[After
years of spending cuts and annual state budget deficits larger than the entire
budgets of some states, this month the independent California Legislative Analyst’s
Office projected a deficit for next year of $1.9 billion — down from
$25 billion at one point — and said California might post a $1 billion surplus
in 2014, even accounting for the tendency of these projections to vary markedly
from year to year. ]
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Sam
Hodgson/Bloomberg News
Prosperous
coastal places like La Jolla, here, are better off than the state as a whole;
m
any inland areas still have high jobless rates.
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LOS ANGELES — After nearly five years of
brutal economic decline, government retrenchment and a widespread loss of
confidence in its future, California is showing the first signs of a rebound.
There is evidence of job growth, economic stability, a resurgent housing market
and rising spirits in a state that was among the worst hit by the recession.
California
reported a 10.1 percent unemployment rate last month, down from 11.5 percent in
October 2011 and the lowest since February 2009. In September, California had
its biggest month-to-month drop in unemployment in the 36 years the state has
collected statistics, from 10.6 percent to 10.2 percent, though the state still
has the third-highest jobless rate in the nation.
The
housing market, whose collapse in a storm of foreclosures helped worsen
the economic decline, has snapped back in many, though not all, parts of the
state. Houses are sitting on the market for a shorter time and selling at
higher prices, and new home construction is rising. Home sales rose 25 percent
in Southern California in October compared with a year earlier.
After
years of spending cuts and annual state budget deficits larger than the entire
budgets of some states, this month the independent California Legislative Analyst’s
Office projected a deficit for next year of $1.9 billion — down from
$25 billion at one point — and said California might post a $1 billion surplus
in 2014, even accounting for the tendency of these projections to vary markedly
from year to year.
A
reason for the change, in addition to a series of deep budget cuts in recent
years, was voter approval of Proposition 30, promoted by Gov. Jerry Brown to
raise taxes temporarily to avoid up to $6 billion in education cuts.
“The
state’s economic recovery, prior budget cuts and the additional, temporary
taxes provided by Proposition 30 have combined to bring California to a
promising moment: the possible end of a decade of acute state budget
challenges,” the report said. “Our economic and budgetary forecast indicates
that California’s leaders face a dramatically smaller budget problem in
2013-14.”
And
38 percent of Californians say the state is heading in the right direction,
according to a survey
this month by U.S.C. Dornsife/Los Angeles Times. For most places, that figure
would seem dismal. But it is double what it was 13 months ago.
California’s
recovery echoes a rebound across much of the country; the state suffered not
only one of the longest downturns but also one of the most severe. Economists
say the turnaround, should it continue, is a positive harbinger for the nation,
given the size and diversity of the state’s economy.
Democrats
here have been quick to argue that the improvements in fiscal conditions that
the state is now projecting after voters approved the temporary tax increase
may embolden other states, and Congress, to raise some taxes rather than turn
to a new round of cuts.
Yet
California still faces major problems. The economic recovery is hardly uniform.
Central California and the Inland Empire — the suburban sprawl east of Los
Angeles — continue to stagger under the collapse of the construction market,
and some economists wonder if they will ever join the coastal cities on the
prosperity train. Cities, most recently San Bernardino, are facing bankruptcy,
and public employee pension costs loom as a major threat to the state budget
and those of many municipalities, including Los Angeles.
A
federal report this month said that by some measures, California has the worst poverty
in the nation. The river of people coming west in search of the economic dream,
traditionally an economic and creative driver, has slowed to a crawl.
Still,
the fear among many Californians that the bottom had fallen out appears to be
fading. Economists said they were spotting many signs of incipient growth,
including a surge in rental costs in the Bay Area, which suggests an influx of
people looking for jobs.
“I
think the state is turning a corner,” said Enrico Moretti, a professor of
economics at the University of California, Berkeley. He said that the recovery
was creating regional lines of economic demarcation — “We are going to see a
more and more polarized state,” he said — but that over all, California was
emerging from the recession.
Richard
K. Green, the director of the Lusk Center for Real Estate at the University of
Southern California, said the foreclosure storm was beginning to subside, and
fewer foreclosed homes were flooding the market. That has meant homes are
selling faster at higher prices — which means fewer homeowners owe more than
their house is worth.
“The
most important thing is, if you look at job growth in California for the last
18 months or so, it’s been higher than average for the country,” he said.
Jerry
Nickelsburg, an economics professor at the Anderson School of Management at the
University of California, Los Angeles, said the resurgence in coastal
communities was spreading, if haltingly, to struggling inland communities,
creating jobs for long-distance commuters who live in places like the Inland
Empire.
In
one sign of a new spirit, some Californians are again promoting the idea of
their state’s setting the cultural and policy pace for the rest of the country,
a meme that, if ever true, appeared at least questionable as California endured
cuts that diminished its once-great higher education system. Rick Jacobs, the
head of the Courage Campaign, a liberal advocacy group, argued that
Californians, by voting to raise their taxes, set a model Washington should
follow in negotiations over how to avert the so-called fiscal cliff.
“One
might argue that what happened in California will set the trend for what will
happen in the country, meaning that opposition to taxing the wealthy is
opposition to the future,” he said.
Conservatives
took a nearly opposite view, arguing that the state’s latest tax increases and
its thicket of regulations would drive out businesses and people.
“I
was born and raised in California; I love the state, but I think California has
been going downhill for quite a while,” said Bradley R. Schiller, a professor
of economics at the University of Nevada in Reno. “The ignorance of voters is
appalling, not to see their own self-interest in restoring their state.”
California
has faced attacks by conservative leaders for much of this presidential election
year, as they presented the state as a model of Democratic policies gone awry.
Mitt Romney compared California to Greece. Peggy Noonan declared that the
“mythic place where Sutter struck gold” had become a symbol of failure.
“California is going down,” she wrote. The conservative Manhattan Institute
devoted an 8,500-word report
to “The Great California Exodus.”
Gray
Davis, a former Democratic governor, noted that voters had approved initiatives
to begin repairing a notoriously dysfunctional government. It no longer takes a
two-thirds vote of the Legislature to increase spending (the requirement
remains for tax increases), and a nonpartisan election system went into effect
this month.
“It’s
a fair criticism, but somewhat antiquated,” Mr. Davis said. “Help has arrived.”
“We’ve
been used to being beat up by the Eastern Seaboard for a very long time,” Mr.
Davis said. It was, he said, a case of coastal envy: “I can see the sun
glistening off the ocean as I look out my office window.”
Joe Mathews, a co-author of “California
Crackup: How Reform Broke the Golden State and How We Can Fix It,” said
California’s main challenge was its governing structure.
“There’s
a great history of trashing on us,” he said. “Just the same way people like to
talk bad about the prettiest girl in school. As badly governed as we are, we
have our strengths: in trade, venture capital, in weather.”
“There
is reason to feel better for the state,” Mr. Mathews said. “I think the economy
is coming back.”
Yet
the surest sign of a resurgent California might have been captured by observant
Twitter posters last week in Southern California. There, Mr. Romney — he of
California-is-Greece fame — was spotted one day at Disneyland and another
pumping gasoline into his S.U.V. before returning to his beachfront home in San
Diego to celebrate Thanksgiving week.
