2010 Census: A Warning to California

By Nicholas Piatek

The 2010 Census Congressional Reapportionment data reveal the big winners and losers among the states, but the results also reveal several valuable lessons for California in the coming decade. In America, population is power. A state that cannot sustain or increase its population will not wield the influence that it desires in Washington. Congressional seats continued their move from the Midwest and Northeast to the West and South, but California did not gain a single seat in 2010 after gaining 10 between 1970 and 2000.

States losing representation –New York, Ohio, Iowa, Illinois, Missouri, Pennsylvania, Louisiana, Massachusetts, Michigan, and New Jersey—are among the states that have felt the worst of the ailing economy. Louisiana, in particular, continues to feel the lingering hardships of Katrina. An individual state’s ability to absorb tough economic times through superior policies is directly related to its ability to maintain or gain population and, thus, political power in Washington. In that respect, the results of reapportionment are not surprising.

Bad policies spurn businesses. When tough economic times hit, businesses make the survival decision to move to more welcoming states or make cuts. Job-seekers follow jobs.

Of the ten states losing representation, seven are among the 25 states with the highest public debt. The three that are not, Ohio, Iowa, and Michigan, all suffer from deep losses in manufacturing industry due largely to the high cost of labor.

Seven of the eight states that will be gaining representations are among the 25 states with the lowest debt.

A state’s debt is just one symptom of a broader policy failure. Arizona, Georgia, South Carolina, Utah, Washington, and Nevada will each gain one congressional seat. Florida will gain two while Texas gains four. These states share common characteristics that attract business: lower labor costs, lower tax rates, and fewer regulations on businesses.

Some of these states were hit harder than others by the recession, but their existing regulations and tax structures were such that they were able to respond quickly and ease the impact of the recession.

The big losers in reapportionment are Ohio and New York. Both states will lose two congressional seats. New York and Ohio rank second and third, respectively, among states that impose the largest tax burden. Texas has the seventh most favorable tax system for businesses. States that will gain seats average a rank of 14 for the favorability of their tax system. The average rank of states that will be losing at least one seat is 34.

Of the ten states with the highest rates of lawsuits against businesses, half will lose at least one congressional seat.

Of the states that will gain seats, only Washington is not a right-to-work state. Of those states that will lose seats, only Louisiana and Iowa are right-to-work states. Inflated wages, high pension costs, and less flexibility during a time of recession make over-unionized states less attractive for businesses. During poor economic times, the cost of public employee unions’ excessive benefits stress state budgets and restrict their ability to handle economic downturns.

While access to a skilled, educated workforce keeps many businesses in states like New York and Illinois, states with attractive tax rates, low litigation rates, and lower costs of living and labor are attracting businesses, growing in population, and increasing their representation.

California is fortunate that it did not lose any congressional seats as result of the 2010 Census. The losses in population over the last few years were offset by the gains experienced in the early years of the decade during technological and economic booms, but the policies in California have pushed companies like Northrop Grumman to Virginia and Fidelity Financial to Florida. Businesses like Google, Hilton, Yelp, Apple, Facebook, and DIRECTV reduced their California presence.

Departing businesses result in fewer jobs, less tax revenues, fewer residents, and less political leverage in Washington. The motives for businesses to leave are obvious: high taxes, excessive laws and regulations, high labor costs, and ease of litigation.

In over 100 years, California’s population growth was smaller than it is now only four other times. In order to bring jobs back to California and keep its leverage in Washington, Californians must demand that Sacramento lower taxes on business, decrease the clout of unions, lift onerous restrictions on businesses, and limit frivolous lawsuits. California is among the worst ten states for taxes, litigation, cost of living, and cost of labor. If we do not act, California will be among the biggest losers in 2020.

Nicholas Piatek is the former Director of Radio for President George W. Bush and the current Director of Business Development and Project Coordination at PRSI.