Fewer people were in poverty in California in 2021 than in 2019. That’s the good news. The bad news is that this was due only to government relief payments, not to 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, at or below $36,900 for a family of four. Researchers arrived at this estimate using the California Poverty Measure, which considers California-specific factors including housing costs and government assistance. Using this measure, researchers found that poverty in the state fell from 16.4% in 2019 to a projected 11.7% in the fall of 2021.
The programs helping to lift people out of poverty included the federal Earned Income Tax Credit, the federal Child Tax Credit, CalFresh, CalWORKs and the California Earned Income Tax Credit.
A spokesperson for Governor Gavin Newsom credited additional state spending for the improved poverty numbers, pointing to $18.5 billion in direct payments, $8 billion in rent relief and $2.8 billion to pay off overdue utility bills.
Without the government assistance, PPIC reported, 3.9 million more Californians would have been in poverty. In fact, the federal poverty measure, which does not consider 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 state budget forecast from the Legislative Analyst’s Office.
On Wednesday, the LAO reported that California faces a budget “problem” of $25 billion in 2023-24 and ongoing deficits, meaning “resources for the upcoming fiscal year are insufficient to cover the costs of currently authorized services.”
The LAO posted a simpler explanation on Twitter: “The basic reason for these deficits is that revenues are expected to grow more slowly than spending over our outlook.”
The state’s revenues grow when economic activity and job growth are strong and more Californians are working at jobs that pay decent salaries. The state’s expenses increase when more people must rely on safety-net programs.
It’s unsustainable to continuously expand government anti-poverty programs in an effort to make up for the fact that Californians can’t find good jobs that pay them enough to live comfortably.
The best anti-poverty program is a thriving economy. Unfortunately, California has the nation’s highest state income tax and sales tax, not to mention its skyscraping gas tax, high corporate tax, and state policies that have driven up the cost of energy. Many job-creating businesses have left the state.
Californians left behind may be eligible for federal assistance. Last month, the Internal Revenue Service began sending out letters to more than 9 million people who are likely eligible to receive federal aid through refundable tax credits, but only if they file a 2021 federal tax return by November 17. The Child Tax Credit may provide 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 to a family with at least three children. Filing help is available at IRS.gov/freefile and ChildTaxCredit.gov.
People depend on the safety net, and the safety net depends on a prosperous, growing economy. California policymakers should keep that in mind.
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