California's Not a Business

A blog about business and economics.
April 2 2013 8:51 AM

If California Were a Business, It Would Own All the Land in California

157554504
This land, too.

Photo by Robyn Beck/AFP/Getty Images

The Sacramento Bee says California is insolvent:

Were California's state government a business, it would be a candidate for insolvency with a negative net worth of $127.2 billion, according to an annual financial report issued by State Auditor Elaine Howle and the Bureau of State Audits.
The report, which covers the fiscal year ending June 30, 2012, says that the state's negative status -- all of its assets minus all of its liabilities -- increased that year, largely because it spent more than it received in revenue.
Advertisement

This is a big mistake. Obviously, California's state government is not a business. But if it were a business, the right way to account for it would be to treat it as the owner of all the nonfederal land in California and all the structures sitting on that land. That stuff—the beaches and the beach houses and the offices and the shopping malls and all the rest—is the tax base of an American state government. California, thanks to 1978's famous Proposition 13, does not in practice collect all that much in real estate taxes. But that's a policy decision, not an aspect of the state's balance sheet. Of course the fact that California is a state government constrained by political factors also highlights the fact that it's a bit dumb to compare governments to businesses. But if it were a business, then it'd be a business in a great financial position. If the actual financial position is not so great, that's precisely because it isn't a business.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Sports Nut

Grandmaster Clash

One of the most amazing feats in chess history just happened, and no one noticed.

The Extraordinary Amicus Brief That Attempts to Explain the Wu-Tang Clan to the Supreme Court Justices

Amazon Is Officially a Gadget Company. Here Are Its Six New Devices.

Do the Celebrities Whose Nude Photos Were Stolen Have a Case Against Apple?

The NFL Explains How It Sees “the Role of the Female”

Future Tense

Amazon Is Now a Gadget Company

Food

How to Order Chinese Food

First, stop thinking of it as “Chinese food.”

Scotland Is Inspiring Secessionists Across America

The Country Where Women Aren’t Allowed to Work Once They’re 36 Weeks’ Pregnant

The XX Factor
Sept. 18 2014 11:40 AM The Country Where Women Aren’t Allowed to Work Once They’re 36 Weeks’ Pregnant
Moneybox
Sept. 17 2014 5:10 PM The Most Awkward Scenario in Which a Man Can Hold a Door for a Woman
  News & Politics
Weigel
Sept. 18 2014 3:19 PM In Defense of Congress Leaving Town Without a New War Vote
  Business
Moneybox
Sept. 18 2014 5:09 PM Three CEOs Step Down in 30 Minutes
  Life
Outward
Sept. 18 2014 4:15 PM Reactions to a Sketch of Chelsea Manning Reveal Transmisogyny
  Double X
The XX Factor
Sept. 18 2014 3:30 PM How Crisis Pregnancy Centers Trick Women
  Slate Plus
Behind the Scenes
Sept. 18 2014 1:23 PM “It’s Not Every Day That You Can Beat the World Champion” An exclusive interview with chess grandmaster Fabiano Caruana.
  Arts
Brow Beat
Sept. 18 2014 4:33 PM The Top 5 Dadsplaining Moments From The Cosby Show
  Technology
Future Tense
Sept. 18 2014 5:03 PM Bono, Apple Creating "Irresistible" Music Format. Prepare to Buy the White Album Again.
  Health & Science
Science
Sept. 18 2014 3:35 PM Do People Still Die of Rabies? And how do you know if an animal is rabid?
  Sports
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.