June 2017 – Public Policy Institute of California

The Changing Face of California’s Water Leadership

California’s water managers face many challenges—from a changing climate to a growing population. We spoke with Celeste Cantú, chair of the PPIC Water Policy Advisory Council. Cantú served for more than a decade as general manager of the Santa Ana Watershed Project Authority and is stepping down this month. She talked about how the profession must change to better address these issues.

PPIC: What does it mean to be a “water leader” in California today?

Celeste Cantú: Currently, our water leaders primarily draw from an engineering skill set; their goal has been to manage discrete problems with precisely targeted solutions. That approach has proven to be too piecemeal for the water challenges we face today. Going forward, water leaders will need to be change agents. Water leaders will need to step out of their silos and see how their work fits into the larger context of the watershed, and think about upstream and downstream impacts. They’ll need “soft skills” such as conflict management in addition to technical expertise, because key to addressing 21st century water problems will be the ability to collaborate and develop solutions that benefit the larger system or watershed.

How we think about water is also changing. For most of the 20th century we managed water as if it were fuel you burned until it was gone. But water constantly circulates. Every drop delivered goes somewhere else when we’re done with it—usually, it’s treated and returned to a river, where someone downstream is likely to use that drop again. Historically, we water managers haven’t seen ourselves as interacting in that cycle―we see ourselves more in the context of our discipline or local agency. By thinking about the entire water cycle, we can manage the drop to get more beneficial uses from it. We get as many as 10 or 20 uses in the Santa Ana watershed before we release it to the ocean. It’s been said that a drop of water in the Santa Ana River is the hardest working drop in California! Collaborating across boundaries to get more uses from that water drop is the defining challenge of a successful 21st century water strategy.

PPIC: How have the state’s water challenges changed?

CC: I’ve seen an upward spiral of progress over the course of my career. Early on, we mostly were thinking about how to reduce pollution from particular sources. After getting that pretty much taken care of, we moved on to addressing more diffuse pollution that doesn’t come from one place. We’ve made progress but still have quite a ways to go. I’ve also seen an evolution toward integrated water management, an important strategy that addresses multiple water issues more efficiently and synergistically. It means the water supply agencies work with the stormwater agencies and water quality people to get more functionality out of that water drop. We’ve made progress on this as well. Finally, thanks to California’s leadership, we have a much better understanding how much water we use and how to conserve it.

PPIC: Will the next generation of water leaders face new water challenges?

CC: They absolutely will, due to climate change, but they also come much better prepared to address these challenges. They bring a greater understanding of the linked qualities that exist in nature and which define water resource management. They come better prepared for collaboration and not only solving problems but creating a new vision of resiliency. I am optimistic, and committed to sharing knowledge with the new leadership. After I retire this month I’ll be working with Water Education for Latino Leaders (WELL), which helps cultivate water leaders among elected officials working in Latino communities.

The incoming generation of water leaders is much more diverse. California needs water leaders who reflect our demographics, or they will lack standing or legitimacy. We’ll need to make some difficult choices and substantial investments in water in the future. Since we don’t have sufficient revenue streams, water managers will have to have trusting relationships with their ratepayers. People from the community are better able to develop those relationships.

Learn more

Explore the California’s Water briefing kit
Visit the PPIC Water Policy Center’s water supply page

California is Still Golden for College Graduates

Over the past 15 years, 1.5 million more people have left California than have moved here from other states, according to estimates from the California Department of Finance. Remarkably, even in the face of this outflow, California still experiences net gains of college graduates (those with at least a bachelor’s degree). Over the past five years, California ranks second among all states in net gains of college graduates from other states, even as it ranks first in net losses of less educated adults.

From a demographic perspective, these patterns are unprecedented. In contrast to California, other states that gain large numbers of college graduates, such as Texas and Florida, also gain large numbers of less-educated residents. And states that lose large numbers of less-educated residents, such as New York and Illinois, also lose large numbers of college graduates. California is unique in gaining large numbers of college graduates while losing large numbers of less educated adults.

Why does California have such disparate migration patterns? People move across state lines for many reasons, but primary among them are jobs, housing, and family. California’s strong labor market for highly educated workers attracts college graduates from other states, while the state’s high cost of housing is especially hard on workers with less education and lower incomes.

California will face a large skills gap by 2030—it will be 1.1 million college educated workers short of economic demand if current trends in the demand for skilled workers and the educational attainment of the state’s population continue. Can migration fill this gap? No, but it can help. However, in 2015–16 the University of California awarded more than 50,000 bachelor’s degrees, the California State University awarded more than 90,000, and private non-profit colleges in California awarded almost 40,000—much more than the average annual migration gain of about 20,000 college graduates.

The best way to close the skills gap is to prepare more Californians for the economy of the future. The state can increase the number of home-grown college graduates by focusing on college readiness in K–12 schools, improving completion and transfer rates at all the state’s higher education institutions, and expanding access to four-year colleges. By taking action now, the state can realize big benefits in the future: higher incomes, more tax revenue, less demand for social services, and greater economic mobility.

Learn more

Read California’s Future: Higher Education
Visit the PPIC Higher Education Center

Video: Building Urban Drought Resilience

The recent drought was long, hot, and difficult, and it brought a host of challenges to the state’s water suppliers. Yet California’s urban areas came through the ordeal fairly well, thanks to preparations since the last major drought. Last week a panel of urban water experts explored the various tools California’s cities, suburbs, and the state used to manage water over the past five years. The lessons learned can help us prepare for future droughts.

The panelists at the Sacramento event were David Mitchell of M.Cubed and a co-author of the new PPIC report Building Drought Resilience in California’s Cities and Suburbs; Wade Crowfoot, CEO of the Water Foundation; Thomas Esqueda, public utilities director for the City of Fresno, and Rosemary Menard, water director for the City of Santa Cruz. The panel was moderated by Ellen Hanak, the PPIC Water Policy Center director.

“Water suppliers build resiliency through their water supply investments, which reduce the chance of shortages developing during a drought, as well as through drought contingency plans,” said Mitchell in his presentation on the new report’s key findings. “Both are key to understanding a region’s resiliency to drought.” Around $20 billion has been invested since 1992 in urban drought resiliency, he noted.

Some key takeaways from the event:

The state’s conservation mandate resulted in strong water savings. But it threw a wrench into local drought planning and created uncertainty about state and local roles in managing drought going forward.
While the urban economy performed well over the course of the drought, most water suppliers were not prepared for the fiscal impacts.
Regular communication with water users is essential to get support for conservation, new investments, and changes to rates.
Regional cooperation is much more common among the state’s water utilities than it was in past droughts, which has helped make urban areas more resilient.
Smaller, rural communities are still struggling to recover from the drought’s effects. It will take a concerted effort to improve their ability to withstand drought and address water quality problems.

Learn more

Read the report Building Drought Resilience in California’s Cities and Suburbs (June 2017)
Read California’s Water: Water for Cities (from the California’s Water briefing kit, October 2016)
Visit the PPIC Water Policy Center’s drought resource page

Video: Attorney General Becerra on the Issues

The Trump administration has clashed with California on a range of issues, and the state’s new attorney general, Xavier Becerra, is at the forefront of the legal battles with Washington. Before a large crowd in Sacramento, Becerra talked about his views and what he has done so far on a range of issues. He spoke with Mark Baldassare, PPIC president and CEO.

Some key highlights:

Environment: Becerra said he has been most active so far on this issue and vowed to continue to be aggressive, whether it is initiating lawsuits, joining other suits, or moving forward with the Paris climate agreement, to the extent the state can do so. “I’ve got the governor’s back on anything he wants to do on the environment,” he said.
Immigration: Becerra said he favors legislation to make California a sanctuary state as long as it does not undermine the ability of local law enforcement to protect public safety by, for example, combating drug and sex trafficking.
Health care: Becerra said that single-payer health care is ultimately the right approach to coverage. “I hope California gets further along in recognizing that affordability only comes when you have universality,” he said.

Grants Awarded to Combat Recidivism

Proposition 47, passed by voters in November 2014, reclassified a number of drug and property offenses from felonies to misdemeanors. Backers of Proposition 47 argued that spending on prisons should be reserved for only the most violent and serious offenders, with more resources directed toward prevention and support programs.

Sentences were immediately reduced after the measure passed, and both the state prison and county jail populations declined. Between October 2014 and December 2016, the overall prison population dropped by 6,664 inmates (4.9%) and the jail population by 8,545 (10.4%). Although all of that decline cannot be attributed to the initiative, both populations have decreased as intended.

Proposition 47 requires any net state savings from the measure—coming from a decrease in the prison population—to go toward grants and programs for K‒12 schools (25% of savings), victim services (10%), and mental health and substance use disorder treatment (65%). It should be noted that the measure did not require counties to report or redirect any local savings that may come from the change in sentencing.

The measure required that the first transfer of savings occur by August 2016. This first transfer totaled more than $67 million and went to the three agencies tasked with distributing the grants (Table 1). The first grants were awarded this month. It’s estimated that nearly $46 million in savings will be transferred for fiscal year 2017–18. By 2019–20, long-term savings will be $75 million annually.

Administration of grants for those with mental health and substance use disorders is the responsibility of the Board of State and Community Corrections (BSCC). This independent state agency already oversees statewide regulations, inspections, and new construction funding for local jails and juvenile facilities. I focus on the BSCC grant program below because it is the largest category of Proposition 47 savings and is the only grant program that will help current offenders in the criminal justice system. However, it’s important to note that the California Department of Education has recently awarded its first year of grant funding.

All projects funded through the BSCC are required to include some combination of mental health services, substance use disorder treatment, and efforts to work with individuals before arrest or booking into jail. Priority is given to projects that also provide housing-related support and/or other community-based supportive services. At least half of the funds have to go to non-governmental community based organizations.

The BSCC is using the Proposition 47 funds to provide three-year grants, with an estimated $104 million available in funding from June 2017 to August 2020. Fifty-eight public agencies—including superior courts; school districts; district and city attorneys; health and human services; and police, probation, sheriff, and county education offices—submitted proposals. In the end, the BSCC is funding 23 projects across 17 counties, totaling $103.7 million in funding.

Projects are considered small or large depending on their funding level. Fifteen large scale projects (more than $1 million) received funding, including $6 million for the Los Angeles City Attorney’s Office to implement a health-focused drug intervention and pre-booking diversion program in five South Los Angeles locations. Eight small scale projects ($1 million) received funding, including $960,667 for Merced County Probation Department to provide mental health and substance treatment for men up to 24 years old in the Los Banos region.

The goals of these programs are twofold: showing successful outcomes for participants, and giving criminal justice practitioners and policymakers more information on effective tools for evidence-based programming. PPIC will continue to describe and follow these projects in the months and years to come.

Why Drought Makes Water Rates Rise

For those in the business of selling water, drought often brings financial strains. New research by the PPIC Water Policy Center found that more than 70% of California’s urban water suppliers experienced reduced revenues during the latest drought. We talked to David Mitchell—an economist specializing in water and a co-author of a new PPIC report on urban drought resilience—about the cost of water and drought.

PPIC: Why do customers’ water rates sometimes rise during drought—even after big jumps in water conservation?

David Mitchell: For urban water suppliers, most of their costs are fixed. They have to pay these costs whether they sell a gallon or a million gallons. Their infrastructure costs for treatment plants, reservoirs, canals, and other investments needed to get water to us don’t change with their water sales, at least in the short run. Some costs do drop with reduced water use—for example, energy used for pumping or treatment. But most facility costs don’t, and neither do most staffing costs. The bills for these fixed parts of the system still have to be paid.

There are instances in every drought where communities push back on price hikes. But customer backlash isn’t inevitable. Creating and empowering citizen advisory groups can help build understanding and consensus around water supply issues, for example. This is what the city of Santa Cruz did when it faced a backlash over its plans to invest in desalination for drought security. City leaders turned it into a win by listening carefully to the community. The advisory group met with city staff and outside consultants for more than a year. City staff were deliberative and respectful. Santa Cruz went from having little community support to significant support both in terms of a long-term plan for addressing drought and near-term changes to its rate structure.

PPIC: How does drought affect suppliers financially?

DM: It affects them in lots of ways. With rationing, the supplier will have an immediate revenue problem unless it adjusts rates or has significant financial reserves. They may have to defer capital investments. Droughts also drive up costs in various ways. Drought often degrades water quality, so treatment costs go up. A supplier may need to acquire supplemental water that is more expensive than usual supplies. Suppliers spend more repairing leaks to cut waste.

Drought also brings higher customer costs, through educational programs, rebates, and staffing to address concerns. For example, Metropolitan Water District of Southern California spent half a billion dollars on rebates to replace lawns, toilets, and other fixtures in 2015.

PPIC: What are other reasons that water suppliers need to raise rates?

DM: First of all, urban water rates have been outpacing inflation in most of California for a long time―the drought just put an exclamation point on it. It’s a trifecta of aging infrastructure, increasing regulation, and worsening scarcity. In some parts of California the cost for upgrading old infrastructure is particularly significant. For example, San Francisco is spending billions to renovate its Hetch Hetchy system.

PPIC: How can suppliers reduce the financial risks of drought?

DM: Rates have to adjust. That’s just simple math―if you sell less water but your costs are basically the same, you’re going to have to adjust your rates. Communicating to customers the reason for adjusting rates is key, though. Also, making these adjustments early is better than deferring them to the end of the drought, though this is something that many utilities still fail to do. Our new report recommends that utilities get pre-approvals for special surcharges that they can introduce during droughts—something very few utilities currently do. Cash reserves are also important since they help mitigate the need for large rate increases. Following a drought, utilities are sometimes tempted to change rates so that a larger portion of the bill is a fixed service charge, rather than a per gallon fee. Although this keeps revenues from falling as much when water sales decrease, it also weakens the price signal to encourage efficient water use—an important goal both during droughts and over the longer term.

Learn more

Federal Data Could Help Students Choose a College

Every year, hundreds of thousands of California high school seniors make significant financial decisions about whether and where to attend college. But students and their families currently have few options when it comes to knowing the financial costs and benefits of attending certain colleges and choosing certain majors.

A new federal bill would allow for a nationwide data system that could provide earnings information by college and major, among other data. The bipartisan bill, called the College Transparency Act, would allow student records from individual colleges to be submitted to the federal government and combined with earnings and financial aid information from the IRS (Internal Revenue Service) and the US Department of Education. Currently, the Higher Education Act prohibits connecting student-level information kept by colleges, such as a student’s enrollment and major, to earnings and aid data kept by federal agencies. This leaves students and parents in the dark as they try to weigh the economic benefits of colleges and majors against the rising costs of attending college.

What could a new federal data system mean for California?

California currently lacks a longitudinal statewide data system that can track students from college to work, and the information that is available to students has limitations. For example, the California Community Colleges Chancellor’s Office provides the Salary Surfer, a helpful tool that presents salary information on community college graduates by program of study, using a combination of student data and data from the California Employment Development Department. But the Salary Surfer only includes those students who attended a community college and subsequently work in California, there’s no indication of whether students transferred to a four-year college to obtain a bachelor’s degree (which would likely affect earnings), and there’s no campus-level information.

A new federal data system could have some advantages over a state-run system. The market for higher education has become more national, and more Californians are choosing colleges outside of the state. In addition, some graduates of colleges in California leave the state to work, and their earnings can’t be recorded by a state-based system. A comprehensive federal database could help students compare schools across state lines and give a more complete picture of graduates’ earnings, even if they work in another state. Currently, the federal College Scorecard offers a helpful but limited look at earnings. The scorecard only has earnings information for those who receive some sort of federal financial aid and does not show earnings by major.

The proposed data system could fill existing blind spots in California’s databases and the current federal scorecard, providing information across state lines and earnings estimates for both colleges and majors within those colleges. Such a system could help students and parents more accurately weigh the costs and benefits associated with the important and sometimes expensive decision of whether and where to attend college.

Learn more

Visit the PPIC Higher Education Center

Commentary: Strategy for California’s Next Drought

This commentary was published in the Sacramento Bee on June 8, 2017.

The recent drought brought record high temperatures and record low precipitation, pushed numerous native fish species to the brink of extinction and led to unusually large drops in groundwater levels. But the biggest milestone for urban areas was the state’s unprecedented order to cut water use by an average of 25 percent. This mandate was a blunt instrument. It didn’t reflect how well prepared most urban suppliers were, or their willingness to further reduce water use when needed.

Read the full commentary on sacbee.com.

Video: Villaraigosa on His Priorities

When Antonio Villaraigosa was asked to name the top issues most important to the state’s future, he started with the economy. His key concerns are poverty and the state’s business climate, its “byzantine and bureaucratic regulatory framework.”

Villaraigosa, candidate for governor and former mayor of Los Angeles, spoke at the Speaker Series on California’s Future sponsored by the Public Policy Institute of California (PPIC). As part of the series, PPIC is inviting all major candidates for governor to participate in a public event. Other highlights of his remarks:

Health care: He believes in universal health care but is skeptical about how to pay for the current plan before the legislature: “You’re selling snake oil when you say that single payer is something that’s going to happen any time soon.”
Infrastructure: He emphasized his long-term support for high-speed rail. He sees it as an economic development strategy to transform the Central Valley by connecting it to the two big centers of the economy, Los Angeles and the Bay Area.
Higher education: He said the state needs to look at how community colleges are funded and marshal its resources to make sure students get through the system and transfer to four-year colleges. But he’s not an advocate for making community college free to all: “It’s already free for poor people, and that’s who it should be free for.

Watch all candidate videos.

Year-Round Pell Grant Revived

As California State University and the University of California work to increase the number of students who graduate within four years, the federal government has reinstituted the year-round Pell Grant—a financial aid program that can help accomplish this goal. Increasing on-time graduation rates has benefits for both students and the state—opening up more spots in the state’s higher education institutions, reducing the total amount of tuition and fees that students pay, and allowing students to enter the workforce sooner.

The year-round Pell Grant is designed to address a specific problem: while students need to take 15 units in the fall and in the spring semester to graduate on time, many take only 12 units, which adds an extra year to their time to degree. Acknowledging this issue, some campuses are adopting the “Finish in Four” model, which encourages students to complete 30 units per year while giving them flexibility in how they meet that goal. For example, a student could take 12 units in the fall, 12 in the spring, and 6 in the summer. The year-round grant program complements this model by allowing recipient students flexibility to use Pell funding for summer coursework.

Many California students already receive Pell Grants―around 46% of students at CSU and UC, and 29% at the community colleges. The new year-round grant allows recipients to receive one-and-a-half Pell awards in one academic year. While this may not cover the full cost—six units during the summer term costs about $120 more than six units in the fall and spring terms—it makes attending more affordable.

However, it is unclear if the program will incentivize students to enroll in the summer term to stay on track for timely graduation. The program was previously only in effect for two years (2009–2011), and the limited research studying its impact suggests mixed results. Preliminary findings from a study presented at the Association for Public Policy Analysis and Management conference found a small increase of 3.5 percentage points in Pell students’ summer enrollment. Initial findings from another study presented at the Association for Education Finance and Policy conference found that summer enrollment increased by 28 percentage points. Given the short lifespan of the first year-round Pell, its impact may have been limited by students’ lack of awareness of the program and campuses’ lack of infrastructure to offer the right courses.

To ensure the program’s effectiveness, colleges need to help students use the summer semester to reach a full 30 units per year. The year-round Pell is not the only effort to help students use their summers to finish on time. For example, Sacramento State University is offering $1,000 grants for students who enroll in the summer term. Given the uncertainty of long-term federal funding for a year-round Pell, campuses may need to develop other similar programs to incentivize summer enrollment and encourage on-time graduation.

Learn more

Visit the PPIC Higher Education Center