Why are people leaving California? This has been a hot topic online and in the news. Last October, we wrote about the trends we were observing about people leaving California. We continue to talk with friends and business associates that are moving out of California. It happens on a weekly if not daily basis.
Just in the last two days, we talked with a business associate and client moving to the east coast. Scott just had his car smog checked, which is required every two years in California when completing the annual registration for a vehicle. The owner said his business was down 30% in the past year. Why is he seeing 30% less cars? Yet another daily incident that makes us wonder if people are leaving California. So we felt it was time to write an updated article.
This is our view and opinion of the situation, not just citing statistics found elsewhere. Since we live in Northern California in the middle of Silicon Valley, read on to hear our first-hand account of the situation.
In this blog, you’ll learn:
- Firsthand reasons we’ve heard people tell us they’re leaving California
- Why business leaders are choosing to move their companies out of California
- Update on the efforts to recall Governor Gavin Newsom - With the final tally of verified Recall signatures
- Why the recall group thinks Governor Newsom should be removed from office
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Why Are People Leaving California?
We continue to talk with friends, clients and business associates that are moving out of California. It happens on a weekly, if not daily basis. Just in the last two days, we talked with a business associate and client moving to the east coast and felt it was time to write an updated article.
Reasons people have told us why they’re leaving California:
- Can afford a bigger and nicer home in another state
- Recently retired and want to move somewhere with a lower cost of living and lower or no state income taxes
- Working from home permanently opened the opportunity to move to parts of the country with a lower cost of living
- Employer is leaving California and their job is leaving with the business
- Three months of bad air due to forest fires
- Power outages during the forest fire season
- California pandemic policies include some of the strictest business and church closure rules in the US. For example, Disney has theme parks open around the world, but the Newsom administration has forced all theme parks in California to remain closed, resulting in Disney laying off thousands of people from their Parks Division, many in California.
- Santa Clara County, in Northern California, where our firm is based, has the strictest business and church closure rules in California, if not the entire nation
- California public schools have been closed during the pandemic, while they are open in some other parts of the country and study shows it lags behind the rest of the nation, ranking 49th in states for returning kids to classrooms4.
- Some High School sports in California have been cancelled, while they have been able to continue in other parts of the country
- Governor Newsome closed all of the public beaches in Southern California angering many residents
- High crime level in the larger cities
- Preference to live in an area with a more balanced, or more conservative viewpoint as the politics in CA has become skewed to the Democratic Party. (Democrats hold a veto proof majority in both houses of the CA legislature)
It’s difficult to say how much each of these factors contributed to people leaving California, since the situation with each family is different. We have not seen any polls to quantify these factors.
What do You Think is the Top Reason for the California Exodus?
Many weighed in on the reasons they think people are leaving California in our LinkedIn poll. When forced to choose, voters felt overwhelmingly that California's highest state taxes was the top reason, at 46% of the vote. Folks also commented that they wanted to choose all of the reasons too!
The California political environment came in second and companies allowing employees to indefinitely work from home opened up options to live anywhere, came in a close third at 28%. Follow us on LinkedIn for more opportunities to engage and let us know what you think.
Businesses Leaving California
Some people are leaving because their job and entire company are leaving.
Thousands of businesses are leaving California, even iconic large companies such as:
- Hewlett-Packard Enterprise is moving to Houston
- Oracle is moving to Austin
- Palantir is moving to Denver
- Tesla’s founder, Elon Musk, is leaving and opening a new factory near Austin
- Other companies leaving include Toyota, Charles Schwab, Nestle and Jamba Juice
Between 2008 and 2019, CNBC reported that 18,000 companies have left California1 and this trend has accelerated recently.
Reasons company leaders’ site for why they left California:
- High state and local taxes - California has a top marginal income tax rate of 13.3%, the highest of any state and by comparison, 9 states have no individual state taxes on wages
- Unique taxes like the first in the nation: “Overpaid CEO Tax”, that targets the income gap between CEOs and employees, passed in San Francisco in November 2020
- Unfriendly and inefficient business regulations make it more costly to do business
- Government leaders forcing factory shut downs, like Alameda County did in 2020 to Tesla
- High cost of living for employees, including a shortage of housing
- Inconsistent delivery of public services, such as water rationing and power shutoff
Companies are finding it easier to leave California as employee relocation logistics are minimized given the emphasis on home and remote work as well as tech hubs developing in Texas and other states.
Will Governor Gavin Newsom Be Recalled?
The growing discontent of the residents in California have led to an effort to recall Governor Gavin Newsom. The recall effort was launched on June 10, 2020 and supporters had until March 17, 2021 to collect the 1,495,709 signatures (12% of the residents of California) needed to trigger a recall election2.
The signatures must be verified by the County Clerk’s office in each county. On November 6, Judge James Arguelles, extended the signature deadline for the recall from November 17, 2020 to March 17, 2021, due the pandemic. If supporters turn in enough valid signatures to trigger a recall election, a recall election will take place within 60-80 days of signature verification.
UPDATE: The California’s Secretary of State office confirmed in late April that enough signatures were turned in to force a recall vote of Governor Newsom. The Secretary of State’s office announced on May 5 the final tally of 1,719,943, verified signatures for the recall. There were 441,406 signatures found to be invalid.
READ a full report of the Governor Newsom Recall vote tally by county, from the office of the California Secretary of State, Elections Division5.
A recall election will present the voters with two questions:
- The first question asks: “Should Gavin Newsom be recalled as Governor of California?” If more than 50% vote yes to recall Newsom, then he is removed from office
- The second question asks: “Who would succeed Newsom?” The candidate with the most votes would become the next Governor; a majority is not needed
In a letter from the group organizing the recall, the frustration in the state residents can be seen in the reason they list to recall Governor Newsom.
Reasons organizers state for recall of the California Governor:
- Moved to ban gas-powered cars
- Tried to shut down companies in the state’s gig economy
- Released almost 18,000 dangerous prison inmates
- Closed 20 prisons
- Failed to keep the power on
- Mismanaged the forests, leading to deadly fires
- Dining at the French Laundry restaurant, without a mask, with lobbyists while limiting Thanksgiving gatherings to 3 households for the rest of the state residents
- Closing businesses but not his own winery
- Sending his own children back into the classroom, while most of the state public schools were closed
- 8 million jobs lost
- 10% of the nation’s population, but 34% of the nation’s welfare recipients
- Highest state income taxes in the nation
The group leading the recall effort reported a final tally of 2,117,730 signatures were collected. They met their goal of at least two million signatures to ensure enough can be validated. As of March 23, the rate of verified signatures was 84%. Assuming the verification process runs it's full course, the public may be voting by mid-November.
Governors in 11 other states faced recall campaigns in 2020, but none of them reached the threshold to force a ballot. Money has been pouring into the group leading the Newsom recall effort reporting fundraising totals of $2.5 million, as of early February, 20213.
Why do People Stay in California?
With these reasons to leave California, it raises the question: why do people stay in California?
There are still many reasons that keep people in the Golden State. In our next blog, we’ll explore the reasons people tell us why they still love living in California. Since the Financial Journey Partners team members live in the Silicon Valley themselves, we’ll give you our top reasons why we enjoy it here so much.
Financial Journey Partners is Here to Help You
Our Financial Journey Partners office is based in San Jose, California. We have clients that live in many states across the country. If you have questions about your investments or financial situation, call us to schedule time to talk about your specific situation.
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1 CNBC – Why some tech companies and billionaires are leaving California
2 Ballotpedia – Gavin Newsom recall, Governor of California (2019-2021)
3 Los Angeles Times – Gov. Newsom recall backers report raising more than $2.5 million
4 San Jose Mercury News – COVID-19: Data show California far behind in reopening schools
5 California Secretary of State – Current Recall Efforts