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A Silicon Valley Billionaire Wants To Split California Into 3 States. But He Still Doesn't Know How It Would Work.

"Whatever it is, it's going to be better than this slowly smothering government that we have today."

Posted on July 17, 2018, at 11:27 p.m. ET

Eric Risberg / AP

Water wars, a poor Southern California, and the erasure of laws protecting abortion, the environment, and property taxes.

The consequences of a proposal to split California into three states could be far-reaching and costly, experts told BuzzFeed News, and proponents of the November ballot measure have offered few solutions to mitigate the potential fallout.

"It's intellectually fascinating," said University of Southern California political scientist Darry Sragow, "but it would be an overwhelming and essentially impossible task to perform in any reasonable amount of time."

Put forward by Silicon Valley venture capitalist Tim Draper, Proposition 9, known as Cal 3, would break California into three new states — Northern California, California, and Southern California — each of which would then adopt their own constitution.

In an interview with BuzzFeed News, Draper — who tried and failed to get a proposal to divide California into six states on the ballot four years ago — said that the current state has become "ungovernable," and blamed lawmakers in Sacramento for its poor rankings in quality of life, K-12 education, and cost of living.

Dividing California into smaller states, he said, would result in governments that would be more responsive to local needs and that would — in theory — invest more money in education and infrastructure.

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Under his Cal 3 proposal, the new state of Northern California would be composed of 40 counties stretching from the Oregon border to Santa Cruz.

Southern California would encompass 12 counties from Mono and Madera counties in the north down to San Diego and Imperial counties along the southern border, while the third state, California, would extend along the coast, encompassing six counties from Monterey to Los Angeles.

"This is an opportunity for California to have a fresh start, to be empowered to create a new way of thinking about government," Draper said.

But experts in public policy, constitutional law, political strategy, and economics say there is no evidence that breaking California into three would solve the issues Draper has cited.

Draper himself has not offered much insight into how it would work.

"Whatever it is, it's going to be better than this slowly smothering government that we have today," he told BuzzFeed News.

Tim Draper
Frederick M. Brown / Getty Images

Tim Draper

Lee Ohanian, an economics professor at UCLA and senior fellow at Stanford University's Hoover Institution, said that if passed, the plan could pressure governments to offer better services because they'd be competing for residents and businesses.

"That limits how much new state governments can tax, it limits how badly your schools can perform relative to the schools in the other two Californias, it limits how bad your housing policies are, it limits what you do with homeless, it limits how bad your infrastructure is," Ohanian told BuzzFeed News.

But, he added, unanswered questions about how the new states would actually be set up — and how they would deal with a range of issues, from the environment and natural resources to taxation and reproductive rights — make it unclear how residents and businesses would benefit.

"It's not as if any of these localities have carved up a well-conceived government and well-conceived plan for what it would look like, what services would be and what taxes would look like," he said.

The proposal is also already facing legal challenges. Last week, the Planning and Conservation League, a Sacramento-based environmental group, filed a petition to block the initiative from the ballot, arguing it is invalid because it does not comply with the state constitution.

California's ballot initiative process is designed to pass statutes and constitutional amendments, the group's attorney, Carlyle Hall, told BuzzFeed News, not to "break up the existing constitution and start over again."

The California Supreme Court is expected to review the petition Wednesday. It could decide to dismiss the petition, schedule an oral argument to discuss its merits, or take the initiative off the November ballot to allow more time to consider the case, leaving open the possibility that it could instead go before voters in 2020, according to attorney David Ettinger.

If the proposition is allowed to stay on the ballot — and then passed by voters and approved by Congress and the president — California’s existing assets and debts would be divided among the three new states. The new state governments would then have to figure out how to divvy up prison populations and water resources, and adopt new constitutions.

The California Aqueduct funnels water from the northern part of the state to the south, passing here through the Dos Amigos pumping plant in Los Banos.
Justin Sullivan / Getty Images

The California Aqueduct funnels water from the northern part of the state to the south, passing here through the Dos Amigos pumping plant in Los Banos.

Water negotiations could take years to resolve

Because much of California's rain and snow falls in the northern part of the state, residents in the south rely on a large and complex system of reservoirs, aqueducts, power plants, and pumping plants to get their water supply.

Draper said the new states "will probably get their water from wherever they’re getting it now," noting that Southern California also relies heavily on water from the Colorado River.

But experts said that negotiations over water rights and ownership would likely lead to years-long legal battles.

"Who owns the water projects that crisscross these different boundaries? Would there be one part of California that ended up with no water? That would be a little problem," said Daniel Mitchell, a professor emeritus at UCLA's Luskin School of Public Affairs.

Mitchell said that while unlikely, there are no guarantees that the new Northern California would not "turn off the tap" on aqueducts that cross the new state borders.

"There always have been water controversies in California and that's been the history of the state," he said.

Southern California would miss out on tax revenue from Silicon Valley

Dividing the state in three could also put the new Southern California state at a disadvantage financially, according to an analysis by the state's Legislative Analyst's Office (LAO).

Under the Cal 3 plan, Northern California would have a much larger tax base because Bay Area residents currently pay more in income and property taxes. And while residents of the proposed California state pay about the statewide average in income and property taxes, residents in the counties that make up Southern California pay much less.

Based on 2015 numbers, the per capita personal income tax (PIT) for Northern California would be $63,000 whereas the per person PIT for Southern California would be $45,000, according to the LAO report. The existing state had a per capita PIT of $54,000 in 2015.

"Those who would be in Southern California ... would be missing out on the tax revenue generated by San Francisco and Silicon Valley," Ohanian said. And as a result, the proposed state of Southern California would have less money to spend on education, health care, welfare, and prisons.

Ohanian said residents in San Diego, who have income levels similar to those in the rest of the existing state, would be hit particularly hard because residents in the rest of the proposed state earn much less.

"They’re going to be thinking, OK, I'm bringing home the paycheck and what am I getting out of this?" Ohanian said. "There certainly would be enough to kind of run a government, but it's certainly not in that location’s interest for anyone in that area."

Conversely, the proposal would disproportionally benefit Northern California, he added, because that new state would be able to keep more of the tax revenue that the area is currently generating.

Peggy Grande, a spokesperson for Cal 3, suggested that the issue of Southern California having a lower tax base "would be quickly resolved" through competition for residents and businesses.

"That dynamic could easily shift based on the tax structure and the business incentives that are offered," Grande told BuzzFeed News.

From abortion to property taxes, "everything is up for grabs"

In addition to figuring out how to divide California's assets, debts, and natural resources, the new states and their leaders would have to create new constitutions and decide which of the state's current laws they'd continue to uphold and which ones they'd leave behind.

"Each of these states are going to hold constitutional conventions and fight out every issue that’s ever been contentious in California," Mitchell said. "All these things, everything is up for grabs."

State laws regarding abortion, greenhouse gas emissions, parental leave, consumer rights, and Proposition 13 — the landmark 1978 state ballot measure that limited homeowners' property tax rates — would be "basically be put in a shredder," said Sragow, a veteran political strategist in the current state.

And the Planning and Conservation League — the group seeking to block the initiative — has pointed out that by starting from scratch, Californians would be getting rid of all environmental protections currently in place.

"They feel that California in its existing status is the leading state in the country on environmental matters," Hall said, and believe such groundbreaking legislation should be kept intact.

But Draper and other Cal 3 proponents have encouraged voters to see it as an opportunity for the state's residents to decide which laws work best for their region — and which laws they'd like to change.

"Now you've got a clean slate," Draper said.

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