California’s high cost of living places state near — but not at — the top in poverty rates

California politicians — Gov. Gavin Newsom in particular — are fond of portraying their state as an economic powerhouse of global stature.

“We dominate in every category,” Newsom bragged earlier this year, during a presentation to the Center for American Progress, a left-leaning think tank. “We are the center of the universe (and) America’s coming attraction.”

Newsom is weighing a run for the White House after his governorship ends in January. And he implies that were he to become president, the nation as a whole could emulate California’s productive economy.

There are, however, economic data points that he ignores in his recitations of California’s virtues, such as the state having the nation’s highest cost of living and an unemployment rate at or near the top.

And then there’s poverty.

Tuesday the Census Bureau released its latest calculations of poverty. The nation’s official poverty rate — the one that has been used for decades to guide the distribution of federal funds and qualifications for various forms of welfare — is 10.7%, the same as California’s rate.

The bureau also calculates what it calls a “supplemental poverty measure” that takes into account additional factors, such the cost of living, and is widely considered to be much more accurate in real world terms than the one-size-fits-all official rate.

The national supplemental rate is 13% and California’s is, as usual, much higher at 17.8%. That’s slightly higher than the 17.7% rate California had the last time supplemental rates were issued.

But the good news is that, for the first time in a long time, California doesn’t have the highest mark. It was tied with Louisiana the last time, but now that state has surged ahead of California to 19.8%.

In Louisiana and other states — particularly those in the South — that have above-average rates, low incomes are the primary factor. But in California the culprit is the aforementioned high costs of living, particularly for housing but also for utilities and transportation.

The Public Policy Institute of California and Stanford University’s Center on Poverty and Inequality used methodology similar to that of the Census Bureau to calculate a California Poverty Measure with similar results.

Their last foray, dated 2024, tabbed California’s poverty rate at 17.4%. However, the two research organizations took it further, calculating rates for the state’s 58 counties and devising “near poor” rates, defined as families with up to 150% of the $42,600 poverty line annual income.

Combining the poor and near poor, 35% of Californians were living in impoverished circumstances in 2024, struggling to put roofs over their heads, food on their tables and to meet other expenses in contemporary California.

That figure aligns exactly with the 13.9 million, or 35% of, Californians who qualify for Medi-Cal, California’s health care system for the poor, which now costs $222 billion and dominates the state’s budget.

Medi-Cal exemplifies both California’s efforts to lift people out of poverty and the limits of those efforts. The state cannot afford to overcome poverty by spending tax dollars. It can only soften its impact at the margin.

Poverty will decline only when the costs of housing and other living expenses moderate, or when the state’s economy — as it once did — creates jobs that are ladders to the middle class. At the moment, both factors are moving in the wrong direction, and California continues to be a two-tier society, with more than a third of its people mired in the lower tier.

Should Newsom seek the presidency, his rivals will certainly wield that fact as a political weapon.