California Tops the Charts in Debt as Taxpayer Dependency Backfires

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The most populated state, California, also has the largest debt in the U.S., and the reliance on taxpayers appears to be backfiring. The Golden State’s debt stands at nearly $21 billion and rising. While much of it comes due to the pandemic, the problems are piling up since the state also has the highest unemployment rate in the U.S. 

California’s financial predicament


The debt burden and an interest rate of around 2.6% sit heavily on California’s budgets. The state has managed to clear $650 million in interest. While $650 million in interest has already been paid, the looming due date of an additional $50 million in September adds to the pressure on California to meet its financial duties. 

The fifth-largest economy’s issues 

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California, the most populous state in the U.S. and the fifth-largest economy in the world, has faced challenges in recent years due to growing living costs. Businesses hire fewer workers, and people are not investing as much in real estate due to price increases, which results in lower tax revenues.

Unemployment is the central issue


California had the highest unemployment rate in the States, with 5.3%, based on data for March 2024. In addition to the $68 billion budget problem identified for 2024-25, California reportedly faces operating deficits of around $30 billion annually.

Other states with massive debts 


California has the highest debt, followed by New York ($7.5 billion), Connecticut ($227 million), and the Virgin Islands ($81 million). However, the Golden State’s struggles with reimbursements, unemployment nearing one million people, and some of the wealthiest leaving due to taxation leave people wondering whether relying on taxpayers is backfiring. 

Proposed budget cuts 

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The lawmakers and California Governor Gavin Newsom proposed a $17.3 billion cut. This includes postponing $1 billion for transit infrastructure and $550 million for preschool and kindergarten facilities. California also proposes expanding the tax on health insurance plans by $4 billion, enabling it to receive matching federal funds.

Potential for more issues


Budget cuts could affect programs that support underprivileged Californians, including initiatives for struggling foster kids, homelessness prevention, and low-income housing funding. As a column published in the L.A. Times suggested, many issues need to be addressed. It added that politicians are perceived to lack courage. 

Job growth 


California experiences job growth in specific industries, such as government, leisure, and hospitality. However, not all employment policies by the state government are well-received. In the past two months, wage hikes for fast-food workers have been heavily criticized. 

The $20 wage for fast-food workers

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Californians working in fast food chains began receiving a $20 minimum wage on April 1. Since then, there have been numerous reports about businesses laying off people, increasing prices on the menu, using self-serving kiosks, and cutting workers’ hours. But that’s not the only branch with an increase in wages.

The $25 wage for healthcare workers


The state voted to increase the minimum wage for healthcare workers to $25 per hour over several years. The law will go into effect in July. This increase is perceived to cost the state $2 billion. Yet, other workers are also seeing wage increases, which will be on November’s ballot. 

Californians to the rescue


The question of increasing the state minimum wage to $18 per hour will be on the general election ballot in November. The federal minimum wage is $7.25 per hour, and it hasn’t been raised since 2009. The liberal state faced pushback from GOP legislators.

Republican Senator blasted the measures


Roger Niello, a Republican from Fair Oaks, warned that current spending levels would only increase the state’s deficit. Yet, he added that the majority ignored these warnings, leaving the state among the states experiencing the most significant income loss of around 4%. 

Taxing the rich 


The wealthiest Californians are leaving the state in response to its high taxes and skyrocketing cost of living. Additionally, the state has been experiencing severe weather, which has caused insurance companies to stop issuing policies for flooding or fires. Other states with severe weather issues include Florida and Louisiana.  

Kate Smith, a self-proclaimed word nerd who relishes the power of language to inform, entertain, and inspire. Kate's passion for sharing knowledge and sparking meaningful conversations fuels her every word.