(The Center Square) – California’s Little Hoover Commission, a bipartisan state oversight agency, issued its much-awaited report on retail theft, finding that theft is underreported and causes inflation.
The commission’s two recommendations are the state collect more data on individuals arrested for theft, including law enforcement response, people arrested, demographics, charges, and recidivism, and conduct studies on theft prevention. Legislators had requested the LHC complete a report including these statistics as they relate to Proposition 47, a 2014 ballot measure which turned many “wobbler” drug and theft charges that could be felonies or misdemeanors into misdemeanors, but LHC couldn’t find enough data to do so.
The report says the only major source of theft underreporting data, the U.S. Department of Justice Bureau of Justice statistics on household and personal belongings theft reporting rates — which does not include theft from businesses — finds reporting in the category decreased from 39% in 2010 to 31.8% in 2022.
Business leaders point to major differences between reported burglary and other crimes, with burglary alone dropping as other violent crimes have risen since Prop. 47 as evidence that theft is underreported.
“We know that there is underreporting. Since Prop 47 was passed, murder, rape and robbery increased by more than 20% in the number of crimes. Same holds true for motor vehicle theft which is up 19.8% since the passage of Proposition 47,” said Matt Ross, Communications Director for Californians Against Retail & Residential Theft, to The Center Square. “The only significant drop is burglary at 30% So either California is doing an amazing job at stopping burglary when every other crime stat is on the increase, or there is underreporting.”
The LHC report also noted the impact of theft on small businesses and inflation.
“Some businesses have cited theft as a reason for closing stores. Mom and-pop businesses, often operating on razor-thin margins, have a smaller safety net than national retailers to recover from these losses,” wrote the LHC. “In addition to the immediate monetary losses, there are indirect costs associated with retail theft, such as enhanced security measures and an increase in insurance premiums. In extreme cases, these cumulative expenses can result in business closures, subsequently affecting local employment.”
It’s unclear the degree to which retailers are raising prices to offset theft losses, but retailers are reporting growing losses from shrinkage. The National Retail Federation’s annual retail report from the end of 2023 found “shrink” rates — losses from theft, fraud, and inventory damage — grew 14% in 2022 over 2021 to 1.6%, or $112.1 billion when applied nationwide. Because shinkage represents lost inventory, not lost profit, and businesses often have a 50% markup on goods, this means shrinkage cost approximately $168 billion in lost business revenue.
With the LHC’s conclusions “submitted to the Governor and the Legislature for their consideration” and its “recommendations often taking the form of legislation,” it’s likely the state will soon take action on improving crime reporting and data collection, which could spawn future anti-crime legislation in coming years.
