How does California's budget compare to other states? California represents the fifth-largest economy in the world and its 39.25 million residents give it the largest population in the United States. California is not alone in its fiscal challenges. During the recession the depth of cuts in state and local government employment have been unprecedented according to the Rockefeller Institute of Government. As the economy has recovered, the unemployment rate was 4.2 percent as of December 2018 according to the Bureau of Labor Statistics. Total nonfarm employment grew 1.8 percent and government employment grew 1.2 percent from December 2017 to 2018. The sector that saw the greatest growth over the time period is Professional & Business Services, growing 3.6 percent over the 12 months.
According to the Tax Foundation, California’s total state and local tax burden in fiscal year 2012 ranked 6th highest nationally, at a rate of 11.0 percent of per capita income compared to the national average of 9.9 percent. Recent changes to the federal tax code in 2017 impacted the amount that Californians can deduct state and local taxes from their federal income returns, newly capping the deduction at $10,000. For taxpayers that itemize, the average SALT deductions before the tax change were approximately $17,000 in California. In 2014, SALT deductions reduced Californians’ taxable income by $101 billion—more than twice that of second-place New York.
California has the 20th-highest poverty rate of 14.3 percent. Mississippi has the highest at 20.8 percent, while New Hampshire has the lowest of 7. percent. Due largely to the high cost of housing, California has the highest poverty rate under the Supplemental Poverty Measure (SPM), which takes cost of living into account. California’s SPM rate is 20.4 percent, compared to the national average of 14.7 percent.
Comparison of Tax Rate by Type
California spends more total dollars for public services than other states largely due to its large population, so per-person (or "per capita") comparisons are the most useful. As of 2018, California ranked 6th in state and local spending per capita with $11,528. Alaska spends the most with $20,668 and Idaho spends the least with $6,493.