EconomyAs of 2007, the gross state product (GSP) is about $1.812 trillion, the largest in the United States. California is responsible for 13 percent of the United States gross domestic product (GDP). As of 2006, California's GDP is larger than all but eight countries in the world (all but eleven countries by Purchasing Power Parity). However, California is facing a $26.3 billion budget deficit for the 2009–2010 budget year. While the legislative bodies had appeared to address the problem in 2008 with the three-month delayed passage of a budget they in fact only postponed the deficit to 2009 and due to the late 2008 decline in the economy and the credit crisis the problem became urgent in November 2008. One problem is that a substantial portion of the state income comes from income taxes on a small proportion of wealthy citizens. For example, in 2004, the richest 3% of state taxpayers paid approximately 60% of all state taxes. The taxable income of this population is highly dependent upon capital gains, which has been severely impacted by the stock market declines of this period. The governor has proposed a combination of extensive program cuts and tax increases to address this problem, but owing to longstanding problems in the legislature these proposals are likely to be difficult to pass as legislation.
State spending increased from $56 billion in 1998 to $131 billion in 2008, and the state was facing a budget deficit of $40 billion in 2008.
California is also the home of several significant economic regions, such as Hollywood (entertainment), Southern California (aerospace), the Central Valley (agriculture), Silicon Valley (computers and high tech), and wine producing regions, such as the Napa Valley, Sonoma Valley and Southern California's Santa Barbara, Temecula Valley and Paso Robles areas.
In terms of jobs, the five largest sectors in California are trade, transportation, and utilities; government; professional and business services; education and health services; and leisure and hospitality. In terms of output, the five largest sectors are financial services, followed by trade, transportation, and utilities; education and health services; government; and manufacturing. California currently has the 4th highest unemployment rate in the nation at 9.3% in December 2008, up significantly from 5.9% a year earlier.
California's economy is very dependent on trade and international related commerce accounts for approximately one-quarter of the state’s economy. In 2007, California exported $134 billion worth of goods, up from $127 billion in 2006 and $117 billion in 2005, surpassing the 2000 peak of $125 billion for two consecutive years. Computers and electronic products are California's top export, accounting for 36 percent of all the state's exports in 2007.
Agriculture remains a very important sector in California's economy. Farming-related sales have more than quadrupled over the past three decades, from $7.3 billion in 1974 to nearly $31 billion in 2004. This increase has occurred despite a 15 percent decline in acreage devoted to farming during the period, and water supply suffering from chronic instability. Factors contributing to the growth in sales-per-acre include more intensive use of active farmlands and technological improvements in crop production.
Per capita GDP in 2007 was $41,805, ranking 7th in the nation. Per capita income varies widely by geographic region and profession. The Central Valley is the most impoverished, with migrant farm workers making less than minimum wage. Recently, the San Joaquin Valley was characterized as one of the most economically depressed regions in the U.S., on par with the region of Appalachia. Many coastal cities include some of the wealthiest per-capita areas in the U.S. The high-technology sectors in Northern California, specifically Silicon Valley, in Santa Clara and San Mateo counties, have emerged from the economic downturn caused by the dot.com bust. In spring 2005, economic growth had resumed in California at 4.3 percent.
California levies a 9.3 percent maximum variable rate income tax, with six tax brackets. It collects about $40 billion per year in income taxes. California's combined state, county and local sales tax rate is from 7.25 to 9.75 percent. The rate varies throughout the state at the local level. In all, it collects about $28 billion in sales taxes per year. All real property is taxable annually, the tax based on the property's fair market value at the time of purchase. This tax does not increase based on a rise in real property values (see Proposition 13). California collects $33 billion in property taxes per year.
In 2009 the California economic crisis became severe as the state faces insolvency. In June 2009 Gov. Arnold Schwarzenegger said "Our wallet is empty, our bank is closed and our credit is dried up." He called for massive budget cuts of $24 billion, about 1/4 of the state's budget.
California, as the most populous U.S. state and home of Silicon Valley, is one of the country's largest users of energy. However, due to its mild weather and strong environmental movement, its per capita energy use is one of the smallest of any U.S. state.
California's vast terrain is connected by an extensive system of freeways, expressways, and highways. California is known for its car culture, giving California's cities a reputation for severe traffic congestion. Construction and maintenance of state roads and statewide transportation planning are primarily the responsibility of the California Department of Transportation (Caltrans). The rapidly growing population of the state is straining all of its transportation networks, and a recurring issue in California politics is whether the state should continue to aggressively expand its freeway network or concentrate on improving mass transit networks in urban areas.
One of the state's more visible landmarks, the Golden Gate Bridge was completed in 1937. With its orange paint and panoramic views of the bay, this highway bridge is a popular tourist attraction and also accommodates pedestrians and bicyclists. It is simultaneously designated as U.S. Route 101 which is part of the El Camino Real (Spanish for Royal Road or King's Highway), and State Route 1 which is also known as the Pacific Coast Highway. Another of the seven bridges in the San Francisco Bay Area is the San Francisco – Oakland Bay Bridge, completed in 1936. This bridge transports approximately 280,000 vehicles per day on two-decks, with its two sections meeting at Yerba Buena Island.
Los Angeles International Airport and San Francisco International Airport are major hubs for trans-Pacific and transcontinental traffic. There are about a dozen important commercial airports and many more general aviation airports throughout the state.
California also has several important seaports. The giant seaport complex formed by the Port of Los Angeles and the Port of Long Beach in Southern California is the largest in the country and responsible for handling about a fourth of all container cargo traffic in the United States. The Port of Oakland, fourth largest in the nation, handles trade from the Pacific Rim and delivers most of the ocean containers passing through Northern California to the entire USA.
Intercity rail travel is provided by Amtrak California, which manages the three busiest intercity rail lines in the US outside the Northeast Corridor. Integrated subway and light rail networks are found in Los Angeles (Metro Rail) and San Francisco (MUNI Metro). Light rail systems are also found in San Jose (VTA), San Diego (San Diego Trolley), Sacramento (RT Light Rail), and Northern San Diego County (Sprinter). Furthermore, commuter rail networks serve the San Francisco Bay Area (ACE, BART, Caltrain), Greater Los Angeles (Metrolink), and San Diego County (Coaster). The California High Speed Rail Authority was created in 1996 by the state to implement an extensive 700 mile (1127 km) rail system. Construction was approved by the voters during the November 2008 general election, a $9.95 billion state bond will go toward its construction. Nearly all counties operate bus lines, and many cities operate their own bus lines as well. Intercity bus travel is provided by Greyhound and Amtrak Thruway Coach.