January 2019, Volume 25, Number 1
California: Fires, Housing
California had its worst-ever fire season in 2018, including the largest mega-fire in recent history, the Camp Fire that destroyed the town of Paradise in northern California in November 2018, killed 86 people and destoyed 14,000 homes.
The Camp Fire was apparently sparked by power lines owned by Pacific Gas and Electric during high winds. PG&E charges an average $0.20 per kilowatt hour, second only to the $0.23 charged by Consolidated Edison among US investor-owned utilities. PG&E, with 16 million customers, may raise rates to cover the cost of damages caused by the Camp and other fires.
Some analysts have estimated that PG&E may have to pay $30 billion for its role in wildfires in 2017 and 2018. The Legistlature has agreed that PG&E can pass on to ratepayers the cost of 2017 fires, and is considering bills to allow PG&E to pass on the cost of 2018 fires. PG&E says much of the blame for the fires should be attributed to drought and climate change.
The Mendocino complex fire north of Clear Lake burned almost a million acres or 700 square miles in Mendocino National Fores, making it the largest fire by acreage in California's history. Lake County has had eight major wildfires in the past three years that burned over half the county's acreage.
Housing in Salinas is unaffordable for many residents due to the growing gap between house prices and incomes; 44 percent of California residents, and 47 percent of Los Angeles residents, spend over a third of their income on housing. Zillow reported that the median price of a California house was $550,000 in Fall 2018, and the median rent for a two-bedroom apartment was $1,800.
Salinas is a city of 157,000 separated from coastal Carmel and Monterey by "the lettuce curtain." Over 70 percent of Salinas residents are Hispanic, and many work in agriculture. The city hopes to build 10,000 new homes in the northeast on land that is now farmed.
A profile of 7,000-resident Huron emphasized that half of the city's children are in families that have incomes below the poverty line and that three-fourths of adults did not complete high school. Area farm workers earn $11 to $12 an hour filling seasonal farm jobs; California's minimum wage rose from $11 to $12 on January 1, 2019. Huron Mayor Rey Leon, who was a clean air advocate in Fresno before returning to his birthplace, wants to make Huron green with bike paths and trees.
MS-13 gang members killed at least 14 people, four women and 10 men, in and around Mendota between 2015 and 2017. An August 2018 police operation arrested 25 suspected MS-13 members; local residents paid bribes rather than risk retaliation after receiving demands for money. MS-13 gang members are mostly Salvadorans, and the gang's presence in Mendota was linked to the arrival of Salvadorans.
The Los Angeles County Board of Supervisors in December 2018 voted 4-1 to approve the 19,000-home Centennial project in the northwestern corner of Los Angeles county on land owned by the 270,000-acre Tejon Ranch. The development, with homes to be priced at about $500,000, drew opposition from environmentalists concerned about sprawl.
California is spending almost $11 billion to build the first 119 miles of high-speed rail between Madera and northern Kern County, employing 2,300 workers on 20 sites to lay track and build bridges. Half of Californians want to stop high-speed rail, as do two-thirds of San Joaquin Valley residents.
The cost of the San Francisco and Los Angeles project was pegged at $35 billion in 2009, and is currently estimated to cost $80 billion. Instead of the first trains rolling in 2020, they are now projected to begin operating in 2026.
Immigration. California's Attorney General in December 2018 challenged US Citizenship and Immigration Services (USCIS) effort to use receipt of welfare benefits as a reason to withhold immigration benefits such as green cards. Federal immigration law requires foreigners to support themselves, that is, to not become "public charges" in the US.
The Trump administration announced regulations that would consider food and housing benefits, in addition to cash payments, as reasons to deny immigration benefits. California's Attorney General sued the Trump administration over 40 times in its first two years, sometimes joining suits filed by other states.
California has been losing residents to other states since 2004. In 2017, some 661,000 people left California for other states, while 523,000 moved to California. More educated people are moving to California, while less educated people are leaving. A net 185,000 international immigrants arrived in 2017, up from the average 150,000 a year for most of the past two decades. In recent years, almost 60 percent of legal immigrants settling in California have been from Asia, especially China and India.
Elections. California voters faced 12 ballot measures in November 2018, including four dealing with housing. Prop 10, which would have repealed a law restricting local rent-control ordinances for single-family homes and properties built after 1995, was defeated by 62-38 percent. Voters approved Prop 12, which bans the sale of meat and eggs from animals kept in small enclosures after 2022.
Democrats swept all statewide offices in November 2018 elections, and won 60 of the 80 Assembly seats and 29 of the 40 Senate seats. Governor Gavin Newsom favors sanctuary cities, stricter gun controls and California becoming a zero emissions state.
Outgoing Governor Jerry Brown, who was the youngest California governor between 1975 and 1983 and the oldest between 2011 and 2019, is credited with balancing the state's budget. The 2011 budget approved by the Legislature dealt with a then $27 billion deficit by borrowing and raising taxes. Brown vetoed this budget, raised taxes, and persuaded voters to approve an income tax hike in 2012. The 2018-19 state budget is projecting a $6 billion surplus.
California's 2018 GDP of $2.7 trillion surpassed the UK in 2018, and the state budget is projected to have a record $15 billion surplus in 2018-19. The state faces growing inequality among residents. Prop 13 in 1978 capped property taxes, generally at one percent of the value of the house, and makes it hard to raise property taxes more than two percent a year. One result is that adjacent homeowners can have very different property tax bills depending on when they bought their homes.
Businesses, which are sold less frequently than houses, are a major beneficiary of Prop 13. An initiative on the November 2020 ballot will ask voters to end the tax break for businesses, creating a split tax roll for homes and businesses and raising up to $10 billion a year.
The steeply progressive income tax system means that the top one percent of taxpayers pay half of the state's income taxes, which are 70 percent of state revenue. Much of the state's income tax depends on capital gains, so that state revenues depend on the performance of the stock market, generating booms and busts in state finances.