How can it be that a state like California, with so much wealth, solid economic growth, and a strong social safety net, nonetheless has the nation’s highest poverty rate?

For more than two and a half years, The Cato Institute’s Project on Poverty and Inequality in California has been seeking answers to that question. We’ve met with more than 150 Californian political and business leaders, academics, local activists, as well as ordinary Californians struggling with poverty, and blended their experience with the latest data and Cato’s decades of experience researching social welfare issues.

Today, we released a comprehensive report of our findings, along with 24 specific recommendations for ways we believe California can do a better job of helping its neediest residents. These recommendations encompass such areas as housing and homelessness, education and workforce, criminal justice reform, changes to the safety net, and removing barriers to economic inclusion.

California has experienced strong economic growth for many years, averaging 5.8 percent for the past 5 years, and a growing economy is essential to reducing poverty. But economic growth can have a significant impact on poverty reduction only if all Californians can fully participate in the opportunities it offers. Economic growth will do little to reduce poverty if all the benefits from that growth accrue solely to those at the top of the economic scale

We found that far too many California programs and policies pushed people into poverty or made it harder for others to climb out. However well-intentioned, government actions can create a two-tier economic system that locks the poor out while protecting those with more connections or resources to navigate the system.

For example, there is no way to address poverty in California without dealing with the lack of affordable housing, and the homeless crisis that is entwined with it. Yet despite recent steps in the right direction, notably SB 9 and 10, too many regulations still stand in the way of affordable housing or homeless services.


That’s why we call for an end to all exclusionary zoning practices, reform of the California Environmental Quality Act (CEQA), and limits to building fees, among other changes. We also call for removing barriers to providing services to the homeless and for making conservatorships easier for those homeless individuals unable to care for themselves, while also moving away from a law enforcement model for dealing with homelessness.

Similarly, a quality education is key to fighting poverty, yet California schools continue to underperform, especially for children of color and low-income communities. Yet, the state continues to block alternatives to failing school systems.


For instance, charter schools in California outperform their more traditional counterparts, despite serving more at-risk students. Yet, the state’s Local Control Funding Formula (LCFF) short-changes charter schools, capping the supplemental level of funding for serving high-need students, while not applying this cap to district schools.


This cap affects about a third of charter schools. Charter schools that serve the highest concentrations of high-need students are underfunded by about 24 percent relative to traditional public schools. It is past time for the state to end its hostility toward charters and other types of parental choice.

One thing California has done well is taken important steps to reform its criminal justice system, but that system continues to burden the poor and minorities. A significant body of scholarly research underscores the connection between mass incarceration and poverty. Studies have shown that, for example, a father being incarcerated increases his family’s likelihood of being poor by 40 percent.


Moreover, some 20 percent of Californians have criminal records that can make it harder for them to get a job, go to college, or even find housing. California needs to go much further, decriminalizing victimless offenses, from drug use to sex work, and establish a mechanism to automatically expunge criminal records for those who do not re-offend.

Finally, California needs to remove unnecessarily regressive regulations that prevent people from getting jobs or starting a business, such as occupational licensing, occupational zoning, and regulations that drive up the cost of childcare.


To cite just one example, California has the third most onerous occupational licensing regimes in the nation. It costs as many as 200,000 jobs annually, most the sort of entry level jobs that would benefit low-income communities.

Of course, many of these recommendations will be controversial. They will discomfort powerful special interests. Few will agree with every proposal. But we hope this report help spark a broad conversation on how California can do a better job in serving its most vulnerable residents.