California exit: Golden State growth slows as more people leave

Once the land of fresh starts and opportunity, why is California’s population on the decline? An older demographic and a wealth tax are among the reasons the state’s growth rate has stalled. 

First Look

More people are leaving California than moving here, continuing a trend that coupled with fewer births has slowed the growth rate in the nation’s most populous state to a record low amid a pandemic that is reshaping its future.

Officially, California added 21,200 people from July 1, 2019, to July 1, 2020, increasing the state’s population by a paltry 0.05% to 39.78 million people – still by far the most of any state.

But the bigger news from Wednesday’s new population estimate was that 135,600 more people left the state than moved here. It’s only the 12th time since 1900 the state has had a net migration loss, and the third largest ever recorded.

California became a state in 1850 after a gold rush spurred a massive migration of people moving west to seek their fortune. The state boomed again following World War II because of the aerospace and defense industry, and again in the 1980s and early 1990s as technology companies made Silicon Valley a household name.

That growth slowed for the first time in the mid-1990s after the United States cut back on its aerospace spending following the end of the Cold War. It happened again during the lead-up to the Great Recession in the late 2000s. New population estimates released Wednesday by the state Department of Finance show it’s now happening a third time, as California recorded its third consecutive year of net migration loss.

The reasons why aren’t yet fully understood. In recent weeks, a string of high-profile business leaders have announced they are leaving California for states with lower taxes and fewer regulations – including Tesla CEO Elon Musk and the headquarters of tech giants Oracle and Hewlett-Packard, whose roots trace back to the founding of Silicon Valley.

A niche industry has emerged around the trend, with real estate agents starting websites like “exitcalifornia.org” and “leavingthebayarea.com” as the state’s median home price hit a record high of more than $712,000 in September.

“With COVID and a lot of tech companies allowing people to work remotely, it’s certainly opened up the door for a lot of people to consider making the move out of California,” said Scott Fuller, a real estate agent whose business is aimed at helping people leave California – something he did in June when he moved his family to Arizona. “We’re seeing a lot more high-income earners who are actively planning an exit strategy.”

Matt Frinzi carried out his exit strategy on Tuesday, when he finished packing up his BMW X3 and left his home in San Francisco for Reno, Nevada – a state that does not have an income tax. Mr. Frinzi has lived in California for 25 years, saying when he moved to San Francisco in the 1990s he thought it as “the premiere city in the United States.”

“I wouldn’t give you a nickel for it now,” he said.

Mr. Frinzi said he came from a working class immigrant family in New Jersey, building a nice life in the medical business. Now, with some in the state Legislature pushing for a new “wealth tax” on the state’s highest earners, Mr. Frinzi said it was time to leave. The coronavirus pandemic furthered his resolve to move, he said, because of “government overreach,” including the state ordering businesses like restaurants and hair salons to close.

“You’re going to think I’m a right-wing kook. I’m really not. I’m a reasonable Republican,” he said. “I believe in the Constitution of the United States, and it’s unrecognizable in the state of California, particularly in San Francisco.”

But while it’s fashionable to blame California’s taxes and policies for its recent exodus, state officials say the more likely culprit is the pandemic and the migration patterns of the state’s large community of international immigrants.

Walter Schwarm, a demographer with the state Department of Finance, said California’s net increase from international immigration has fallen every year since 2017, shortly after President Donald Trump took office and put in place policies that made it more difficult and expensive for people to legally move to the United States.

Plus, people who move to the U.S. from other countries often come to California first, but don’t settle here, Department of Finance spokesman H.D. Palmer said.

“They have migrated to other states and other regions in the country because of either family ties or because there have been larger communities in certain areas of the country that reflect the home countries from which they came,” he said, pointing to the large Hmong population in Minnesota as an example.

But immigration and emigration are not the sole reasons for California’s slowing growth. The data shows more people are dying and fewer people are having children. That’s partly because California’s population is getting older, leaving fewer people who are more likely to have kids.

“We’re missing 100,000 people that would normally be there every year because the birth rate has slowed down,” Mr. Schwarm said.

But it’s also likely more people are dying because of the pandemic. From 2017 to 2020, the number of deaths in California grew by an average of 4,800 deaths per year. But this year, California’s deaths increased by 12,800.

California had reported a total of 6,163 coronavirus deaths on July 1, a number that has since grown to 21,481 as of Tuesday.

State officials base their population estimates on a number of sources, including birth and death counts, the number of new driver’s licenses and address changes, school enrollments, and federal income tax returns.

This year’s estimate is shakier than usual because several of those data sources were affected by the response to the coronavirus pandemic, including changing or extending deadlines for some taxes and license renewals. The state will likely revise this estimate next year based on new information.

This story was reported by The Associated Press.