Prescott, Ohanian: How the Golden State lost its luster - San Jose Mercury News

Prescott, Ohanian: How the Golden State lost its luster - San Jose Mercury News:

Prescott, Ohanian: How the Golden State lost its luster

By Edward C. Prescott and Lee E. Ohanian, Special to The Mercury News

Last month's $167 billion dollar budget deal forged by Gov. Jerry Brown and California lawmakers is four times as large in per capita terms as it was in the early 1960s under Brown's father, Gov. Pat Brown. But despite spending less, the budgets of yesteryear contributed considerably more to economic growth.

State governments of the 1950s and 1960s were an integral part of California's postwar boom, when the state grew from 11 million in 1950 to 30 million in 1990.

The budgets of yesteryear provided a blueprint for how government can promote growth by making investments in education, water and transportation infrastructure.

These investments were made at a challenging time. The baby boom and immigration from other states more than doubled California's population between 1940 and 1960. State resources were strained by the fact that 44 percent of the state's population was 24 years or younger, providing little tax revenue but requiring considerable investments in schools.

Rapid population growth in Southern California highlighted the importance of investing in water and highway infrastructures. Pat Brown's budgets were based on themes of creating opportunities and providing excellence in government. In his 1960 budget statement, Brown argued that "Democracy has come to mean equality of opportunity. Access to education has the highest place."

Pat Brown would undoubtedly be disappointed with today's California education system. A recent UC Berkeley report estimates that over half of California schools do not adequately repair their physical plants. California's K-12 education is now regarded as among the worst in the country.

Brown's 1960 vision of hiring the best teachers and allowing them to excel is hamstrung by teacher unions, particularly the 325,000-member California Teachers Association. The CTA has blocked important education reforms, including modifications to teacher tenure rules that would facilitate removing poorly performing teachers. The state's teacher dismissal rate is about .003 percent per year, reflecting a time-consuming process that can cost as much as $200,000 per case.

Protecting poorly performing teachers is very costly. Stanford University economist Eric Hanushek finds that removing the bottom 5-10 percent of K-12 teachers would raise our student achievement from well below the average of the developed world, to near the top.

California also made remarkable transportation and water infrastructure investments in the 1960s, but those investments are not being adequately maintained nor expanded. The Reason Foundation ranks California roads as the second worst in the country. The Road Information Program estimates that bad roads coststate drivers $44 billion per year, despite the fact that California gasoline taxes are 40 percent higher than the national average.

California's water infrastructure situation is no better. The last major water infrastructure was the 1960 California Water Project. But as state capital spending declined, the California Water Project never realized the capacity that its planners envisioned. Most of the project was completed by the early 1970s, but California's population has grown by 18 million since then.

The failure to expand water infrastructure is not because voters were unwilling to pay. Since 1970, voters approved 15 of 16 state water bonds, yet this did not deliver major new water storage or canals nor maintain existing infrastructure.

California's capital outlays have declined from about 20 percent of the state budget in the 1960s to about 3 percent today. California's political leaders once agreed that substantial infrastructure investment was a major obligation of state government.

This principle, which created so many opportunities that helped generations of Californians succeed, now sadly appears to be lost.

Edward C. Prescott, a 2004 Nobel Laureate in Economics, is a professor of economics at Arizona State University. Lee E. Ohanian is a professor of economics at UCLA and a senior fellow at the Hoover Institution. They wrote this for the Mercury News.Prescott, Ohanian: How the Golden State lost its luster - San Jose Mercury News: