California is hardly ‘over.’ But it does need to make two big changes

by Jonathan Taplin

Maybe it’s the fires, but the news seems filled with California apocalypse stories. One San Francisco based columnist recently wrote, “I’m starting to suspect we’re over.”

I beg to differ. Since 2000, California has consistently grown at a rate almost twice that of the U.S. GDP. Yes, we have had bad years, particularly in 2008, when the U.S. economy experienced the Great Recession, but we rebounded much faster than the rest of the country.

Last month the U.S. reported GDP growth of 2%, while California is growing at 4%. Is this a state that is over?

The problems that seem to have set the California declinists off are the fires and the homelessness and housing problems that are plaguing our large cities. But a reasoned analysis of these issues suggests that they are solvable problems.

Californians have risen to big challenges in the past, largely by testing new approaches to governance and public policy that were eventually embraced by the rest of the nation.

In 1947, for example, California authorized the creation of Air Pollution Control Districts in every county. This was a direct response to the notorious “Black Wednesday” in 1943, when smog in Los Angeles blinded drivers and residents thought it was a gas attack. Civic leaders knew the state could not continue to grow under such unhealthy conditions. In 1967, Gov. Ronald Reagan, who understood that an air quality act being debated in Congress was much less stringent than California’s, requested that California get a waiver to set its own higher standard. The waiver was granted and has been renewed every four years, until President Trump decided to cancel it.

Just as important, we have the resources, if carefully marshaled, to attack the issues facing California’s urban centers. Legislative budget analysts recently said the state budget could see a record $26 billion in cash reserves by mid-2021, with an unrestricted surplus of $7 billion. This is in addition to an expected $18.3 billion in the “rainy day fund” that former Gov. Jerry Brown established.

In the past year, Gov. Gavin Newsom has promoted public/private partnerships with Apple, Google and Facebook that will fund more housing in Silicon Valley. That these three corporations, among the six largest in the world (by market cap), reside in California means leveraging such partnerships could serve other public needs as well.

It’s a good thing California’s finances are in good shape, because we can expect no help or guidance from the federal government, even if a progressive wins the White House. As Norman Ornstein of the American Enterprise Institute has pointed out, “By 2040 or so, 70 percent of Americans will live in 15 states. Meaning 30 percent will choose 70 senators. And the 30% will be older, whiter, more rural, more male than the 70 percent.” In other words, the Senate could well be controlled by a conservative minority for years to come, one that would be resistant to providing any aid to progressive states like California.

Californians will have to chart our own future. That means aggressively pushing back against federal harassment. After President Trump tried to revoke the federal waiver that allowed the state to set tougher auto emissions standards, California sued the administration twice. Recently, Newsom banned new state purchases of vehicles from automakers like G.M., Toyota, and Fiat-Chrysler that sided with Trump.

Charting our future also means tackling two politically difficult challenges: developing millions of new housing units and building a secure energy grid that doesn’t start fires.

The housing crisis is partially an outgrowth of 1950’s zoning laws. Much of the land in Silicon Valley is zoned for single-family homes exclusively. Silicon Valley’s Atherton, for example, is the richest zip code in America and is entirely single-family residential use.

Last year, some Democrats tried to pass SB 287, which would have required cities to allow high-rise development along mass transit lines, but opposition by local homeowners unwilling to accept increased urban density blocked the bill. This year, proponents tried again with a more aggressive bill, SB 50, which proposed to override local zoning laws that block high density housing. Although both of these measures were stymied, this issue won’t go away and the politics will likely get harder for those who stand in the way.

On the energy front, there has been some positive movement, but it may take years to create a modern and safe energy grid.

Pacific Gas & Electric, which filed for bankruptcy protection this year, spent billions paying out shareholder dividends while neglecting to upgrade its system to modern insulated lines and modern transformers that might have prevented the devastating fires caused by power lines. In contrast, the municipally owned Los Angeles Department of Water and Power is moving toward deploying 145 megawatt battery storage systems on the grid to be able to route around interruptions caused by high winds.

Now more than two dozen California mayors and county leaders, led by the mayor of San Jose, are calling for a customer-owned power company to take over PG&E. It’s clear that municipally owned utilities have been investing in their infrastructure in ways the private utilities have not. Newsom has suggested that the state might support the mayors’ plan for control of PG&E.

California recently moved ahead of Britain to rank as the fifth largest economy in the world. This record is due in part to the combination of world-class universities, a huge, diverse workforce, openness to immigrants, a strong social safety net, and the presence of the leading engines of the new economy, like Apple and Google.

The Golden State is not over. But a strong and secure future will depend on the state’s ability to confront the forces creating the housing crisis and worsening income inequality. These challenges will require as much political commitment and ingenuity as what California mustered in the last century to create an economy that provides opportunities for millions of newcomers.

 

Jonathan Taplin is the director emeritus of the Annenberg Innovation Lab at the University of Southern California and the author of “Move Fast and Break Things.”

 

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