Fewer people lived in poverty in California in 2021 than in 2019. That’s the good news. The bad news is that this was only due to government aid payments, not an improving economy or more job opportunities.
The Public Policy Institute of California and the Stanford Center on Poverty and Inequality found that about 4.5 million Californians live in poverty, on $36,900 or less for a family of four. The researchers arrived at this estimate using the California Poverty Measure, which takes into account California factors such as housing costs and government assistance. Using this metric, the researchers found that poverty in the state has fallen from 16.4% in 2019 to a projected 11.7% in fall 2021.
Programs that help lift people out of poverty have included the Federal Earned Income Tax Credit, Federal Child Tax Credit, CalFresh, CalWORKs, and the California Earned Income Tax Credit.
A spokesman for Gov. Gavin Newsom cited additional government spending for the improved poverty numbers, citing $18.5 billion in direct payments, $8 billion in rent rebates and $2.8 billion to pay overdue utility bills.
Without government support, PPIC reported, 3.9 million more Californians would have been in poverty. In fact, the federal poverty measurement, which doesn’t take into account California’s programs and payouts, found that poverty in California actually increased from 10.5% in 2018 to 11.6% in 2021.
The poverty rate for 2022 will be worse, PPIC said, because many of the pandemic relief programs ended in 2021.
It’s not a pretty picture, especially considering the latest government budget forecast from the Legislative Analyst’s Office.
On Wednesday, the LAO reported that California faces a $25 billion “fiscal problem” and persistent deficits in 2023-24, meaning “it has insufficient resources for the coming fiscal year to meet the costs of the current… approved services”.
The LAO posted a simpler statement on Twitter: “The primary reason for these deficits is that revenue is expected to grow at a slower pace than spending beyond our outlook.”
Government revenues rise when economic activity and job growth are strong and more Californians work in jobs that pay decent wages. Government spending increases as more people rely on safety nets.
It is unsustainable to keep expanding government anti-poverty programs to compensate for the fact that Californians cannot find good jobs that pay them enough money to live comfortably.
The best anti-poverty program is a prosperous economy. Unfortunately, California has the highest state income tax and sales tax in the country, not to mention sky-high gas taxes, high corporate taxes, and state policies that have pushed up energy costs. Many job-creating companies have left the state.
Californians left behind may be eligible for state assistance. Last month, the Internal Revenue Service began sending letters to more than 9 million people who are likely eligible for federal aid through refundable tax credits, but only if they file a 2021 federal tax return by Nov. 17. The Child Tax Credit can be provided up to $3,600 per child, the Recovery Rebate Credit up to $1,400 per adult and $1,400 per dependent, and the Earned Income Tax Credit up to $6,728 for a family with three or more children. For filing assistance, visit IRS.gov/freefile and ChildTaxCredit.gov.
People depend on the safety net, and the safety net depends on a prosperous, growing economy. California politicians should keep that in mind.