Should California Split Up to Save Itself?

Venture capitalist Tim Draper’s proposed ballot initiative to divide California into six states was green-lighted by California’s secretary of state two weeks ago.

But veteran economic forecaster Bill Watkins, who specializes in California, sees the six-state idea as economically unviable, while maintaining reservations about the viability of the existing California.

“I’m not spending a lot of time worrying about [the six-Californias initiative] because I don’t expect it to happen,” says Watkins, executive director of the Center for Economic Research and Forecasting (CERF) based at California Lutheran University in Thousand Oaks, Calif.

In an interview with ThinkAdvisor, Watkins hearkens back to a proposal his institution was tasked with analyzing years ago to divide Santa Barbara County between its coastal and inland areas.

“There you have something like the entire state: The coastal area is very wealthy and in the presidential election you never see a Republican bumper sticker. The inland portion, based around the Santa Maria area, is largely working class and immigrant and there you never see a Democratic bumper sticker,” Watkins remarks.

“They just weren’t going to have the tax base,” he says his team found at the time, and that as well describes the situation of some of the proposed Californias.

“California’s wealth is concentrated on the coast,” he says, adding that the huge economic disparity among its different regions is evidenced by the not well-known fact that inland city San Bernardino has the highest poverty rate in U.S. outside of Detroit. Central California’s Fresno is close behind.

What has changed in the decade since dividing Santa Barbara was hotly debated has been the discovery of vast oil reserves in some inland areas.

“Some counties would want to be separated just for the development of oil,” Watkins says. “Places like Kern County could end up much better off if they’re using policies.”

But while Watkins, who generally eschews political analysis, thinks the Draper initiative will likely carry Kern County, he expects the more populous coast to vote against the initiative — at least in part to prevent exploitation of these energy resources.

The CERF economist sees three, not six, Californias, consisting of a Northern coastal area extending from Napa down to Ventura counties; a Southern coastal region consisting of Los Angeles, Orange and San Diego counties; and the largely rural rest of California.

The coastal regions, the San Francisco Bay Area particularly, are “generally very environmentally concscious,” and its Silicon Valley tech heartland “seems to prosper no matter what the state does,” Watkins says.

These economic haves have a huge population advantage over rural California’s have-nots, and are not eager to alter current arrangements.

What’s more, Watkins notes that “California is run by San Francisco,” meaning that every statewide office today is filled with someone from the Bay Area, making it unthinkable that a secession proposal, even if it were to pass, would advance any farther. (Watkins notes further hurdles: secession would require both state and federal approval.)