly passed its job-killing global warming bill.

That is why the state now has a budget crisis of staggering proportions, and why university students are seeing those large fee hikes. But why is the California legislature so irresponsible, not to say goofy? Well, California is extremely rich in state university campuses: the UC and CSUC systems alone amount to 33 campuses, about a third of them mega-campuses of 30-35 thousand students, with another 10 around 20,000. The mega-campuses completely dominate the Assembly districts they are in, and their large concentrations of students and faculty skew the district electorate not just to the left, but to the devoutly politically correct but hopelessly unrealistic left. Virtually all of them routinely send Democrats to Sacramento. College towns with more modest sized campuses play their part too, but mega-campuses make their districts so one-sided that in the last election UC Berkeley’s Assembly seat had no election even though it was vacant: the Democratic nominee still ran unopposed. Where there is real competition between the parties the two sides keep each other honest and realistic, but when Assembly seats are so inevitably left that there is no contest, there is nothing to stop the side that has automatic electability from sliding into fantasy. Those districts provide the margin that allows an immature leftism that has lost contact with reality to control the state legislature and ruin the business climate of the state.

The irony here really cries out for attention: a large state university system needs a free market economy that hums along in top gear so that the revenue needed to support it can be generated. But California’s two unusually well developed state university systems provide enormous local voting power in many Assembly districts for a bitterly anti-capitalist ideology that sabotages the California economy. The campuses are shooting themselves in the foot. The power that those students and faculty chanted about is indeed theirs, and if they used it to elect sensible assemblymen and state senators their problems would be solved by the healthy business climate that would result. The votes that they actually cast are the source of their troubles.

Only one idea for solving the funding crisis was floated on March 4. It was to repeal the state’s requirement that taxes can only be raised by a two thirds vote, so that taxes can be raised yet again and more money made available to the campuses. In other words, let’s make the funding crisis even worse, by driving out of California even more wealth and wealth creating capacity, and raising the unemployment level even more. “California is not a tax-heavy state,” said Assemblyman Joe Coto, whose office is right next door to San Jose State University, which enrolls 31,000 students. And that raises the question: how much longer will the California citizenry want to support a system of higher education that keeps its legislature stuck on stupid? It’s not a question for this state alone.

John Ellis is President of the California Association of Scholars, and a Professor Emeritus at the University of California, Santa Cruz

  • Shalom Freedman

    I have little knowledge of California's affairs, and this was a kind of combination primer and wake- up article. I would only wonder why the extreme Left so easily dominates at the campuses.

  • Eric Till

    You might consider mentioning Prop 13 in regards to the budget deficit, and how that act might necessitate some of the increases in those other tax rates you mentioned. And people love that law, so even if biz isn't happy, at least the property owners are.

    • aspacia

      No Way. Prop. 13 was enacted to stop older people losing their homes, and I was a California teacher, a teacher who now resides in Las Vegas.

  • Frank(ly) M'Dear

    Excellent and very insightful piece. I would take issue with only one thing. The author writes that "…Those (student-heavy) districts provide the margin that allows an immature leftism that has lost contact with reality to control the state legislature and ruin the business climate of the state."

    I suggest that you cannot "lose contact with reality" if you have no firsthand knowledge of the "reality" in question to begin with. The overwhelming majority of university students everywhere have "ideals" (I'm being nice here!) and maybe some theoretical understanding of someone's interpretation of current economic reality, but no "familiarity" with DEALING with it.

    • BS1977

      The students are merely reflecting the basic training they have received from their Marxist teachers….that they DESERVE an education; the leftist campus provides an enabling atmosphere for the expectations of the GIMMEGENERATION…welfare, "free" medical care, education, housing, food and unsecured loans from Freddie Mac for a home……The collectivist leftist education has given them the expectation that there will be equality of OUTCOME…..not opportunity…..This means no matter how little or how poorly they do, they will get everything everyone else does in the Welfare Utopia. This is the PC indoctrination…amnesty for illegals, carbon credits, cap and trade, open borders, free education, free medical care, free free free!!!! Wheeeeeee!!!!!

  • artcohn

    Why such praise for the riots of 1964? Virtually every one of the leaders of the 'free speech" riots endded-up as a member of a left-wing undemocratic, free speech restricting organization.

    • aspacia

      Hum, do you mean Civil Rights demonstrators like Chuck Heston?

  • DOn

    The generation that we have created expects someone else to provide for them while they mentally masturbate their lives away. They blame others for their laziness; use racism, feminism, anti-religous bigotry, and a host of other isms and accusations as crutches because it is easier to do that than to get up out of bed, yurn off the ipod and the xbox, go to work to pay for your own education and stop suckling from momma government. They can't think critically or analyze anything and think objective news is the onion.

    • BS1977

      The paradigm of the Nanny State is this: You are not responsible, society and government are responsible for YOU. You do not have to compete….all you have to do is breath and the Nanny State will take care of you. You do not even have to be a citizen…just jump across the border and show up…The Nanny State and all its peon tax payers will care for you. Need some foreign aid? No problema. The Nanny State wants you to feel secure also. Feel neglected, discriminated against, unhappy with life in Cuba or Venezuala? Just come on down. Become a student and start marching in your smelly wool socks and sandals and demand a free education, free housing, free medical care, more money for Women's Studies, Latin Studies, Black Studies, Vegetarian Studies….anything old thing you want……Let the Nanny State provide for your every whim!!!


    Ever notice that communists always demand funding from capitalists?

  • Dave Hollenbeck

    Someone ought to include Economics101 in the curriculum.
    To get tax money to pay for your every wish–Someone has to PAY taxes

    • Bruce

      Save Econ 101 for grad school. It's far too complex for Alice-in-Wonderland lefties. Start with Econ 1A and the notion of supply and demand. That will require a crash course in Logic to dispel the Left's delusional obsession with Wishful Thinking. Lots of remedial education required.

  • david

    The article does not go far enough. THE major problem in California is the long-term looting of the state's coffers by grossly overpaid, over-benefited public employees. If public employee salaries and benefits were brought into line with the free economy, the state's budget would balance.

    As far as the U.of C., I graduated from UC Santa Cruz and UC Berkeley (Law School). The first thing needed is to get rid of all the trash. While science departments are valuable to California, pseudo-fields like gay/lesbian/transgender studies, chicano studies, black studies and many others are an utter waste of human and financial resources. Many other departments at most of the UC and Cal State campuses are also so politicized and Marxist that they are destructive. Clear it all out!

    • aspacia

      True, I graduated from the University of Redlands and did my graduate studies at CSUB. Talk about indoctrination, and grading regarding politics. Earned A's on exams, but B's – A- on essays because of my opposing opinions, expecially regarding the necessity of varmit rifles for farmers and ranchers. Talk about a liberal blood pressure hike during a classroom discussion regarding firearms. Care for the poor varmit more than the human's livelihood . Too sad.

  • Pete from CA

    Critics love to beat on Prop 13 "as the source of all problems." This, like most leftist mantras, is false. Prop 13 passed at a time when the State Legislature was sitting on a massive surplus that they refused to use to either reduce taxes or to refund to the tax payers. Prop 13 not only reduced property taxes, but it put into place rules designed to make it more difficult to raise taxes of all kinds. It also changed the relationship between counties and the state due to the effect on tax collections.

    Over the years, the politicians have devised a number of schemes to negate most of the effects of Prop 13. When Prop 13 was passed, California fell from being a high tax state to being one of the states below the median in the general level of taxes. Our economy boomed and tax revenues to the state flowed into the coffers.

    But the unions, leftists, and politicians couldn't keep spending in check. Taxes now place California as number 1 or number 2 in overall tax burden. The "rich" and businesses are leaving the state.

    Good thing I'm not "in charge." My answer to the students would be to cut funding to the California universities by 30% and cut enrollment by 50% (and likewise cut the population of leftist professors by 50%). The funds saved can be used to provide support to other areas where there are budget shortfalls. After all, getting a university education is not a right — but it is a privilege, generously funded by the state's taxpayers. (And to those who claim it is a "right" — well — you're wrong.)

  • doubleblack4

    Dr. Ellis please take a look in the mirror. You will see a major problem. To wit: The incredible salaries paid to employees of the UC and State College system, especially the teaching staff and administrators. How much were you making for the few hours you taught each week? How fat is your pension? Of course you are embarrassed to tell.
    Don't you see you are part of the problem and your lane-brained colleagues especially so.
    But with 90% of the staff left-wingers who hate America you have accomplished your goal of creating the college UNeducated class who want everything given to them. Thanks a lot.

    • Michael

      I thik that is exactly what Dr. Ellis is saying in this article. The leftwing media loves to complain about executive salaries, bonuses, oil companies. But they are surprisingly silent about hi-paid, do nothing, baby boomer college professors & administrators.

  • Colorado Independent

    It's all Prop 13's fault….sure. Notwithstanding the fact that if it wasn't for Prop 13 the bankrupt cities and counties would have raised property taxes to the point where your taxes would be equal to your mortgage–and the muni and county employees would still be screaming "more, more, more!" The state was saved once before from bankruptcy by the internet boom. So what did Sacramento do? Instead of appreciating the fact that they had dodged a fiscal bullet, the legislature took every available dollar and either spent it or created another entitlement program. California is getting exactly what the voters asked for with one exception–there's not anyone left to pay for it.

    Suggestion: Go to the government model that works in other states where the legislative sessions are limited to a finite number of days each year, term limits are defined, and the budget has to be balanced. If you get rid of professional politicians and the borrowing your problems will be solved. The citizens don't get everything that they would otherwise ask for, but we are solvent and rational in both taxes and spending. (see NE or CO)

  • johncarens

    California is a swirling petri dish of cancerous radical Marxism. It is infected with shallow Anti-American chic, and has adopted every stupid, puerile and destructive public policy it can in an attempt to will utopia into existence. They adopted a "green" energy policy over 30 years ago when they embraced Avory Lovins asinine "Soft Energy Path", and as a result, enjoyed rolling blackouts, and are now a net energy debtor to neighboring states. They offered free in-state college tuition for years, and now they are saddled with a carbuncle so huge it will smother them.

    What is tragic, though, was that it was once a great state, if slightly politically bi-polar. San Fransisco, a mere 50 years ago, was a bastion of solid conservatism. The state elected Ronald Reagan and George Deukmejian governor, and sent Nixon to Washington as a senator. Howard Jarvis ignited the economic Renaissance of the 1980's and 1990's. But now, though, it has thoroughly descended into madness– a madness from which it cannot emerge, unless the nation as a whole casts out the radicals, Maoists and Marxists from the town square.

    Which, if Dame Nancy Pelosi gets her way, may actually happen.

    • rangerdgd

      You get an "A"for your commentary..I lived in San Francisco fro 1955-2000,and my family was there before the Civil War,and can remember when it was a conservative stronghold..Nobody I knew from my family,to the people I grew up with,resemble any of the Commie fruitcakes that govern that once Great City now…It's a damn shame

  • R. Vine

    According to the State Higher Education Executive Officers organization, California spends less per student than other states ($6,363 in 2007-08 in California vs. $7,285 as an average of all states, including California). According to the Public Policy Institute of California and many business leaders California is not producing enough college graduates to sustain industry in California. So cutting funding to higher ed will only exacerbate poor business climate. We should cut spending on incarceration and work to reduce medical costs.

    • Michael

      No correlaton between college grads & business climate. Or per student spending for that matter….sorry, try again.

  • david

    The UC and Cal State systems should dump all the trash. E.g., gender studies, lesbian studies, chicano studies, black studies, and all those liberal arts departments that are just politicized leftist tripe such as women's literature at UC Santa Cruz. The state should devote its educational resources to useful majors such as engineering and computer science and other sciences. The crap courses are just a huge drain of money and divert students who might manage to be useful to society if they were taught something useful.

    • BS1977

      Excellent points…..most of the liberal trash called "curriculum" is useless, utterly politicized leftist garbage….getting a degree or PHd in Marxist Journalism, Black Culture or Women's Social Seminars…what does this mean for our society. Zero Zip Nada. Get back to the basics: Mathematics, Economics, Science, Agriculture, ENgineering, Languages, History…..

  • jgreene

    These students and Marxist Educrats deserve exactly what they are going to get – closed Universities and a State Bankruptcy. At a certain point in our lives, we must begin to assume some responsibility for our lives. I suggest that California's student body has to come out of the hypnotic haze of liberalism before that will happen.

  • rangerdgd

    Lefties hate the fact that they can't get their hands on more revenue from higher property taxes because of prop 13..It 's been at 2 1/2 % for all this time..I guarantee you if it wasn't for prop 13,and the state was in the toilet like it is now,your proprerty taxes would be up around 20%..California has ruined business for the last 25 years..If it wasn't for the remnants of the high tech boom still there,the California economy would resemble Zimbawbwe..I know..I lived there for 45 years

  • david

    Most of the public would be shocked and upset if they knew the fantastic salaries and benefits that the professors (and much of the bureaucracy) at the UC and Cal State schools receive. I don't object so much to good salaries for the hard sciences, where for the most part the professors are doing useful work, are less politicized, and we are competing with other schools for quality teachers. I do object to the money lavished on useless, politicized leftist departments and joke majors (e.g., "History of Consciousness" and "Chicano Studies" at my alma mater UC Santa Cruz) which have a destructive effect on our young people and more generally the state. Once these lefties get tenure, they do any damn thing they want, or nothing at all, and soak the taxpayers while indulging themselves.