How California can address economic disparities between coastal and inland regions

California is an economic powerhouse. It is a center of innovation and birthplace to world-leading enterprises – and may soon become the world’s fourth largest economy. 

But this is only half of the story.

While the knowledge-based economies of California’s coastal metropolises have surged ahead in recent decades, the state’s inland and rural regions have been left behind.

As a result, California features shocking regional disparities in income, employment and education. Personal income in the Inland Empire is less than two-thirds per capita compared to Orange County. Fewer than a quarter of the people in the Inland Empire earned a bachelor’s degree but more than 40% did in Orange County.

To reduce these disparities, less prosperous regions need inclusive regional economic development. In other words, they need both sustainable economic growth and greater economic inclusion. 

Fortunately, state leaders have begun to promote regional approaches to economic development. Last year, the governor and Legislature invested $600 million in the new Community Economic Resilience Fund. Known shorthand as CERF, the fund will support regional collaboratives encompassing business, labor, community organizations, local government and other stakeholders as they create and implement strategies for inclusive development.

The state’s support for inclusive regional economic growth deserves recognition. However, on its own, CERF does not provide the support, coordination or leadership needed to reduce the economic disparities between regions. 

The Little Hoover Commission, California’s independent government oversight agency, identified steps state leaders can take to help lift up California’s less prosperous regions in a new report.

First, California must prioritize historically disadvantaged regions for CERF funding and other related programs. The institutional capacity to advance economic growth varies by region, and some need additional investment much more than others. The state can maximize its spending and help rectify longstanding inequities by prioritizing CERF funds for more disadvantaged regions.

Second, state government needs to align resources in support of regional plans and priorities. There is significant federal and state funding available to support regional economic growth efforts – the commission identified $9.3 billion in one-time state funding alone. The catch? It is spread across more than 50 programs administered by almost 20 agencies. Regions cannot be expected to coordinate all these resources alone.

Third, state leaders must put equal emphasis on growth and inclusion. California must address the significant economic disparities that exist within regions, as well as those between them. State government must work with less prosperous regions to build on their strengths and make their economies more productive, competitive and innovative while ensuring that disadvantaged communities benefit.

Fourth, California should increase regional capacity for inclusive development. Building cross-sector partnerships in support of inclusive economic development requires significant time and money. Regions need reliable resources to build and sustain these efforts once CERF ends. 

Next, the state must institutionalize regular reporting of key regional economic metrics to remind the public of the inequities the state has yet to fully address and keep us on track. 

Lastly, California’s looming $24 billion budget deficit makes this work even more important, and state government must be a wise steward of taxpayer money. In this case, that means doing more to organize existing resources in support of regional economic opportunities. To ensure that this effort is efficient and coordinated over the long term, the governor should appoint a single, senior leader responsible for regional economic development.

The community resilience fund has the potential to advance the economies of California’s less prosperous regions. But without further action, the state risks turning this transformational opportunity into yet another one-time program that supports some helpful, localized projects but ultimately yields limited transformational impact. 

California cannot let this opportunity go to waste.