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January 2012, Volume 18, Number 1

California: Poverty, Water

Fresno county had the state's highest farm sales and the state's highest poverty rate in 2010. Fresno county had farm sales of $5.9 billion, and almost 27 percent of Fresno county's 935,000 residents had incomes below the poverty line. Over 36 percent of Fresno county's school-aged children were poor, also the highest rate in the state. Neighboring Tulare county had the second-highest farm sales, $4.9 billion, and the second-highest poverty rate, 25 percent.

About 16 percent of California residents had incomes below the poverty line, which was $22,113 for a family of four in 2010, and 21 percent of California's school-aged children were poor.

High farm sales and high poverty rates often go together. Agriculture offers many seasonal jobs, so that even if farm workers earn more than the state's minimum wage of $8 an hour, many do not have sufficient earnings to lift their families above the poverty line. Economic development efforts aim to preserve the San Joaquin Valley's economic engine, agriculture, while diversifying the economy to create more high-paying year-round jobs.

The Congressional Research Service in 2005 found per capita income in the eight-county San Joaquin Valley was lower than in the 68-county Central Appalachia region. Both regions are anchored by one natural-resource based industry, agriculture and mining.

The San Joaquin Valley continues to attract migrants from Mexico despite double-digit unemployment rates. With conditions even worse in rural Mexico, many rural Mexicans are drawn to the San Joaquin Valley for opportunity for themselves and their children. Some observers fear that the central San Joaquin Valley will eventually resemble Appalachia, with young people leaving for education and not returning. Residents who remain may not be attractive to job-creating investors because they lack education or are retired.

Children of farm workers who do not move away for education or to join the military sometimes bolster the ranks of gangs. The state mounted an 18-month operation, Operation Garlic Press, that resulted in over 100 arrests in October 2011 of suspected Nuestra Familia gang affiliates in farming towns such as Dos Palos and Los Banos.

Stewart and Linda Resnick, the owners of Paramount Farms with a net worth of $1.8 billion, are aiming to reduce poverty in Lost Hills, an unincorporated place in Kern county near Paramount's headquarters. Linda Resnick says that she would like "to create a high school and trade school that would enable students to get the technical information to get a middle-level job in agriculture." Paramount controls the Kern Water Bank, an underground reservoir capable of holding one million acre feet of water that was owned by the state to store water in rainy years.

Napa grape growers who do not provide housing for their workers pay a $10 per acre fee to support affordable housing for their farm workers; growers must re-approve the levy in June 2012. The county is conducting a $110,000 study of farm worker housing needs to be conducted by Bay Area Economics and California Human Development Corporation.

California attracts people from other countries, but fewer from other states. In 1950, over 53 percent of California's almost 11 million residents were born somewhere else in the US and moved to California; in 2010, less than 20 percent of over 37 million California residents moved to California from other states. In 2010, almost 55 percent of California residents were born in California (another 28 percent are immigrants). With fewer educated newcomers moving from other states, educating the children born in California becomes more important for economic success.

Water. In 2003, San Diego county signed a 75-year agreement to buy Colorado River water from the Imperial Irrigation District. The IID water is transferred to San Diego via the Colorado Aqueduct owned by the Metropolitan Water District of Southern California.

The IID-San Diego water transfer agreement has come under pressure because of declining run off from Imperial Valley farms into the Salton Sea, the 360-square mile lake created in 1905 by flooding and levee breaks that has been sustained by run off from Imperial Valley farms. The Salton Sea has 50,000 parts of salt per million parts of water, more salt than the Pacific Ocean, which has 35,000 ppm.

There are 480,000 acres of farm land in the Imperial Valley, and about 5,800 have been fallowed to make water available to San Diego. The amount of fallowed farm land is projected to rise to 30,000 acres as water transfers increase, which could decrease run off and increase salinity in the Salton Sea.

Imperial Valley farmers get about 20 percent of the Colorado River's water under the "first in time, first in right" principle of water use. California in 2003 offered to help fund restoration of the Salton Sea to finalize the 2003 IID-San Diego agreement, but budget deficits mean the state has not provided restoration funds. Some farmers, who fear that they will eventually have to fallow more land or make payments to maintain the Salton Sea, sued to end the IID-San Diego agreement. However, the California's 3rd Appellate District Court upheld the agreement in December 2011.

Budget. Tax revenues in 2011-12 have been lower than projected, forcing mid-year cuts of almost $1 billion in the state's $88.5 billion general fund budget. Governor Jerry Brown plans to ask voters in November 2012 to approve a temporary increase in the state sales tax and higher taxes on high earners to raise almost $7 billion a year to balance the proposed $93 billion general fund for 2012-13, and to cut $4 billion in welfare and home health care.

These social service reductions mark an historic retreat in California, which traditionally offered more social services than other states. Brown said that California can no longer afford to be so generous with the poor.

California has a structural deficit, meaning that the state's outlays grow faster than its revenues except in boom years, when owners of IT-related industries sell stock and have capital gains. There have been many proposals to close this outlay-revenue gap, including reduced funding for the three major state-supported programs: K-12 schools, prisons and health care for the poor.

As in the federal government, most Republicans favor cutting expenditures to close the gap, while most Democrats favor raising taxes. The Think Long Committee in November 2011 proposed a change in the tax system to raise more revenue. Think Long would lower income tax rates in exchange for extending the sales tax to services that are not now taxed.

Governor Jerry Brown supports the California High-Speed Rail Authority, which aims to cut the 400-mile trip between San Francisco to Los Angeles from about seven hours driving to 2.5 hours with a $98 billion train expected to completed by 2030. About $3 billion in federal funds are available to begin construction in the San Joaquin Valley, which has come under fire for underestimating costs, overestimating ridership, and destroying farm land. Supporters hope that once construction begins, the new rail line will be hard to stop. Critics hope to block the Legislature from approving the bonds needed to begin construction.

Cities. Many California cities are struggling with budget deficits. Stockton, a city of almost 300,000, is struggling to close a budget deficit linked to a 20 percent unemployment rate and one of the highest US foreclosure rates by declaring a fiscal emergency and breaking contracts with police and other organized groups of employees. The police union has protested with billboards that proclaim Stockton the second most dangerous city in California, after Oakland. Unions say that Stockton went into debt in order to redevelop its waterfront, which is mostly empty.

California enacted a law in summer 2011 to eliminate the state's 400 redevelopment agencies that aim to stimulate local development by giving $5 billion a year in tax breaks to developers. Critics hailed the decision, noting that developers often back supportive city council candidates in exchange for subsidies. Supporters of redevelopment countered that the end of tax breaks would be harder to turn around blighted areas.

A German born in Chechnya, Harry Burkhart, angry over the pending deportation of his mother to Germany on fraud charges, was arrested after setting dozens of cars on fire in 50 incidents in the Los Angeles area in January 2012 that caused at least $3 million in damages. His mother, an ethnic German from Chechnya who received German citizenship in Frankfurt, was arrested in Germany for fraud, but escaped and flew with Harry to Canada, where both applied for asylum and were rejected, prompting the move to Los Angeles.

Bill McEwen, "Resnick wants to enhance Valley," Fresno Bee, December 10, 2011. Kurtis Alexander, "Fresno County has state's highest poverty rate," Fresno Bee, November 29, 2011. Tony Perry, "Massive California farm-to-city water deal snared in litigation," Los Angeles Times, October 30, 2011. Cowan, Tadlock. 2005. California's San Joaquin Valley: A Region in Transition. Congressional Research Service.

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