Conference Workshop on March 4th Will Explore Strategies for Reducing Poverty in California

Millions of Californians, many of them children, live in poverty today. By one measure California has the highest poverty rate in the nation. Public policies can address poverty, and the deep economic hardship in California calls for a sustained, multifaceted response from state leaders. What specifically should be done?

An afternoon workshop at Policy Insights 2015, the California Budget Project’s annual conference coming up on March 4th in Sacramento, will take a close look at policy strategies for addressing economic hardship in our state and their potential impact on low-income individuals and families. This session will feature the following panelists:

• Speaker of the Assembly Toni G. Atkins
• Senator Mark Leno, chair, Senate Budget and Fiscal Review Committee
• Assemblymember Mark Stone, member, Assembly Committee on Human Services
• Erica Williams, assistant director of state fiscal research, Center on Budget and Policy Priorities
• Chris Hoene, executive director, California Budget Project (Moderator)

We hope you’ll join us for this and other sessions — including the keynote address from Ezra Klein, editor-in-chief of Vox.com — that will explore the most pressing issues and questions facing our state. You’ll also be helping the California Budget Project celebrate our 20th anniversary.

Early-bird registration ends February 19th, so register today to save 15% off the full registration.

Questions? Contact us at cbp@cbp.org or 916-444-0500. We look forward to seeing you on March 4th!

— Steven Bliss

Economic Context of the 2015-16 Budget: A Recovery That Is Leaving Many Californians Behind

California’s state budget is a primary funding source for many public services and systems that support working families and help them climb the economic ladder. Unfortunately, many of these areas of public investment remain underfunded and undersupported today. One example is California’s subsidized child care system, which helps parents work more hours by giving them affordable child care options. Funding for child care and preschool programs remains nearly one-third below the pre-recession level.  Other areas, such as assistance for low-income seniors and people with disabilities (SSI/SSP) and the state’s system of public higher education, also are undersupported even as the state’s revenues surpass where they were before the budget shortfalls caused by the Great Recession.

Providing support for economic security and opportunity is especially important given that so many in California are still struggling in the current recovery. While California’s economy has improved markedly since the worst years of the Great Recession, many regions are still coping with high rates of poverty and joblessness. For these parts of the state, it still feels like California is in a recession.

The latest county-level Census figures on poverty drive home this point. These figures combine poverty estimates from the American Community Survey with other administrative data to generate estimates of poverty for smaller geographic areas. (This process results in statewide poverty rates that differ from those published last fall.) The new data show that 16.8 percent of all Californians, and 23.5 percent of all California children, lived in poverty in 2013. In other words, nearly one in four California children lived in households with incomes below the federal poverty line ($23,624 for a family of four with two children in 2013). Within California there are large disparities among regions (see table). While counties in the San Francisco Bay Area all had poverty rates that were lower than the state average, counties in the San Joaquin Valley all had above-average rates of poverty and child poverty. Fresno County had the highest rates of poverty in 2013, with 28.6 percent of all people living in poverty and 42.0 percent of all children living in poverty.

[Click table to view at full size]

Unemployment also remains worryingly high in regions throughout California. In the third quarter of 2014 (the last full quarter for which data are available), 11 counties had unemployment rates in the double digits, and more than half of these counties were in the San Joaquin Valley. The county with the highest unemployment rate was Imperial County in the southern part of the state, where more than one in four workers (26.9 percent) were unemployed.

Poverty and unemployment are just two measures of an economy’s health, yet other measures of economic well-being — such as income or food insecurity — also show that California’s recovery is not leading to economic gains for many families. Again, such measures show a large regional disparity and a California that is deeply segmented not just along income levels, but by geographic area as well.

When Governor Brown releases his proposed 2015-16 budget this week, there is likely to be a large focus on an “either/or” choice between responsible budgeting and committing more state dollars to underfunded programs. This is a false choice given the economic realities faced by many Californians today. The 2015-16 budget that is eventually enacted must start to address on-the-ground economic conditions in much of California. This means that the state budget must take on issues of poverty and joblessness and help boost an economy that is leaving many Californians behind.

— Luke Reidenbach

Lack of Affordable Housing Contributes to California’s High Poverty Rate

Poverty is more prevalent in California than in any other state, according to recently released US Census Bureau data. Nearly one-quarter of Californians (23.4 percent) lived in poverty each year, on average, between 2011 and 2013, based on the Supplemental Poverty Measure (SPM) — a more accurate indicator of economic well-being than the traditional poverty rate. Only Nevada’s poverty rate, at 20.0 percent, comes close to California’s under the SPM, while the poverty rates of all other states fall at or below about 19 percent, reaching as low as 8.7 percent in Iowa.

California’s high housing costs help explain why the state has the highest SPM poverty rate in the nation. Unlike the traditional poverty rate, the SPM takes into account local housing costs: poverty thresholds — the incomes below which families are considered to be living in poverty — are higher where housing costs are higher, reflecting the fact that families typically spend more in these high-cost areas to keep a roof over their heads. For example, the SPM poverty threshold is $24,336 for a four-person family who rents their home in a California metropolitan area, compared with $19,985 for a comparable family in an Oklahoma metro area. SPM thresholds also vary within California: In the San Francisco metro area, a family of four who rents their home is considered to be living in poverty if their income is below $33,562, while the threshold is much lower — $23,344 — for a similar family in the Merced metro area.

Rising rents have made housing much less affordable in recent years, particularly for families whose wages and incomes haven’t kept pace with the cost of living. The housing market bust helped fuel demand for rentals as people lost their homes or were unable to buy houses due to tighter lending standards, unemployment, or lower incomes. As rental vacancies fell, rental prices spiked. Typical rents increased by more than 20 percent in the metro areas of Los Angeles, San Diego, Riverside-San Bernardino, and Fresno between 2006 and 2011, and by more than 10 percent in the Bay Area and Orange County. By 2012, typical rents were higher than they were six years earlier in nearly all of California’s metro areas.

More recently, rapid job growth in California’s major urban areas has caused rents to jump higher, outpacing average wage gains. Typical rents rose by 6 percent or more in six of California’s major metro areas between July 2013 and July 2014. San Francisco, Sacramento, and Oakland saw the greatest increases among the 25 largest rental markets in the US, with typical rents rising by more than 13 percent. In fact, six of the 10 metro areas with the nation’s least affordable rents relative to wages are in California. Los Angeles, for instance, ranks third, after Miami and New York. Workers earning the average wage in LA would have to spend just over half of their earnings to afford the typical rent on a two-bedroom apartment. In Oakland, San Francisco, the Inland Empire, San Diego, and Orange County, typical rents would eat up between 44 percent and 49 percent of the average worker’s earnings.

California’s rental housing affordability crisis is even tougher for workers earning below the average wage. A full-time worker earning San Francisco’s minimum wage of $10.74, for example, would have to spend 83 percent of her income to afford a one-bedroom apartment in the city priced at “fair market rent.” To afford a comparable apartment in LA, a full-time worker earning the state’s minimum wage of $9 per hour would have to spend 69 percent of her income on rent.

Clearly, reducing economic hardship in California will not only take boosting workers’ earnings, as we discussed here, but also increasing access to affordable housing. Watch in the coming weeks for more blog posts on how the state’s lack of affordable housing contributes to poverty.

— Alissa Anderson

CBP Infographic: Poverty Is a Problem We Can Address

Census Bureau data released yesterday show that poverty in California remains high. Our brief report on the new Census data shows that the share of all Californians with incomes below the federal poverty line in 2013 remained significantly higher than in 2006, the year before the Great Recession began. More than 5.6 million Californians — over one in seven — had incomes below the poverty line in 2013.

What’s more, nearly 2 million California children were living in poverty in 2013. Although the state’s child poverty rate — 20.3 percent — is down significantly from that in 2011 (24.3 percent), children still account for a disproportionate share of Californians living in poverty.

This CBP infographic (below) highlights the new top-level poverty data from the Census and shows why state policies that boost workers’ earnings can play a major role in reducing poverty and fostering greater economic opportunity across our state. A full-size (PDF) of this infographic is available here.

— Steven Bliss

Stanford’s “Pathways” Magazine Echoes Our Report’s Key Findings on Poverty

The latest issue of Stanford University’s Pathways, a magazine featuring articles about poverty, inequality, and social policy, perfectly echoes a number of the key messages in our recent report, Five Facts Everyone Should Know About Poverty.

An article by Marianne Page, deputy director of the Center for Poverty Research at UC Davis, for example, calls into question the “common mantra [that] the only enduring solutions to poverty are economic growth and the jobs it delivers.” Page shows that economic expansions reduce poverty less than they did in the past partly because a growing share of the new jobs pay low wages. Similarly, our Five Facts report shows that poverty in California is more often due to low-wage work than to a lack of employment. Like Page, we argue that reducing poverty will take policies that boost workers’ earnings, such as continuing to increase the state’s minimum wage and establishing a state Earned Income Tax Credit (EITC).

Hilary Hoynes, professor of public policy and economics at UC Berkeley, demonstrates the resounding success of the federal EITC in another Pathways article, suggesting that it “may ultimately be judged one of the most successful labor market innovations in U.S. history.” Hoynes writes:

The effects of EITC extend well beyond simple income support and poverty reduction. … It leads to various improvements in the mental and physical health of mothers. It brings about a reduction in low birth weight among infants. And it improves the performance of children on cognitive tests. This burgeoning body of work suggests, then, that income support programs have benefits that extend well beyond an increase in cash flow for families in poverty.

With evidence like that, it’s no wonder that half of all states have created their own EITCs to further leverage the benefits of the federal credit. And it’s why California should do the same. Poverty is a problem state policymakers can address if they choose to prioritize investments in proven strategies.

— Alissa Anderson