Letter from California: Is the Golden State heading for a breakup?

Could California be headed for a breakup?  You could describe it that way.  In a state that has one of the highest divorce rates in the country, approximately three out of four marriages end in divorce it would come as no surprise that the state of California has decided to split up.

Seriously though, if Timothy Draper, a successful American venture capital investor from Silicon Valley, California and a graduate of both Stanford University and the Harvard Business School has his way, the state of California will be divided into six separate states. 

Draper has proposed this change in California’s layout due to what he describes as a state that is “ungovernable in its current state.”  In its present state, according to the California Taxpayers Association website, California has the “highest statewide state sales tax rate in the nation, the second highest gasoline tax in the nation, the highest personal income tax in the nation, the highest corporate income tax in the West, and it ranks nationally as the nineteenth highest in property tax despite Proposition 13 passed by the voters in 1978, which places limits on property taxes.” Perhaps Draper has a point with less than promising statistics like these.

Draper said smaller governments in these six individual states would be more responsive to the needs of its people compared to a larger single government in Sacramento.  He also recognizes the potential for competition among the residents of the various states which could bring about positive change.

Draper said in an interview given earlier this year in February that “Vast parts of our state are poorly served by a representative government.”  He went on to state that Californians “would be better served by six smaller state governments.” 

There are many who believe that Draper’s ballot initiative doesn’t have a chance of passing. It certainly would appear to be an uphill battle. Matt David, a Republican consultant based in Los Angeles and campaign veteran, recently said, “California is as diverse geographically as it is demographically, but ultimately we all take pride in the fact that we are all Californians.” He went on to predict “that diluting that identity between six states will never happen.”  Only one state has been successful in recent history of dividing up its state.  Virginia was split into two states, becoming Virginia and West Virginia during the Civil War.Draper will be required to gather 800,000 signatures by mid-July in order to place the proposed measure on the November ballot.  He has also said that he may wait until 2016 to make a serious run at dividing the state due to the high number of signatures needed and the short time period to gather them. Draper indicated that he “wants to make sure there’s enough time,” to secure the signatures needed.

(Courtesy of California Legislative Analyst’s Office)

(Courtesy of California Legislative Analyst’s Office)

Should Draper’s movement to divide California succeed and be approved by the voters, the final approval of Congress would still be required. Many believe that even if the voters want a division, Congress would never agree to it.

The division would necessitate adding ten senators to represent the newly created six states and would give California even greater political representation than it already garners. California currently has two senators to represent its constituents.

The division would allow Los Angeles and the surrounding coastal cities of Santa Barbara and Ventura to become West California. Central California would encompass California’s farming community while San Diego would be the largest city in the newly formed South California.  Silicon Valley, according to the documents Mr. Draper submitted to the Secretary of State’s Office, would become one of the six states and the remaining five states would be divided up regionally.  San Francisco would be included into the state of Silicon Valley.

Draper believes that California, without the division, “will get worse.” He went on to say that “California is not working.”

Draper believes that California could still benefit from passing the initiative to divide the state even if Congress takes its time to approve the split.  “We won’t have to wait for federal government to anoint six states,” says Draper, “These counties will be able to self-organize into these regions, states-to-be.”

Section four of the ballot initiative would allow for modifying the California Constitution to give charter counties the ability to be more independent when it comes to issues such as taxes and development.  Proponents suggest that counties would be able to come together as regional governments and ignore future state laws if there isn’t money to pay for them.  This would be a refreshing change for some who believe that the only goal of the Democrat governed state is to spend money even when they can’t afford to do so.  Democrat Governor Jerry Brown in January unveiled his new budget that proposes spending billions of new dollars on schools, healthcare, social services and environmental programs even though the state has the country’s highest poverty rate and 8 percent are unemployed among its 38 million residents.

Draper has been quietly gathering signatures, without much mention in the news, as the mid-July deadline draws closer.  He appears to be a man on a mission who believes in California and wants to see a better California for everyone.  “This is a gift to California,” Draper said. “If they want to do this, they’ll vote it in.  We’re getting a lot of interesting support from different regions that feel they’re not getting the services they deserve, and they’re right.” 

Only time will tell if attempting to divide California will reap a big payoff for California and for Timothy Draper, a man who appears used to reaping big payoffs by being able to recognize sound investments when he sees them, such as his investments in Skype, Hotmail, Tesla and many others.

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