California In The Rearview Mirror

For Gary and Cathy Dean, the California Dream has led to...Nevada. Gary, 46, is a victim of the construction industry's decline in southern California. After collecting unemployment for more than a year--and sending out some 500 resumes--he found a job last fall as project manager for a construction crew refurbishing an apartment complex in Las Vegas. Cathy has moved to Vegas, too: this week she starts a new job as a marketing director for an interior-design firm working on new homes and hotels. The Deans are happy to be working, but leaving California was a bitter experience. "We didn't want to leave the state," explains Cathy, a southern California native. "We were pushed."

For Joaquin, a well-muscled young man from Puebla, southeast of Mexico City, the California Dream can be found at the intersection of San Gabriel Boulevard and Garvey Avenue in the fast-growing town of Rosemead, east of downtown Los Angeles. Like most of the men who gather there, Joaquin is an illegal immigrant seeking work as a day laborer. Like them, he will probably settle for an off-the-books job mowing grass or doing construction work for $5 an hour. The scene is played out every day on street corners all over Los Angeles, where thousands of determined immigrants defy the prevailing gloom. "Sure, we have heard that the economy in California is bad," Joaquin says. "But we get enough work to make being here worth our while."

With a devastating recession now entering its third year and no relief in sight, California has reached a historic crossroads. Employers and better-educated workers are fleeing the Golden State in search of opportunities elsewhere. Legal and illegal immigration from Latin America and Asia, meanwhile, continues unabated, filling cities like Los Angeles and suburbs like Rosemead with disproportionate numbers of low-skilled workers. The combination-the outmigration of skilled workers and the influx of unskilled immigrants-is steadily eroding California's tax base and trapping state and local government in an excruciating fiscal bind. Notable for their work ethic and keen ambition, immigrants contribute prodigiously to the economy. But new immigrants also consume more than their share of tax-supported services like welfare, health care and public education, magnifying the recessionary squeeze on government budgets.

California's current slump is the worst since the Great Depression. It has cost the state an estimated 750,000 jobs since 1990--more than 400,000 in Los Angeles County alone. Construction jobs have dropped by 119,000 since 1989, and many of those workers have already left the state. The end of the cold war and the advent of large-scale cuts in U.S. defense spending sharply hit the aerospace industry, long a mainstay of southern California's economy. Displaced aerospace workers now constitute something of a "lost generation," says Jack Kyser of the Los Angeles Economic Development Corporation. Tougher times have come to Silicon Valley as well: last week Apple Computer of Cupertino yielded to the continuing shakeout in the personal-computer industry by announcing that. it would lay off nearly a sixth of its work force.

The flight of business firms and people is particularly striking because the state's vibrant economy was a population magnet for so long. According to a study last year by the state's five largest electric and gas utilities, more than 1,000 manufacturing firms have left California since 1980. Although the trend seems to have slowed in recent months, that is not necessarily good news for the state. According to Barry R. Sedlik, manager of business retention for Southern California Edison Co., some companies have merely postponed plans to relocate because of lousy economic conditions. "It's expensive to move," Sedhk explains.

Companies that have moved, according to the utilities' report, have gone mostly to Mexico, Nevada, Texas and Arizona. Even towns like Coeur d'Alene, Idaho, have benefited. In five years, Coeur d'Alene and surrounding Kootenai County have nabbed 2,000 California manufacturing jobs in fields as diverse as swim wear and computer software. "The bottom line is, if you're going to manufacture a product, you can't do it in California and be competitive," says Bob Potter, a retired telephone-company official who is the sole recruiter for the Kootenai County Jobs Plus program. And some California-based firms have decided to expand elsewhere. Intel, the computerchip giant, announced in April that it was building a $1 billion, 1,000-employee plant in Albuquerque, N.M., despite an ardent courtship by California.

All this suggests that California's allure to native-born Americans may now be fading. In 1992, the California State Department of Finance, which uses address changes for driver's licenses as a demographic indicator, found the first evidence of out-migration to other states in two decades. United Van Lines, similarly, last year ranked California in its "high outbound" category, which means that 55 percent or more of all the firm's California shipments were outbound rather than inbound. U-Haul International, Inc., reports the same trend this year. Between March and July, U-Haul found 5.5 percent more outbound than inbound truck and trailer rentals for California-and 11.1 percent more outbound than inbound traffic for the city of Los Angeles. "We have lost our migrant stream from the rest of the United States," says Nancy Bolton, a demographic consultant to UCLA's Business Forecasting Project. Philip Romero, an economics adviser to Gov. Pete Wilson, says the reversal of this longstanding population trend is tantamount to a statewide "wealth drain."

Yet California's total population is booming, thanks to record levels of immigration from outside the United States. In 1992, 200,000 legal immigrants and at least 100,000 illegal aliens settled in the state. Together with their American-born children, who are citizens, these new arrivals accounted for 85 to 90 percent of California's population growth last year, Romero says. The resulting strain on government is enormous. Some 400,000 illegal aliens are eligible for the state's publicly funded health-care system, and pubic schools all across southern California are bulging at the seams. A state study found that undocumented aliens cost state and local governments $3 billion a year, and Governor Wilson's office estimated the immigrant population costs state government $5 billion a year more than it pays in taxes.

The inevitable result is a monumental uproar over immigration itself. Wilson is pushing Washington for federal aid to offset what he calls the "taxpayer squeeze," and the state legislature is awash with pending bills to further regulate undocumented workers. What is happening, says political analyst Sherry Bebitch Jeffe, is nothing less than "the Balkanization of California"-a widening gap between the haves and havenots and between voters and immigrants as well. "That is the dynamic that is driving the state these days," jeffe says, "and it's not good news for the immigrants." And if California doesn't narrow the gap, it will be bad news for the nation as well.

As jobs exit and immigrants pour in, California is providing more services with lower revenues. The numbers add up to hard times:

Since 1987, 42 states, along with Puerto Rico and Mexico, have benefited from companies fleeing California.

California has lost 750,000 jobs since 1990. In June the jobless rate statewide (9.1 percent) and in Los Angeles (9.6 percent) outpaced the national figure of 7 percent.

In the 1980s, California's population surge accounted for 27 percent of the nation's growth.

Last year, according to estimates, up to 90 percent of new residents were either immigrants or had been born to recent immigrants.

Fewer than half of L.A.'s 641,000 schoolchildren are proficient in English. At home they speak some 80 languages, including Spanish, Cantonese, Vietnamese, Tagalog, Cambodian and Hebrew.