WASHINGTON — Massive government spending amid an economic disaster helped California reap an unexpected federal profit, a Democratic-sponsored study concluded Friday.
Commissioned by Democratic Sen. Barbara Boxer, the study determined that California in 2008 and 2009 received more from the federal government than the state sent to Washington in the form of taxes. However temporary, that reverses a trend of more than 20 years.
"(We) have really worked hard to send more dollars to our state," Boxer said Friday, adding that "of course, we want to do even more."
Now running for re-election against GOP critics who question her efficacy, Boxer trumpeted the new study amid a sensitive political environment. She explicitly cast it as a response to recent complaints by Republican Gov. Arnold Schwarzenegger that California has been systematically shortchanged by a federal government now controlled by Democrats.
"I just wanted to make the case that California is struggling, and we're helping," Boxer said.
Boxer's staff economist determined that California received approximately $1.02 back in federal spending for every $1 in tax revenue it sent to Washington in 2008. The economist further estimated California received $1.45 back in federal spending for every $1 in tax revenue the state sent in 2009.
By contrast, as Schwarzenegger noted in his State of the State speech this week, California has until now received only about 78 cents back for every dollar sent to Washington.
"This should be much more fair and equitable," Schwarzenegger said, adding that "we are currently owed billions of dollars by the federal government."
The governor's budget proposal calls for an additional $6.9 billion in federal spending in California.
Since the mid-1980s, California has been one of the nation's "donor states." For a host of entrenched reasons that include demographics, funding formulas and the fade-away of the Reagan administration defense buildup, the state has been sending Washington more than it receives.
As a relatively high-income state, California pays more in federal taxes. As a relatively young state, California receives less in Social Security and Medicare. Neither of those factors have changed.
As a one-time jolt, though, Congress in February approved over Republican opposition a $787 billion stimulus package.
"This is showing the effects of spending under the (stimulus bill)," Tracy Gordon, an assistant professor at the University of Maryland and adjunct fellow at the Public Policy Institute of California, noted when apprised of the new findings.
Some of the findings are estimates, and subject to revision.
Tax receipts and federal expenditures for 2009 at the state level will not be available until the summer of 2010. Boxer's economist therefore assumed the state's tax payments fell at the same rate as occurred nationally during the recession. The economist likewise assumed federal payments to California increased at the same rate as occurred nationally.
Federal revenues nationally dropped by 16.6 percent from 2008 to 2009, as tax payments shrunk. Total federal expenditures nationally increased by 12.5 percent during the same period.
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