Climate Change and California’s Future

Mark Baldassare, PPIC’s president and CEO, opened the PPIC conversation on climate change this week with these remarks. We invite you to watch the video of the event.

California has found its way to broad, bipartisan agreements on environmental issues for decades. The state has been a leader in efforts to improve air quality, conserve open space, and protect the coastline. The public has typically embraced these “green” policies. In a PPIC poll in 2014, majorities of Californians said that “stricter environmental laws and regulations are worth the cost,” while fewer said they “cost too many jobs and hurt the economy.” Despite increasing evidence that climate change poses a major threat here and abroad, the federal government and international community have been slow to act. California, on the other hand, has been responding since the early 2000s with some of the most far- reaching policies in the world.

Most notably, Republican Governor Arnold Schwarzenegger joined Democratic legislators and signed AB32 – the Global Warming Solutions Act—in 2006. It committed California to reverse the trend of rising greenhouse gas emissions and to lower those emissions to 1990 levels by the year 2020. It was hailed as a watershed moment in California history that would also have far-reaching consequences nationally and internationally.

In the years that followed, the governor and legislature worked to comply with the law by adopting a number of major policy changes. These include efforts to expand renewable energy, change community development, and create a market price for carbon through a cap and trade program. In 2010, a campaign led by Democrat Tom Steyer and Republican George Shultz persuaded voters to soundly reject Proposition 23, an initiative to suspend AB32. Voters then passed Proposition 39 by a wide margin. This 2012 initiative closed corporate tax loop holes to pay for clean energy projects.

The state’s response to climate change has had consistent support from a broad coalition that cuts across racial/ethnic, economic, and regional groups—while the amount of support has varied along partisan lines. In the PPIC annual environment survey last July, 68 percent of adults said they favored the emission goals identified in AB32. Strong majorities have expressed support for the law since we first asked about it in 2006. Sixty-five percent of Californians are also in favor of the state government making its own policies to address global warming—separate from the federal government. Majorities have expressed this preference since we first asked about it in 2005. And sixty-one percent say that the state government should act right away to reduce global warming rather than wait for the economy and job situation to improve.

One reason the state’s response to climate change has had such strong support is the high level of concern about the issue among Californians. In a PPIC poll last December, 76 percent of adults said that global warming is a very serious or somewhat serious threat to the economy and quality of life in California. More than seven in 10 have expressed this view since we started asking this question in 2005.

Another explanation for Californians’ support is the perceived economic benefit of the state’s policies. In the PPIC poll last December, 43 percent of adults said that California’s efforts to reduce global warming will result in more jobs for people around the state. In contrast, 29 percent said the state’s effort will not affect job numbers, and only 21 percent said it will result in fewer jobs. Californians have always been much more likely to say that taking action on global warming will result in more jobs— rather than fewer—since we began asking this question in 2010.

Today, California climate change policy has reached another pivotal moment. Last year, the state Air Resources Board declared that California is now on track to achieve its greenhouse gas emission goals by 2020, just five years from now. Earlier this year, Governor Brown and state legislators proposed that California recalibrate its climate change policies with a new set of goals reaching farther into the future. As before, the new goals are ambitious and contentious.

In January, Governor Brown proposed three new goals to be accomplished in the next 15 years: increase the amount of electricity produced from renewable sources from one-third to 50 percent; reduce today’s petroleum use in cars and trucks by up to 50 percent, and; double the energy efficiency of buildings and make heating fuels cleaner. SB 350 by Senators Kevin de Leon and Mark Leno reflects the governor’s new goals for 2030. And SB 32 by Senator Fran Pavley would set California’s greenhouse gas emissions in the year 2050 at 80 percent below the level reported in 1990.

There is much to consider in setting these goals and we know that change of this magnitude is not easy. Governor Brown said in his inaugural address: “Taking significant amounts of carbon out of our economy without harming its vibrancy is exactly the sort of challenge at which California excels. This is exciting, it is bold, and it is absolutely necessary if we are to have any chance of stopping potentially catastrophic changes to our climate system.”

California can benefit from the innovation, technologies, and new jobs generated by the state’s leadership on climate change policy. Achieving the goals, however, will also have costs and require lifestyle changes around transportation, employment and housing decisions.

The climate change policies in place today and the proposed goals will affect every Californian. To talk about some of the experiences so far and the issues raised by a new set of climate change goals, we have put together a bipartisan panel that reflects several key perspectives. The panel includes state and local government representatives, as well as business interests from different sectors of the economy.

The state’s climate change policies are among the most difficult and important issues to surface this year. We hope that a public dialogue about the challenges that we face, the goals under consideration, and the trade-offs involved in upcoming policy choices will help California to achieve its brightest future.

California’s Future Challenges and Opportunities

PPIC hosted a day-long series of conversations this week about creating a better future for our state and highlighting the choices we need to make today to do so. After a keynote address by Nancy McFadden from the governor’s office, panelists from government, business, and philanthropy discussed California’s challenges and opportunities before a large audience in Sacramento and online. They tackled difficult topics, such as improving economic opportunity and increasing citizen engagement in government. And they discussed ways the state can build on its strengths—an improving economy, a diverse population, and a history of reform and innovation.

We will post videos of all of the sessions soon. In the meantime, we want to share the opening remarks prepared by PPIC researchers. They set the context each session:

We hope their insights will pique your interest and inspire you to watch the conference videos when they become available.

The Working Poor in California

Today saw the release of the jobs report for March. California’s March unemployment rate was 8.1 percent, unchanged from February. Employers in California added 325,100 jobs over the past year–the largest increase in the nation. This is encouraging news for state residents who live near the bottom of the income ladder because, for a variety of reasons, workers in this category tend to be most affected by economic downturns.

Federal and state safety net programs target low-income families, and our work has shown that these programs play a major role in mitigating poverty. But a closer look shows that earnings from employment—not support from the social safety net—are the predominant source of income for working-age Californians living in poverty. Among poor adults with children, after-tax earnings made up 74 percent of family resources in 2011 (when the California unemployment rate was much higher than it is today, averaging 11.8 percent). In dollar terms, this translates into annual family earnings of about $22,200. For poor working-age adults with no children, earnings made up 69 percent of resources on average, or $10,400 (the much lower amount in part reflects the typically smaller family size of this group of adults).

Regionally, across California’s three most populous counties—Los Angeles, Orange, and San Diego—earnings made up between 75 and 82 percent of resources for poor adults with children. For those without children, earnings were 70 to 74 percent of resources. In California’s Central Valley, an economically struggling region of the state, earnings still made up the majority of family resources for poor working age adults: 59 percent for adults with children and 62 percent for adults with no children.

Although similarly detailed statistics for 2014 are not yet available, we can expect that earnings play at least as large a role in the resources of California’s poor today, now that the economy is on the upswing.

Videos Highlight Water Finance Event

The drought has focused attention on water supply and highlights the crucial role of funding in supporting our water system, said Ellen Hanak, PPIC senior fellow, at a half-day conference PPIC hosted last week at the Sacramento Convention Center. The conference focused on the issues highlighted in the PPIC report Paying for Water, which pinpoints funding gaps in five key areas of water management. Hanak opened the conference with a presentation of her report, starting with an overview of how California pays for water. She noted that state general obligation bonds make up just a small part of the $30 billion spent annually on the water system.Most funding, about 85 percent, comes from local sources—rates, fees, and taxes. However, legal obstacles make it difficult for local agencies to raise money. Hanak then summarized the areas in which the state is failing to deliver the level of services California residents expect. She closed with a roadmap of recommendations for funding reform.

In the first panel discussion, experts from local water agencies and the governor’s office took up the issue of “fiscal orphans” for which there is no clear revenue stream—areas such as flood control, stormwater, and safe drinking water for small, disadvantaged communities. panelists talked about their challenges and successes in building better integrated systems in these orphan areas.

The second panel tackled a series of tough questions: How can the state partner with local and regional agencies to improve water management? What has the state done well and what can it do differently? Panelists with both state and local perspectives joined this lively discussion.

The third panel considered some of the legal challenges posed by Propositions 218 and 26. Panelists said these constitutional amendments have pushed water authorities to be more transparent in their use of taxpayer funds. But the measures and the courts’ interpretations of them have also made it more difficult to fund water solutions.

Good News on the California Economy

Information released today shows that the state’s economy in 2013 was stronger than we thought. According to revised data, California’s economy created 447,400 jobs during 2013, on an annual average basis. This is about 200,000 more jobs than the government initially reported. (Previous estimates understated this number because some jobs were erroneously excluded and because of errors inherent in sampling methodology.)

How are these numbers generated? On a monthly basis, a survey of employers helps to estimate payroll employment for California’s “nonfarm” workers (which excludes proprietors, the self-employed, unpaid family workers, farm workers, domestic workers in private households, and uniformed members of the armed services). In March of each year, these initial estimates are reconciled to actual counts of employment derived from unemployment insurance tax records, and revised estimates are released.

The effect of these revisions on the underlying employment trend is significant, with California adding jobs at an average annual rate of 3.0 percent during 2013. This is nearly double the rate that the government had previously reported (1.7%), and is significantly higher than the national rate. In fact, starting in the last quarter of 2012, California’s employment has grown at an annual rate that is 1.4 percentage points higher, on average, than the national rate. We have not seen a California-U.S. job growth gap of this order since 2009—and this time around, California is outpacing the nation. Relative to other states, the state’s job growth ranked third in 2013, surpassed only by North Dakota and Utah.

Job growth has been revised upward in most industry sectors. Traditionally, the revision process most impacts those industries experiencing unexpected growth. In 2013, those industries included health care, management, and construction. Jobs in health care and management grew 4.9 and 3.2 percentage points faster, respectively, than originally estimated. Previous estimates had not pegged either of these industries with the fastest job growth. Construction jobs grew at an average annual rate of 8 percent during 2013 (2.7 percentage points up from the initial estimate), which points toward a housing recovery that’s even stronger than expected.

In contrast, jobs in the arts, entertainment, and recreation sector grew at a slower pace than previously reported (3.7% instead of 5.5%). But even so, annual average job growth in this sector remained among the highest. The revised data also revealed that government hiring finally picked up in the last five months of the year—adding on average 25,800 jobs more than previously reported, a reversal of the trend reported in the initial estimates.

Upward revisions pushed job growth higher throughout the state. For example, in 2013 the Los Angeles-Long Beach-Santa Ana metro area is now reported to have created 50,900 more jobs than previously thought, for a total of almost 143,000 jobs created. Likewise, the San Francisco-Oakland-Fremont and the Riverside-San Bernardino-Ontario metro areas created 42,400 and 33,600 more jobs, respectively, than originally reported. This means that employment in these two metro areas grew at an annual rate of 4 percent.

Before the revisions, the state government projected that California would continue to add jobs this year at an annual rate of about 2 percent (around 340,000 jobs). In light of 2013’s stronger-than-expected job growth, we are anticipating an upward revision on job growth projections for 2014, too.

Chart source: California Employment Development – Labor Market Information Division and Bureau of Labor Statistics.