Should California be Broken Up?
A plan to divide California into three states will be on the state's referendum ballot in November. If it passes and is approved by Congress, it could potentially be a significant change for the better.
A movement led by tech billionaire Tim Draper has succeeded in getting a plan to partition California into three states onto the state's referendum ballot this fall. If the initiative passes, it would still have to be approved by Congress under Article IV Section 3 of the Constitution, which at this point seems like an uphill battle. Still, none of the many other proposals to break up the nation's most populous state have gotten this far in recent years. Any division of California will necessarily involve some significant challenges. But the idea is nonetheless worthy of serious consideratoin. It has the potential to create major benefits for both Californians and the rest of the country.
Most of what I wrote about California partition back in 2011 still applies today:
Normally, dysfunctional state policies are constrained by the possibility of "voting with your feet." If a state imposes overly high taxes, adopts flawed regulations, or provides poor public services, people and businesses will tend to migrate elsewhere, thereby incentivizing the state government to clean up its act in order to preserve its tax base. For reasons I discussed in this article, foot voters usually have incentives to be better-informed and more rational in their decision-making than ballot-box voters.
In California's case, however, this dynamic has been undercut by the state's size and favorable geographic location. Because California is extremely large and controls most of the warm-weather coastal territory on the West Coast, people have been willing to put up with a lot of bad policies for the opportunity to live there. Competitive pressure on the state government would be much greater if there were three or four states occupying California's present territory instead of one.
In recent years, conditions in California have gotten so bad that the state has finally begun to experience a net outmigration to other states of approximately 140,000 per year. And the state government has belatedly begun to reform itself, with Democratic governor Jerry Brown proposing to cut spending and abolish the state's abusive redevelopment agencies. But these trends did not take hold until after the state had dug an extremely deep hole for itself that it will take years to dig out of. A smaller California that faced more interjurisdictional competition probably would not have become so dysfunctional to begin with. And if it did, it would have had to mend its ways sooner, since people would have started to leave earlier.
While, as I noted in the 2011, the Brown administration has presided over some useful reforms, California state government still has serious problems—including some of the nation's highest taxes and most stifling regulations of small business. And the state still experiences considerable net outmigration, despite its inherent attractiveness.
Today, I would add two additional points to my earlier analysis.
First, increasing interjurisdictional competition might incentivize one or more of the new states to cut back on the horrendous zoning restrictions that massively inflate the cost of housing in California, and cut off numerous working class and lower-middle class people from valuable job opportunities. Recently, a bill would that would have greatly improved the situation was defeated in the California state legislature. Heightened competitive pressure might lead at least one of the new states to enact something similar in order to increase its tax base by attracting more workers and businesses. That might incentivize one or both of the other two to cut back, as well. Increasing housing and job opportunities in California would be a massive boon to workers in other parts of the country, as well, some of whom might take the opportunity to move to the new Golden States. Given California's enormous size, reduced zoning there could help stimulate productivity and economic growth for the whole nation.
Second, because of its large size and diversity, California is one of the most extreme examples of a state where many regions chafe under policies imposed by a state government radically at odds with their values and interests. Breaking up the state into smaller pieces could make it easier to manage this diversity—as well as increase foot voting opportunities for residents who still feel dissatisfied, but don't want to leave the West Coast. The same analysis applies, even if with slightly lesser force, to other large and diverse states, such as Texas and New York.
Tim Draper's Cal 3 proposal might not be the best possible partition plan from the standpoint of increasing ideological diversity. Two of the new states it creates (one dominated Los Angeles and one by San Francisco/Silicon Valley) would likely turn out be at least as "blue" as the current California. Both Barack Obama in 2012 Hillary Clinton in 2016 won well over 60 percent of the vote in both of them. But the third new state (with San Diego as its largest city), would be a "purple" jurisdiction that Obama won by less than a point, and Hillary Clinton by a 52-42 margin. It would probably enact considerably more moderate policies than the others, thereby subjecting them to greater competition. And, of course, the two new "blue" states might well compete with each other, as well. That would not turn either into a red state. But it could incentivize both to reform some of their more dubious growth-inhibiting policies.
Regardless of the potential benefits for foot voters and others, the Cal 3 plan might still be rejected by Congress, even if it is approved by California voters. Congressional Democrats might oppose it for fear of possibly losing the new "purple" state's electoral votes. On the other hand, if both new blue states elect Democrats to the Senate, as seems likely, the Democratic Party might secure a net gain in senators if the new "purple" state elects even one Democrat out of its two. That might be enough to offset the electoral vote risk in the eyes of Democrats. In my view, the best way to prevent national political calculations from derailing partition would be to simultaneously also break up Texas in such a way that the net effect of the two divisions would be to leave the balance in the Senate unchanged, thereby taking national political calculations out of the equation, as much as possible. But that, obviously, involves challenges of its own, including getting the agreement of the Texas state government.
Any partition of California would also require dealing with some complex practical difficulties, such as dividing up the state debt, and determining such questions as whether residents of the other two states would still qualify for in-state tuition at UCLA and Berkeley. These difficulties should not be underestimated. But many can be handled through negotiation and mutually beneficial deals. For example, the three states could agree to give each other's residents in-state tuition benefits, at least for some time after partition.
Breaking up California will never be easy or costless. And reasonable people can certainly differ over whether the Cal 3 proposal is the best way to do it. But the potential rewards of partition are great enough to justify a serious search for ways to minimize possible downsides in order to make it happen.