This new law is already a better first step than last year’s heavy-handed—and ultimately vetoed—proposal, Senate Bill 1047. The value of the new law, Senate Bill 53, however, will depend on its execution and whether California continues to update its definition of “frontier” to reflect the growing capabilities of firms entering the market. 

Senate Bill 53 defines “frontier foundation models” as models trained with more than 10^26, or 10 to the power of 26, floating-point operations (FLOPs)—a.k.a. massive computing power—and imposes heavier obligations on larger firms with more than $500 million in annual revenue. 

Among the major provisions of the law, it requires large AI developers to publish a framework explaining their safety standards and risk assessment procedures. Before deployment, a developer must also post a public transparency report, including an additional requirement for large developers to disclose risk assessments and the extent to which third-party evaluators were involved in assessing those risks. Developers are required to report critical safety incidents to the state’s Office of Emergency Services (OES), and starting from 2027, the OES will release anonymized summaries of those reports. 

By choosing disclosure and incident reporting rather than rigid technical requirements or pre-deployment approvals, SB 53 leaves space for experimentation—building rules around demonstrated risks instead of hypothetical harms. California’s law also aligns with existing national and international safety standards, rather than creating its own arbitrary standards, which helps maintain consistency across jurisdictions. Because the AI field still lacks agreed-upon standards on dangerous behavior, the law’s framework and reporting provisions are intended to produce the information policymakers need to refine their laws and craft more responsive regulations in the future. 

Concerns with SB 53

Despite the law’s strengths, the definition of a “frontier” model still leaves room for improvement. For now, the threshold of 10^26 FLOPs and the $500 million revenue threshold for large developers create a clear and narrow scope. Former Google CEO Eric Schmidt is among those who recommended the 10^26 FLOPS threshold. But, in the future, this static threshold can drift away from the capability it was meant to capture.

History has shown that algorithmic efficiency often doubles every 16 months, meaning a new update to the law will be required time and time again. If the threshold stays the same, it will miss new models that are just as powerful but trained with less compute, while still flagging older, inefficient ones. Whether the newly created California Department of Technology (CDT), charged with recommending changes to that threshold annually, can successfully convince the legislature remains to be seen.

Another concern with SB 53 is that the reporting obligations, though well-intentioned, may become a mere administrative formality, with companies producing data that checks the box without improving understanding of real issues. The law requires large developers to file quarterly summaries of their internal catastrophic-risk assessments, even when nothing has changed. Unless the information collected is analyzed and shared by the OES in ways that genuinely improve a regulator’s understanding of risk, this could just turn into a bureaucratic sludge that buries insights into true risks.

Looking beyond California: State-based AI best practices in lieu of a federal standard

A flexible scope would also help keep state rules consistent until there is a federal law. Right now, however, the states point in different directions: New York’s “Responsible AI Safety and Education RAISE Act” (A 6953), for example, also covers models with 10^26 FLOPs, but goes further to include models with very high training costs (about $100 million) and even covers smaller models if building them costs at least $5 million. Michigan’s House Bill 4668 skips the compute threshold altogether and simply covers any entity that spent at least $100 million in the past year and $5 million on any single model. 

Looking ahead, if five or 10 more states adopt their own definitions, this emerging state patchwork will only grow more complicated and difficult to comply with. The practical solution could be keeping the definition of the “frontier” aligned by following the same national and international standards. This would avoid putting developers through a dozen different playbooks.

California Senate Bill 53, even with all its flaws, may serve as that model. But the real test of SB 53 will be the value of the information it produces from transparency reports and assessments. If those reports reveal meaningful patterns in model behavior and help the state more effectively respond to risks, California could set an example for others to follow. But if those reporting requirements turn into routine filings and formal checklists, the California experiment could show the limits of transparency laws, potentially pushing legislators toward heavier tools.

The post California’s AI law works by staying narrow appeared first on Reason Foundation.

“This is not just a rebound. This is a breakthrough. We didn’t just meet expectations–we exceeded them,” boasted LAUSD Superintendent Alberto M. Carvalho.

If these test results are the definition of a breakthrough success, LAUSD’s bar for student achievement wasn’t particularly high.

Despite the recent gains, LAUSD’s latest scores show that less than 47% of students met or exceeded their grade-level standard in English Language Arts. Moreover, just 36 percent were at or above the grade-level standard in math, meaning nearly two in three students didn’t meet the basic standard.

It’s a positive that LAUSD’s test scores are about on par with California’s average statewide results from the previous school year (full 2024-25 results have not yet been released). However, statewide results have also not recovered from their post-pandemic slump, when the number of students who met or exceeded the standard for both English and math declined by four percent compared to the 2018-19 school year.

The state and school district have a long way to go to improve their academics, but producing higher test scores can be part of an effort to win back families who have left for alternatives such as charter schools, private schools, and homeschooling. Since the start of the COVID-19 pandemic, the Los Angeles Unified School District has lost more than 70,000 students.

In addition to the kids opting for other schools, LAUSD also has an absentee problem. As of the 2023-24 school year, nearly one in three LAUSD students were chronically absent, meaning that they missed 10% or more of the school year. This means that over 130,000 LAUSD students cumulatively missed at least 2.3 million days of school that school year. The problem was most prevalent among high school students, with about 37% of them categorized as chronically absent.

To the district’s credit, the latest absentee rate is an improvement from the 2021-22 school year, when more than 45% of students were chronically absent. However, the current rate of chronic absenteeism remains well above pre-pandemic levels, when only 18% of LAUSD students were categorized as such during the 2018-19 school year.

To encourage students to return to school, the district made home visits and provided wrap-around services, such as customized bussing, medical care, and even laundry services.

“For every one percent of daily attendance improvement, particularly for the most fragile students, we see a nine percent improvement in academic performance,” Superintendent Carvalho told The 74.

LAUSD needs to get students into classrooms and ensure they are learning once there. It’s a good sign that in recent years, LAUSD has adopted lesson plans based on the ‘science of reading,’ which examines how most kids learn and how to best teach them how to read. This aligns the district with decades of research on best practices associated with reading and could help many of its students, more than half of whom struggle to read.

Yet, the rollout and ensuring proper training for programs like this are essential to effective instruction. Scaling programs can be a challenge, especially for a district as large as LAUSD, which has a significant number of English learners and children from low-income families. A 2024 report by Families in Schools, an advocacy group, found that some LAUSD teachers in their survey were still unfamiliar with the term “science of reading,” admitting that they would need additional training on the concept and its associated lessons.

LAUSD has taken some crucial steps in the right direction, but much work remains to be done. Reducing chronic absenteeism and getting students to attend school regularly, along with training teachers on proven best practices that help kids learn math and reading, could be the start of a truly breakthrough success that’s more significant than this year’s slight improvement in test scores.

A version of this column first appeared in the Los Angeles Daily News

The post LAUSD celebrates mediocre test scores appeared first on Reason Foundation.

Current estimates say the high-speed rail system’s first segment in the Central Valley, connecting Merced and Fresno, may open in 2033, eight years from now and a quarter of a century after the 2008 Prop. 1A vote approving the project. The total estimated cost of the system is now over $100 billion.

At this point, it is almost universally agreed upon that it is doubtful, at best, that the high-speed rail line will ever reach the major metropolitan areas of Los Angeles or San Francisco. So, it is time to ask: How will the state wind down the project, and what should the California High-Speed Rail Authority do with the land it acquired?

First, the state needs to admit defeat. The Mercury News asked a team of 13 university economics professors and executives across the political spectrum if it was time to step away from the high-speed rail project. Twelve of the 13 said yes. The $9.95 billion approved in 2008 to start a rail project originally estimated to cost $33 billion was never realistic. As a Reason Foundation and Howard Jarvis Taxpayers Association study warned at that time, the original business plan underestimated costs, overestimated ridership, and lacked serious discussion of construction costs, train capacity, service levels, and possible speeds and travel times.

Further, for political reasons, the government decided that instead of the rail system running in a straight line between Los Angeles and San Francisco, or straight along I-5, it would veer off to run through multiple parts of the Central Valley. This was intended to build political support for the project in the region. But it increased the possible travel times, making them slower than promised, and almost doubled the cost. From there, the mistakes piled up. Rather than start with Los Angeles or San Francisco, places conducive to high-speed rail due to their large population, employment bases, existing urban transit service, and percentages of high-income workers, the state did the exact opposite, starting in the Central Valley.

Today, an orderly wind-down of the rail program would be most beneficial. Stopping the work is technically as easy as the California High-Speed Rail Authority ordering a pause on all construction activities. The state may have to pay some contractors a termination fee, but that is a fraction of the costs of completing the line.

California may also have to remove some of the tracks. Since the track is being built on state-owned right-of-way, the agency could contract with an outside entity to remove or sell it as is and let the new owners remove it. In the Central Valley, 44% of households are renters, often because there’s a lack of housing supply. Selling the rail project’s Central Valley land to homebuilders would allow the construction of many homes, which could help decrease housing prices across the region.

In walking away from the rail plan, the biggest cost will be that the state must raise revenue to pay off the bonds and the debt already accumulated from the project. Even if the project is canceled, the debt won’t be. But since studies show the train system would lose millions of dollars annually if it ever started operating, paying down the debt is still cheaper for taxpayers. It’s a painful choice for policymakers, but it is time to abandon California’s failed high-speed rail project.

A version of this column appeared in the Orange County Register.

The post Walking away from the California high-speed rail project would be best for taxpayers and the state appeared first on Reason Foundation.

This gridlock is more than just a pain for drivers. It harms the state’s economy. Inrix finds traffic congestion costs the average Los Angeles driver 89 hours a year and drains $8 billion annually from the economy. The traffic also limits the number of jobs accessible to individuals. For instance, without traffic delays, workers could reach four times as many jobs as they can today.

Over the past decade, residents have been leaving California for various reasons. A 2024 poll by the University of California-Irvine found that 50% of the state’s residents are considering leaving. While traffic congestion isn’t the primary reason for fleeing, it is a contributing factor as people consider high housing prices, the employment opportunities they’ll have in their area, their commute times from places they can afford to live, and the quality of life they’ll have with those commutes.

Decades ago, California’s solution to reduce congestion was building high-occupancy vehicle (HOV) lanes, or carpool lanes. Initiated in the 1970s, the state added carpool lanes to hundreds of miles of highways, including I-5, I-405, SR 22, and SR 55.

Unfortunately, California has learned that HOV lanes suffer from the so-called Goldilocks phenomenon. They’re never quite right. Carpool lanes tend to experience too much traffic (they are too hot) at rush hour and too little traffic (they are too cold) during off-peak hours. If speeds in HOV lanes are the same as those in the congested general lanes, drivers have little incentive to carpool. When the lanes are underused, drivers stuck in traffic in the general lanes rightly view the HOV lanes as a poor use of valuable roadway space.

In recent years, the California Department of Transportation (Caltrans) has taken a smart approach to reducing congestion by converting HOV lanes to high-occupancy toll lanes. It is also constructing new toll lanes in some of the region’s busiest highway corridors. The high-occupancy toll lanes still allow carpools, vanpools, and buses to travel in them for free, while also allowing single-occupant vehicles to use them for a toll.

One of these initiatives is the proposed I-5 Managed Lanes Project, a 15.5-mile corridor between Red Hill Avenue and the Orange-Los Angeles County line. One key to the project’s likely success is a variably priced toll, which would rise and fall based on traffic congestion and ensure the volume of cars in the lanes is always just right.

Overall, the proposed express lanes would reduce congestion along the I-5 corridor. Less stop-and-go traffic also means the project would reduce emissions. The revenue generated by solo drivers using the toll lanes would be used to maintain the lanes and fund improvements in that corridor that the state doesn’t have money for otherwise.

Transportation planners have wanted to implement pricing since the 1970s. It is the best way to fund highways sustainably and address traffic congestion. With today’s all-electronic tolling technology, collection costs are low. As Orange County express lane drivers already know, motorists can establish an account, place a small transponder on their vehicles, and the tolls are automatically deducted as they pass under a gantry (sticker reading devices).

The SR 91 express lanes pioneered these lanes and have been highly successful. Ideally, Southern California would have a network of connected express lanes that drivers and businesses could use anytime they need to guarantee themselves a congestion-free trip. The proposed I-5 lanes would help reduce the travel time of emergency vehicles, allow us to get to a child’s soccer game or pick them up at daycare, and ensure we can deliver an urgent package or get to an important appointment on time.

Southern Californians need reliable, free-flowing trips that make it easier to access jobs and services and improve quality of life. Adding more express lanes can help.

A version of this column appeared in the Orange County Register.

The post Proposed I-5 express lanes would help Southern California’s drivers and economy appeared first on Reason Foundation.

But despite what United Teachers Los Angeles and others might claim, LAUSD’s budget woes aren’t due to a lack of funding. According to the latest federal data, LAUSD received nearly $26,900 per student in fiscal year 2023. Taxpayers sending over $537,000 for each LAUSD classroom of 20 students is enough to provide a good education for kids.  

Instead, LAUSD’s problem is its lavish spending. Between 2012-13 and 2024-25, the district’s enrollment plummeted by 164,000 students, yet it added over 17,000 non-teachers such as instructional aides, school counselors, and social workers. The district also doled out a 21% pay raise to teachers in 2023, knowing that billions in federal COVID-19 pandemic relief dollars were set to expire the following year.   

California ranks fourth in the nation in public school spending growth since 2002, which has masked LAUSD’s financial mess. However, after two years of budget deficits and the current economic uncertainty, the state budget is projected to tighten in the coming years, and the district’s mishandling of COVID-19 reopening has accelerated its enrollment declines. 

LAUSD can do a few things to get its fiscal house in order, or it risks the same fate as school districts like Oakland and San Francisco, which are on the brink of insolvency.   

For starters, LAUSD needs to cut spending to sustainable levels. On average nationally, labor accounts for roughly 80-90% of typical public school budgets, so personnel reductions are unavoidable for LAUSD. This is never easy, but can be done in ways that minimize disruptions to classroom learning, such as trimming back on administration and non-instructional school staff. Regular attrition, such as retirements and resignations, can also be leveraged to minimize the need for pink slips.

LAUSD can also save money by reducing its facilities footprint. Research published by Available to All indicates that nearly half of the district’s elementary schools have experienced enrollment declines of 50% or worse in the past two decades, leaving an estimated 160,000 empty seats. 

Underutilized schools are costly to maintain and spread the school district’s financial resources thin, which can result in fewer elective classes and enrichment opportunities for kids. School closures are politically challenging but necessary if LAUSD is going to get on a sustainable path.  

Next, LAUSD can mitigate enrollment losses by giving families more options. States and school districts across the country are moving away from residential assignment, where students are zoned to schools and have limited or no options. Public school open enrollment gives students access to seats in schools regardless of where they live, putting parents in the driver’s seat and creating a competitive environment where public schools are incentivized to innovate, improve and attract students.

A study on LAUSD’s Zones of Choice program—a limited form of open enrollment—suggests that embracing an expansive policy would pay dividends for the school district. In their working paper on the impact of the Zones of Choice program, the University of Chicago’s Christopher Campos and the University of California-Berkeley’s Caitlin Kearns found significant gains in student achievement and college enrollment, which they attribute to increased competition. 

“The evidence demonstrates that public school choice programs have the potential to improve school quality and reduce neighborhood-based disparities in educational opportunity,” the researchers conclude.

Next, LAUSD can mitigate enrollment losses by giving families more options. States and school districts across the country are moving away from residential assignment, where students are zoned to schools and have limited or no options. Public school open enrollment gives students access to seats in schools regardless of where they live, putting parents in the driver’s seat and creating a competitive environment where public schools are incentivized to innovate, improve, and attract students.

A study on LAUSD’s Zones of Choice program—a limited form of open enrollment—suggests that embracing an expansive policy would pay dividends for the school district. In their working paper on the impact of the Zones of Choice program, the University of Chicago’s Christopher Campos and the University of California-Berkeley’s Caitlin Kearns found significant gains in student achievement and college enrollment, which they attribute to increased competition. 

“The evidence demonstrates that public school choice programs have the potential to improve school quality and reduce neighborhood-based disparities in educational opportunity,” the researchers conclude.

The solutions to LAUSD’s fiscal woes are straightforward—spend less, give parents choices, and focus on academics. The challenge will be overcoming objections from United Teachers of Los Angeles and other groups that oppose anything that disrupts the failing status quo. However, adopting these reforms would be a win-win for the district and students and would be worth the political fight.

A version of this column first appeared at the Los Angeles Daily News.

The post How LAUSD can deal with budget deficit, declining enrollment appeared first on Reason Foundation.

Articles, Research & Spotlights 

• Threats to California Public Pension Reforms
• Washington’s Unprecedented Move Will Increase Pension Costs
• San Diego Needs to Manage Pension Costs
• How Are Public Pension Costs Shared Between Employers and Workers? 

News in Brief
Quotable Quotes
Data Highlight
Reason Foundation in the News
Contact the Pension Reform Help Desk

Articles, Research & Spotlights

California Bills Would Increase Taxpayers’ Costs and Public Pension Debt

In 2012, California lawmakers, headed by then-Gov. Jerry Brown, committed to important pension reforms that would place the state’s massive system of pensions on the path to full funding. At the time, California’s pension debt had ballooned to over $200 billion, and governments at all levels were seeing required cost increases cut into their annual budgets. The reform, known as the Public Employees’ Pension Reform Act (PEPRA), slowed the growth of ongoing costs by placing prudent limits on the benefits promised to new workers. With California pensions around 80% funded by the latest reporting, the state still has a long way to go to reach the intended endpoint of PEPRA reforms. However, lawmakers are beginning to undermine these cost-saving measures. Two bills currently under consideration, Assembly Bill 569 and Assembly Bill 1383, would remove the PEPRA provisions that protect government budgets and taxpayers from unfunded pension promises. Instead of reopening the floodgates to more pension debt, California policymakers need to stay the course on the landmark PEPRA reform.
TESTIMONY: Reason Foundation Comments on Assembly Bill 1383 – PEPRA Repeal

Washington Lawmakers Passed a Ticking Time Bomb for Pension Solvency and the State Budget

Washington is one of the best states when it comes to pension funding, but a new short-sighted bill puts years of prudent funding policies at risk. Engrossed Substitute Senate Bill 5357 seeks to reduce immediate costs on public employers by increasing the assumed rate of return for the state’s pension systems and taking a holiday on paying off existing debt. The problems with this approach are twofold: there appears to be no basis for an increase in investment returns, meaning that this change will likely increase costs in the long run and shift them to future taxpayers, and the existing debt was only one or two years from being fully paid off. In this commentary, Reason Foundation’s Ryan Frost explains that all public pensions have been downgrading their market return assumptions, and Washington would be the first to raise its assumed rate of return. Making this move may reduce costs today, but it will ultimately prove extremely costly for governments and taxpayers.

San Diego Doesn’t Have to Accept Spiraling Public Pension Costs

San Diego is unfortunately re-entering a public pension crisis, despite significant past efforts to resolve it. A court decision forcing the city to reactivate its defined benefit pension system has brought back the inherent structural weaknesses that previously led to crippling levels of public pension debt. But Reason’s Mariana Trujillo explains that escalating pension costs are not a foregone conclusion. Successful reforms in other cities and states demonstrate that these risks can be contained. They’ve achieved this by adopting risk-sharing approaches that more fairly allocate financial obligations between public employees and their employers.

Sharing Defined Benefit Pension Costs: A Survey of Public Sector Practices

Pensions generally require contributions from both employers and employees, but not all pension plans distribute these contributions equally between the two parties. New research from Reason Foundation’s Rod Crane examines the employee/employer contribution share for 230 state and locally administered public pension plans. The results show that, on average, employees tend to bear about half of the normal cost of pension benefits when debt-related costs are not included. However, with employers typically covering the remaining costs, as well as any additional debt-generated expenses, governments bear on average 75% of the total annual costs. While these results vary significantly from plan to plan, pension debts have imposed a substantial fiscal burden on government employers.

News in Brief

Partisan Politics Shapes Pension Fund Voting

Using newly mandated Securities and Exchange Commission filings, a study from Northwestern University examines how political affiliation affects the voting outcomes of U.S. public pension funds. The paper uses the political party of a state’s governor to apply a loose political leaning label for a pension board. While this method may not be a perfect predictor of a board’s political leaning, it does help identify some potentially useful correlations. When it comes to decisions on staff compensation, Democratic-aligned funds are ~five percentage points more likely to vote against management and respond strongly to proxy advisor recommendations. In contrast, data indicate that Republican-aligned funds—especially in states with anti-ESG, or environmental, social, and governance, laws like Florida and Texas—anchor their voting behavior to firm performance and are less influenced by proxy advisors. The study also finds that underfunded public pension plans are more likely to engage in share lending—potentially diluting governance influence—though this is driven by funding status, not political alignment. Read the full report here.

Quotable Quotes on Pension Reform

“Having said all of that I also don’t think we should defend things the way they’re working just because it’s the way it’s been done […] You know when I was first State Treasurer I inherited what I thought was a broken dysfunctional pension system. And I fixed it and it was super hard…all constituencies in my party and the entire legislature in Rhode Island, which was mostly Democrats, told me to leave it alone, that politics are too tough. leave it alone […] But I couldn’t…I just couldn’t sleep at night.”
—Gina Raimondo, former U.S. Secretary of Commerce and Rhode Island governor, quoted in “Raimondo Spoke to Harvard Students About Her Success in Rhode Island” GoLocal Prov News, April 14, 2025. 

“First priority is to keep funding the pension system, so people have, at a minimum, their pension.”
—Rep. Mikie Sherrill (D-NJ), quoted in “What’s the potent sleeper issue in this year’s NJ governor’s race? COLAs” North Jersey, April 28, 2025. 

Data Highlight

Each month, we feature a pension-related chart or infographic. This month, Reason’s Rod Crane examines how public pension costs are shared between employers and employees. Using 2023 data, the chart shows that employees cover an average of 51% of normal costs (the estimated cost of benefits earned) but only 25% of total costs when unfunded liabilities are included. The full commentary is here.

Reason Foundation in the News

“Public pension systems should keep politics of all kinds out of their investments to serve their core duty of maximizing investment returns to provide workers with the retirement benefits they’ve been promised while minimizing financial risks for taxpayers. The modern guardrails and reporting standards in this bill can significantly strengthen these vital systems.”
— Zachary Christensen, Pension Integrity Project Managing Director, quoted in “Runestad introduces bill to ban ‘financial DEI’ investing for Michigan’s public pension funds” Michigan Senate Republicans, May 8, 2025.

“The benefit changes back then helped bend the cost and liability curves and built in some risk protections around new hires, but they didn’t fundamentally pour a bunch of money in to solve the current underfunding. It was a Phase 1 reform and then their leadership team left and they stopped pushing additional phases.”
— Len Gilroy, Reason Vice President of Government Reform, quoted in “New Mexico’s Pensions Remain Problematic” Rio Grande Foundation, May 12, 2025.

“Connecticut still has $40 billion in unfunded pension liabilities and another $20 billion in unfunded retiree healthcare liabilities to pay—the second highest in the country in per capita terms, equivalent to $16k per resident. Interest on that debt compounds at 6.9% annually. Any pause or reduction in pension contributions carries long-term costs.”
— Mariana Trujillo, Reason Foundation Policy Analyst, “Opinion: Why Connecticut Risks Return to Fiscal Chaos,” Hartford Courant, May 8, 2025.

The post Pension Reform News: Threats to California’s public pension reforms appeared first on Reason Foundation.

The 2012 Public Employees’ Pension Reform Act (PEPRA), signed by Gov. Jerry Brown, improved the long-term stability of the state’s public pension plans, helping slow runaway costs that had become an insurmountable burden on state and local budgets. 

However, before the full savings from these reforms have been realized, some lawmakers, partnering with public labor unions, are trying to undo them. These reversals would thrust California back into the same pension funding quagmire it was in over a decade ago.

At the time of the 2012 reform, governments at all levels were reeling from exploding public pension costs, caused mainly by irresponsible and unfunded benefit increases granted around the turn of the century. State policymakers needed to slow the growth of pension costs, which they did by modifying the benefits promised to future workers. Specifically, the law limited the size of retirement benefits that could be promised to prospective hires, increased the age at which new hires could retire, and set a minimum for the amount employees must contribute.

The impressive cost savings from the reforms are undeniable. The California Public Employees’ Retirement System, CalPERS—the country’s largest public pension plan—estimates that PEPRA saved its employers, i.e., taxpayers, up to $5 billion over the last decade. Taxpayers are supposed to see even more savings over the next 10 years. CalPERS estimates PEPRA will reduce taxpayers’ costs by $20 billion to $25 billion. However, the reforms must remain in place to realize these savings. 

Unfortunately, two current proposals in the state legislature threaten to derail the pension reforms and increase taxpayer costs. Assembly Bill 569 would allow local governments to circumvent the benefit limits set by PEPRA, opening the gates to the same costly and unfunded pension increases that created the state’s massive public pension debt in the first place.

Assembly Bill 1383 would cause even more harm to taxpayers and PEPRA by undoing limits on pension benefit increases, retirement age adjustments, and contribution requirements for all public safety members enrolled in CalPERS. The bill aims to give police and firefighters costly pre-2012 pension benefits, which have already proved financially untenable for taxpayers and governments.

The proposals would worsen California’s pension funding problems. While significant funding progress has been made since the 2012 reforms—state pensions have improved from 71 percent funded to nearly 80 percent funded— the state’s unfunded pension liabilities jumped above $244 billion in 2009 and haven’t come back down.

Supporters of these new bills to increase pension benefits argue they’re needed to help recruit and retain public workers. However, there is no evidence that handing out costly benefits increases will do that. Surveys of incoming and outgoing public workers consistently demonstrate that pensions are not among the top considerations for new hires or those leaving government jobs. Public workers say they are far more interested in higher salaries, better workplace conditions, and work-life balance, not more pension benefits.

Opening the door for pension cost increases and more debt, while the state is $285 billion short of having the money needed to pay for the retirement promises it has already made to public workers, would be highly irresponsible to government employees and the taxpayers who will ultimately foot the bill.

Maintaining the PEPRA reforms is part of the state’s best hope for fully funding public pension benefits and eliminating debt. Unwisely unwinding PEPRA’s successful pension reforms before the full funding goal is realized would increase unfunded pension liabilities and cost state taxpayers tens of billions in the years ahead.

A version of this column appeared in the Los Angeles Daily News.

The post California bills would increase taxpayers’ costs and public pension debt appeared first on Reason Foundation.

The case of San Diego’s public pension costs and reforms

San Diego previously tackled its pension issues through a 2012 voter-approved reform that replaced traditional defined benefit (DB) pensions with 401(k)-style defined contribution (DC) plans for newly hired employees. The reform reduced the long-term risks of underfunded public pensions and provided employees with more control over their retirement benefits. However, labor unions challenged the pension reform, suing the city for failing to adhere to rules requiring negotiations with them before altering any terms of employment (even for future hires). 

In 2021, the courts reversed the reform, mandating the reinstatement of defined benefit pensions and converting the retirement benefits of employees hired under the defined contribution system back into pension promises.  

After years of steady financial recovery, San Diego is now expecting to have a $136 million deficit in 2025 and a $258 million deficit in 2026, with more deficits to come. The San Diego Department of Finance estimates that from 2026 to 2030, city budget deficits could total $1.03 billion. This grim outlook has compelled the city to implement hiring freezes and impose significant departmental budget cuts, even to public safety.

The return of defined benefit pensions comes with risks. Unlike a defined contribution plan, the DB guarantees particular lifetime payments, but the costs depend heavily on assumptions about investment returns, salary growth, and life expectancy. When those assumptions miss the mark, costs explode—a risk often borne entirely by taxpayers. 

San Diego is already feeling the pressure. The city’s pension plan is only 74% funded, with a $3.4 billion shortfall, meaning it has the funding to pay for 74% of the benefits already promised to workers. This financial burden has grown yearly despite the city making the actuarially required pension contributions in full. The numbers speak for themselves: San Diego’s annual pension costs have climbed to $533 million. Without structural changes, the city is trapped in escalating public pension liabilities.

Risk-sharing success stories from state pension systems

Managing the intrinsic risks of guaranteeing defined benefit pensions to public employees has been a persistent challenge for state and local governments. Some public pension systems have found much success by creating a new tier in the public systems that better distributes risk between employees and employers, and has automatic triggers adjusting contributions to prevent underfunding.

The Wisconsin Retirement System, for example, ties retiree cost-of-living adjustments (COLAs) directly to investment performance. When investment returns fall short, retirees see a reduction in benefits, slowing the accumulation of unfunded liabilities. As a result, Wisconsin’s pension system remains consistently funded at 100%.

Arizona’s Public Safety Personnel Retirement System took another approach, instituting a 50/50 cost-sharing structure where both employees and employers contribute equally to any increase in pension costs, including paying down unfunded liabilities. This ensures that rising costs don’t become an unchecked burden on taxpayers. The system also mandates a strict 10-year amortization schedule for new debt, ensuring liabilities don’t linger for decades, accruing costly interest.

Utah’s pension reforms offer another instructive model. In 2011, the state introduced a plan allowing new hires to choose between a 401(k)-style defined contribution plan or a DB/DC (defined benefit/ contribution) hybrid plan. In the latter, employer contributions are capped at 10% of payroll, and any additional costs beyond that must be covered by employees. The result? This approach ensures that new hires aren’t adding to escalating costs for the state. Today, these plans are 96% funded—far stronger than most pension plans, with the most recent median funded ratio at 76%.

San Diego should follow these examples and implement risk-sharing policies to tame the risks posed by the reopening of its defined benefit plan. A properly designed retirement system ensures that employees share not only the benefits but also the risks of traditional defined benefit plans. These policies wouldn’t just stabilize pension costs; they would protect essential city services from being cut back to shift taxpayer funding to cover rising pension obligations.

Risk sharing is just one element of designing a sound pension system. The key is ensuring that appropriate contributions are made and sound assumptions are used to determine these contributions. Low-risk and market-aligned investment returns are another essential element.

The forced reopening of San Diego’s defined benefit system will expose taxpayers to rising costs, but risk-sharing reforms could help prevent history from repeating itself. Without pursuing new pension reforms, San Diego is once again gambling with taxpayers’ money—and this time, the odds appear worse than ever. 

Editor’s note, May 6, 2025: This piece was updated with the latest San Diego and national data on funded ratios.

The post San Diego doesn’t have to accept spiraling public pension costs appeared first on Reason Foundation.

The Annual Highway Report assesses pavement conditions, safety, traffic congestion, deficient bridges, and the costs associated with roads and bridges across all 50 states in 13 categories. In the latest report, only Alaska—which is not connected to the contiguous 48 states and faces harsh winters and high costs—ranks lower than California.

California’s highways rank in the bottom 10 states in all key pavement condition categories. California’s roads are the worst in the nation in terms of urban arterial road pavement condition, 47th out of 50 in urban Interstate highway pavement condition, 46th in rural Interstate condition, and 41st in rural arterial pavement condition. With some of the nation’s highest gas taxes in the country, fixing potholes and resurfacing roads shouldn’t be too much for drivers to ask.

Miles traveled and traffic congestion are returning closer to pre-COVID-19 pandemic levels, and, unfortunately, California ranks 44th out of the 50 states in traffic congestion. The average driver in the state spends 60 hours a year stuck in traffic congestion, which wastes money and harms the environment. Ultimately, California’s poor roads hurt the economy, increase vehicle maintenance costs for families, and cause people to waste time and fuel stuck in traffic jams.

If you’re looking for anything resembling good news in the report, California is in the middle of the pack — 25th in structurally deficient bridges. But that’s about it. Regarding safety, the state is a disappointing 33rd in urban road fatality rate and 28th in rural road fatality rate.

The disappointing rankings in safety and pavement conditions are even more striking given that California’s highways are among the most expensive in the nation. In spending, California ranks 43rd, meaning it spends more than 42 other states, in capital and bridge disbursements, which cover the costs of building new roads and bridges and widening existing ones. In maintenance spending, California ranks 44th on costs like repaving roads and filling potholes. California’s administrative disbursements, which include office spending that does not contribute directly to road improvements, rank 35th nationwide.

A state can have above-average spending while maintaining a high-quality system. For instance, Utah ranks 47th in capital and bridge disbursement funding, worse than California. However, since all of Utah’s pavement conditions are in the top 10, the state’s overall ranking is a very good 8th in the nation. Neighboring Nevada ranks 36th in capital spending and 49th in administrative expenditures. Yet, because all its pavement conditions are in the top 20, Nevada’s overall ranking is 24th. 

High spending alone is not California’s problem. The problem is that higher spending is not improving pavement quality, reducing traffic congestion, or reducing fatalities.

Evaluating its overall performance and cost-effectiveness against other large and similarly populated states is concerning. California falls significantly behind in cost-effectiveness and road conditions compared to Florida, which ranks 14th in the Annual Highway Report, and Texas, which is 25th overall. Even New York and New Jersey, often near the bottom of the Annual Highway Report’s rankings, now perform better than California.

When it comes to improving in the road condition and performance categories, the state should take immediate steps to improve pavement conditions. It also needs to find a way to reduce urban traffic congestion by adding new capacity and better managing existing highways.

While California may never be able to dramatically lower its road construction and maintenance costs to levels of the average state, it can do a lot more to reduce administrative costs and improve the condition and safety of its highways and bridges. Fixing potholes, smoothing pavement, modernizing deficient bridges, and lowering traffic fatalities are reasonable expectations for drivers and taxpayers. 

A version of this commentary first appeared in the Orange County Register.

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My name is Jude Schwalbach, and I’m a senior education policy analyst with Reason Foundation, a national 501c(3) nonprofit policy research organization. I’m testifying on California Senate Bill 399.

California Senate Bill 399 would make the state’s public school interdistrict transfer program, which allows students to transfer to public schools in districts outside of their residentially assigned school districts, more transparent and accessible. It would require the California State Superintendent of Public Instruction to publish an annual report on the Department of Education’s website, showcasing student transfer data at the school district level. This report would show the number of transfer applications granted, rejected, and withdrawn, and why transfer applicants were denied.

It would also detail the number of actual interdistrict transfer students, disaggregated by student demographics and sub-groups, such as low-income students and English Language Learners. If codified, California would be the fourth state in the country to adopt this level of transparency, representing the gold standard in open enrollment reporting provisions.

Overall, it’s a strong bill that would help parents and lawmakers. The California Department of Education publishing an excellent annual open enrollment report would put school districts’ transfer practices at the fingertips of families looking for transfer information and policymakers seeking to improve public schools for the state’s students.

However, Senate Bill 399 could be improved. In addition to showing the number of interdistrict transfers, the report should also include the same data regarding transfers that occur between two schools inside the school district (within-district transfers). 

While California already publishes data on the District of Choice program, it publishes no data on the much larger interdistrict permit system, which was used by almost 156,000 students during the 2018-19 school year, the last year with data available.

Moreover, according to California’s Legislative Analyst’s Office’s 2016 and 2021 reports, demand for interdistrict public school transfers is growing. The Interdistrict permit program added approximately 16,000 participants, or an increase of 11%, between the 2014-15 and 2018-19 school years.

Detailed transfer data, like those proposed in SB 399, can help families better understand the public school options available and show policymakers and taxpayers enrollment trends. 

Wisconsin and Oklahoma publish annual student transfer reports showing similar transfer data to that proposed in California’s SB 399. Notably, Wisconsin has published its report for nearly three decades, and state policymakers have used this information to modernize existing transfer laws to improve public school students’ experiences.

For example, participation in Wisconsin’s open enrollment program, which allows students to transfer to any public school with an open seat, jumped by almost 20% after policymakers adopted a secondary application time period for transfers because the annual reports demonstrated a high demand for the program that couldn’t be served by one application window.  

Adopting these types of detailed open enrollment reports in California would help create more opportunities to improve public school students’ transfer options and ensure that the interdistrict transfer process is fair and transparent to all families. 

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Frustratingly, San Diego’s fiscal conundrum was largely addressed by a voter-approved pension reform that was later undone by public worker unions through the courts. In 2012, San Diego voters passed Proposition B to tackle rising pension costs by replacing traditional taxpayer-guaranteed pensions with 401(k)-style-defined contribution plans for most newly hired city employees — like most private sector workers receive.

The reform reduced city debt by eliminating the long-term risks associated with underfunded pensions and giving new public employees flexibility and control over their retirement benefits. However, labor unions opposed the reform and in 2021, courts mandated that San Diego reinstate traditional pensions and convert the retirement benefits of employees hired under the defined contribution system into pension promises taxpayers must pay for.

This reversal carries significant financial consequences for taxpayers and the city’s budget. Incorporating affected employees into the legacy pension system is expected to cost San Diego $142 million, most of which became debt, and raised the city’s required yearly pension contributions for 2025 by $48 million. This year, San Diegans are paying $490 million for city pensions. Any salary or pension benefit increases for city workers would further drive up short- and long-term costs.

San Diego’s pension system improved during the reform, increasing from only 66% funded in 2012 to 82% funded in 2021. Today, however, the San Diego City Employees’ Retirement System is back down to 75% funded, sticking taxpayers with $3.3 billion in pension debt.

San Diego’s rising public pension costs are more than abstract balance sheet numbers; they pose real constraints that force difficult budget choices. Three-quarters of San Diego’s expenses are inflexible and committed to pension and bond payments, which must be made, and public safety, where politicians and taxpayers usually don’t want significant cuts.

As pension costs rise, city leaders looking to balance the budget must cut spending in more flexible categories, such as services and infrastructure. City leaders are also increasing parking meter rates, extending trash collection fees, and making other moves to raise revenues. To pay for rising pension costs and to mitigate deficits, San Diego also announced hiring freezes and department cuts that could result in as many as 1,500 layoffs from the city’s workforce of around 12,000.

As public pension costs continue to rise, the city confronts an unavoidable reality: either increase taxes, reduce services or pile more debt onto future taxpayers. City Council President pro Tempore Joe LaCava noted last month, “The Five-Year Financial Outlook makes it clear that projected revenue is insufficient to meet the needs of our city. The takeaway is unmistakable: We must cut expenses, and some cuts will be deep—very deep.”

The union leaders who advocated reopening the pension argue that the rising costs will help recruit and retain public employees, citing higher turnover rates during the Proposition B era. However, this narrative overlooks broader labor market trends. Public employee turnover has risen nationwide, including in cities and states that provide traditional pensions. A workforce report from the city of San Diego found its turnover rate is just slightly above the national average and recommended wage increases, telework expansion and parental benefits — not pensions — as the best solutions to attract and keep workers.

The city’s budget is increasingly dedicated to paying for past commitments, forcing today’s taxpayers to finance the retirements of yesterday’s workforce at the expense of current and future investments. As it reinstates traditional employee pensions, San Diego must choose between raising taxes, cutting services, or pushing more debt onto future taxpayers. Without reforming its pension system, San Diego will only get further trapped in this cycle of rising pension costs for taxpayers and challenging budget trade-offs.

A version of this column appeared in the San Diego Union-Tribune.

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The National Center for Education Statistics (NCES) expects these downward trends in public school enrollment to continue. It projects statewide enrollment losses of 15.7 percent by the 2031-2032 school year.

With decreased enrollment and federal pandemic relief funding expiring, Southern California school districts face severe budget crunches. State and local budgets for the next fiscal year are still being developed, but LAUSD’s projected deficit is $94.5 million, Long Beach Unified’s expected deficit is $54 million, and Santa Ana Unified’s is facing a whopping $180 million budget deficit.

School districts facing these massive deficits should be looking to right size. However, new data from Reason Foundation shows that California’s public schools have been slow to respond to the red ink and loss of students. In fact, California has actually closed fewer public schools in recent years. In total, California closed 31 public schools in 2019-2020 but only closed seven public schools statewide in 2023-2024, which is even fewer public school closures than in smaller, rural states like South Dakota and Utah.

Today, California has thousands of underutilized schools. Statewide research published by The 74 shows that 1,400 public schools lost at least 20% of their enrollment during the pandemic, 125 of which were in LAUSD. Underutilized schools are expensive to operate and spread resources thin, which isn’t good for students.

Generally, public school funding is tied to student enrollment, and fewer students mean fewer dollars. But during the pandemic, California’s public schools got a windfall of federal relief cash, and non-federal funding rose faster than in any other state—by $1,691 per student after adjusting for inflation.

California also has a generous hold harmless provision in its funding formula, allowing public schools to collect funding for students they had in previous years but who are no longer at the schools—known as “ghost students.” A Reason Foundation study estimated that California funded 401,000 ghost students in 2022-2023, costing taxpayers $4 billion.

Together, these policies insulated public schools from making difficult budget decisions like closing underutilized schools, even allowing them to give in to teacher union demands for salary increases and bonuses. For example, LAUSD—which got billions in federal COVID relief funds—gave teachers a 21% hike pay hike in 2023 and doled out pay bumps to counselors, psychologists, nurses, and others.

With federal relief dollars expiring and a bleak state budget outlook, school districts are beginning to face fiscal reality. California’s Legislative Analyst’s Office estimates that the state’s budget deficit could grow to $30 billion by 2028-2029, which would put future K-12 funding increases in jeopardy. Statewide, inflation-adjusted public school funding grew by 59% per student between 2002 and 2022, but declining enrollment puts schools in unchartered waters.

School closures are difficult and politically fraught, and they will not alone balance school district budgets. However, they are critical to properly serving the students still in public schools, right-sizing spending, and reaching fiscal sustainability.

State policymakers should shine a light on the problem by requiring the state to collect and report on vacant and underutilized school buildings annually. That way, taxpayers and other stakeholders can hold public schools accountable for being good stewards of public resources. For their part, local policymakers must tackle enrollment declines and school closures head-on and resist attempts to delay or block plans to reduce their facilities footprint.

Ultimately, California’s public schools must prioritize the students still in them, which will require closing schools and making other difficult decisions such as staff and programmatic reductions.

A version of this column appeared in the Orange County Register.

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If California does not act quickly to reduce this debt to more sustainable levels, it risks being forced to raise taxes—potentially driving away an already burdened tax base—or cut services like roads, education, and policing.

The state’s debt ratio is also important, given California’s large economy and population. The debt ratio compares a state’s liabilities to its assets and revenues. As of 2022, California had the nation’s fifth-worst debt ratio, at 106%—meaning the state owes more money than it takes in. The next two most populous states, Texas and Florida, had far lower debt ratios of 46.52% and 30.26%, respectively.

Thanks primarily to federal aid to state and local governments during the COVID-19 pandemic, California’s debt ratio has fallen by 11% since 2020. However, other states were able to wipe out far more debt. Texas and Florida reduced their debt ratios by about 30% each from 2020 to 2022.

At the state employer level, California has $273 billion in noncurrent liabilities (debts not due within the next year). Unfunded public employee obligations account for 56% of California’s noncurrent liabilities. Roughly two-thirds of these liabilities come from unfunded retiree health care benefits, with unfunded public pension benefits making up most of the rest.

From 2012 to 2022, California’s unfunded public employee debt increased by 710%, from $19 billion to $154 billion. Unfunded obligations represent the gap between the pension benefits that the government has promised to public employees and the funds that have been set aside to meet these commitments. Increases in unfunded liabilities can result from lower-than-expected investment returns or inadequate annual contributions by the government and plan members.

However, $273 billion is just the long-term debt held by the state itself. Local governments have nearly the same amount of debt. In a forthcoming analysis of California’s largest cities, counties, and school districts, Reason Foundation finds that these local entities added at least an additional $238 billion in debt, bringing California’s total state and local long-term debt to over $510 billion. For example, Los Angeles County has $46 billion in debt, the city of Los Angeles has $47 billion, and the Los Angeles Unified School District has $27 billion.

California cities have especially struggled to manage rising pension costs, with some, like San Bernardino, being forced to declare bankruptcy due to the financial strain. Other cities have avoided bankruptcy but have still had to tighten their fiscal belts. San Diego, for example, opted to reduce its required annual pension contributions to contain its short-term budget deficit, pushing pension costs into the future.*

Some cities that have continued making full pension contributions have made cuts elsewhere.

Jim Reed, former mayor of Scotts Valley, explained, “The single most important reason we have the fiscal crunch that we have today is that pensions—our pension liability—is impacting our ability to provide core services.”

California’s state and local governments must focus on paying down debt rather than waiting until the only option is raising taxes. Spending cuts to balance budgets may be politically difficult but are necessary. Likewise, selling unneeded and underutilized property and assets, privatizing infrastructure like airports, and partnering with private sector companies on expensive megaprojects, like needed highway expansion and toll roads, can save or generate money to help pay down debt.

With over half a trillion dollars in total government debt, it is unclear how much longer California’s state government, cities, counties, and school districts can continue on this financial path without reducing spending or raising taxes.

*This piece has been updated to clarify that San Diego adjusted its amortization method, shifting from level dollar amortization—considered by actuaries to be the superior measure—to percent of pay amortization, which ties contributions to payroll growth and effectively pushes a larger share of costs into the future.

A version of this column first appeared in The Los Angeles Daily News.

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During the 2022-23 school year, nearly 8,000 California students used the District of Choice program to attend a public school of their choice. According to data from the California Department of Education, 37% of participants in the open enrollment program were from low-income families, and most, 79%, were non-white. 

Since its launch in 1993, the District of Choice program has helped tens of thousands of students attend schools that are the right fit for them. The 2016 and 2021 reports published by the nonpartisan Legislative Analyst’s Office found that students used the program to escape bullying, access specialized courses such as Advanced Placement, International Baccalaureate, and art classes, and get hands-on training and career preparation. 

However, California’s open enrollment laws still have a lot of room for improvement. A new Reason Foundation report grades open enrollment laws in all 50 states and gives California a “D-.” California’s open enrollment laws do get several things right. They ensure public schools are free to all students, prohibit public school districts from discriminating against transfer applicants, and require public schools with extra seats to allow students to transfer within their assigned school district. 

As a result, 33 states score worse than California on open enrollment, but the state’s laws fall short in two critical ways. They don’t require schools to participate in cross-district open enrollment and lack transparency for parents and policymakers. The crucial weakness is the voluntary nature of California’s cross-district open enrollment programs, including the District of Choice. Too many public school districts can block transfer students from attending their public schools, even when they have open seats. 

The District of Choice program requires participating school districts to accept all transfer applicants so long as space is available. However, less than five percent of the state’s school districts participate in the program. Instead, most districts participate in a more restrictive cross-district transfer program–the Interdistrict Permit System, which only allows students to transfer to a new school if both the sending and receiving school districts agree. 

This means that school districts can prioritize their interests over students’ interests. The Legislative Analyst’s Office found most school districts block most outgoing transfers unless it is about “the availability of child care in the other district or the attendance of a sibling already enrolled in the other district.”

Additionally, data on this program is sorely lacking. The latest data from the 2018-19 school year showed over 146,000 students, or two percent of students enrolled in California’s traditional public schools, used the Interdistrict Permit System to attend a school other than their assigned one.

Ideally, California would strengthen its open enrollment laws by requiring all school districts to participate in this type of cross-district open enrollment, which would improve its ranking to 4th-best in the nation in the Reason Foundation’s open enrollment study. 

State leaders need to make the open enrollment process more transparent. The California Department of Education should collect and publish annual reports showing the number of students using the Interdistrict Permit System, as it already does for the District of Choice program. California should model these annual reports after Wisconsin’s, which supply families, policymakers, and taxpayers with crucial transfer data each year. The state should also require school districts to post their open enrollment policies and available capacity in classrooms by grade level on their websites so parents can find and review them.

The District of Choice law is a good step, and with a few other reforms, California could make it dramatically easier for students to attend the best public school for them.

A version of this commentary first appeared in The Orange County Register.

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Hemp, a variant of the cannabis plant, was legalized at the federal level in 2018. Though hemp and marijuana both come from the same plant, the critical difference is that hemp must contain less than 0.3% tetrahydrocannabinol (THC). Anything higher is classified as marijuana.

Hemp has many commercial uses, from textiles to building materials, but one of its most significant applications is the extraction of cannabinoids. Cannabidiol (CBD) is a non-intoxicating cannabinoid, and clinical trials have proven it reduces seizures in epileptic children. However, extracting cannabinoids like CBD from hemp without trace levels of THC is nearly impossible.

Gov. Newsom is targeting intoxicating hemp products, including those made by chemically converting CBD into forms of THC. However, Newsom does not distinguish between intoxicating products and those with proven therapeutic value. As a result, the standard of “any detectable quantity” would remove CBD therapies from the market even though they pose no threat of intoxication.

The proposal would harm families like Paige and Matt Figi’s, who turned to CBD to treat their daughter, Charlotte, whose severe epilepsy resisted conventional therapies. By age 5, Charlotte was suffering 300 seizures a week and lost the ability to walk, talk, and eat on her own. Hospitals told Charlotte’s parents there was nothing more they could do. The Figis tried CBD, and from that first treatment until her death at age 13 due to suspected COVID-19, the Figis say Charlotte was virtually seizure-free.

Charlotte’s story helped spur medical cannabis legalization across the country. Today, 38 states have legalized some form of medical use, and nine have specifically legalized CBD. Yet, Newsom’s plan would block families like the Figis from accessing this life-changing therapy.

States that have legalized marijuana often impose onerous and costly restrictions due to ongoing federal marijuana prohibition. With federal hemp legalization, however, hemp manufacturers can operate free of both federal rules and state marijuana regulations. Ironically, restrictions on marijuana sales allow hemp manufacturers to offer intoxicating products that compete with marijuana at more outlets and lower costs.

In 2024, over 10 states enacted legislation regulating hemp-derived cannabinoids, and many states are considering similar proposals. Most of these bills have focused on barring sales to minors, ensuring product safety, limiting THC content, and restricting sales of intoxicating hemp to licensed dispensaries. But no state has gone as far as banning hemp products with any detectable THC, as Gov. Newsom proposes.

Newsom previously backed legislation that would have regulated hemp products, imposing rules on hemp similar to those governing marijuana, including manufacturing and labeling standards, limiting sales to dispensaries, and capping THC at 0.3% total or no more than 1 milligram per container. But that measure failed, in part due to concerns raised by patients and parents like the Figis, who feared that forcing all CBD sales into the dispensary system would lead to prohibitively high prices and strip access entirely for many patients since many Californians live more than 100 from the nearest dispensary.

Newsom’s concerns about consumer safety and youth access to intoxicating hemp products are valid. But a ban goes unnecessarily far and will undermine his goals. It would strip patients of access to vital therapies and push consumers toward illicit products without oversight.

If protecting consumers is the goal, California should heed the lessons it learned from legalizing marijuana. Rather than a ban, California should require hemp producers to adhere to the same testing and labeling standards as marijuana and limit sales of intoxicating products to retailers with track records of age-gating adult products.

At the same time, the state should reduce burdensome regulations on marijuana businesses, enabling them to compete in an evolving cannabinoid landscape. By striking this balance between safety, access, and fairness, California can protect patients, consumers and marijuana businesses without restricting access to life-changing cannabis therapies.

A version of this column first appeared in the Orange County Register.

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California Proposition 2: Public Education Facilities Bond Measure

California Proposition 3: Right to Marry and Repeal Proposition 8 Amendment

California Proposition 4: Parks, Environment, Energy, and Water Bond Measure

California Proposition 5: Lower Supermajority Requirement to 55% for Local Bond Measures to Fund Housing and Public Infrastructure Amendment

California Proposition 6: Remove Involuntary Servitude as Punishment for Crime Amendment

California Proposition 32: $18 Minimum Wage Initiative

California Proposition 33: Prohibit State Limitations on Local Rent Control

California Proposition 34: Require Certain Participants in Medi-Cal Rx Program to Spend 98% of Revenues on Patient Care Initiative

California Proposition 35: Managed Care Organization Tax Authorization Initiative

California Proposition 36: Drug and Theft Crime Penalties and Treatment-Mandated Felonies Initiative

The post Voters’ guide to California’s statewide ballot questions (2024) appeared first on Reason Foundation.

California Proposition 2 allows the state to issue $10 billion in general obligation bonds for the construction, improvement, and repair of educational facilities statewide. The measure would allocate up to $8.5 billion for California’s K-12 school buildings and up to $1.5 billion for the state’s community colleges.  

Fiscal Impact 

According to the Senate Appropriations Committee analysis:

The bill’s authorization of $14 billion in general obligation bonds for school construction projects could result in General Fund costs in the tens of billions of dollars to repay, with annual costs in the high hundreds of millions of dollars each year. This estimate assumes an interest rate of 3.75 to 5.0 percent and a 30-year maturity.

Proponents’ Arguments 

California school districts have historically relied on state school bond measures like Prop. 2 to fund important capital projects and building repairs. However, the last successful state school bond initiative was in 2016. That money has since dried up, and a new state bond initiative is overdue. School districts need more funds to keep school buildings in adequate and safe condition, and they are relying on this initiative because they have already approved about $3.5 billion in facilities projects.  

Without the successful adoption of Prop. 2 in November, the already-approved capital projects and others will need to be delayed or covered exclusively by school districts themselves. In that case, district residents would have to pay higher taxes for local bonds and school districts would potentially need to divert resources away from classrooms. Research also shows that students attending schools that are in good condition perform better on standardized tests and have better attendance rates. By passing Prop. 2, voters will ensure that schools have fair access to adequate resources to update aging school buildings and better serve their students.  

Opponents’ Arguments 

Local voters in California can and should shoulder the cost of capital construction and renovation in their school districts. This increases local accountability for school district spending and prevents the state from taking on debt and interest costs.   

Also, Prop. 2 and past measures like it over-subsidize wealthy school districts that are more likely to pass local bonds and that are already spending more on K-12 schools than their peers. The public interest law firm Public Advocates is suing the state over the ballot language, claiming that the state should do much more to subsidize capital costs in lower-wealth districts and do much less for higher-wealth districts that can already afford it.  

This initiative is just like past school bond initiatives—it concentrates benefits for some wealthy school districts, disperses costs across the state, and racks up state debt.  

Discussion 

Proponents of Prop. 2 have a difficult case to make. Nearly three-quarters of California’s school districts have declining enrollment, and over 1,400 schools have lost at least 20% of their students since the pandemic. Also, federal staffing and financial data expose some troubling long-run trends from 2002 to 2020. Despite no aggregate change in enrollment over that period, total staff in California public schools increased by 6.7%, and non-teaching staff increased by 26.3%. Moreover, inflation-adjusted revenues increased by 35.8%, and inflation-adjusted debt more than tripled.  

To be sure, it’s likely true that California school buildings need repairs. But in an environment where many districts have already received large infusions of cash and need to make tough decisions regarding school closures, the state shouldn’t be subsidizing capital costs before districts right-size their operations.  

It’s also true that the state funding structure in Prop. 2 will largely go to the wealthiest districts, which get between $4,000 and $5,000 per student more in state facilities funding according to a 2023 report from the University of California Berkeley. That’s because property-rich districts are more likely to pass bonds and take on bigger projects.  

Even worse, the sliding-scale formula the state uses to determine what percentage of approved projects it will support makes little distinction between wealthy districts like Beverly Hills or Laguna Beach and property-poor districts like Lindsay or Parlier. Under Prop. 2, the state would still cover 60% of approved project costs for renovations and 50% for new construction in the wealthiest districts, and only five percentage points more for the poorest districts.  

Voters are already accustomed to covering the bulk of local school bond measures in California, which are typically approved at a rate of 73%. Indeed, school districts in California already have $220 billion in debt and liabilities, which is over $40,000 per student. And most of it is bond debt. Instead of the state taking on debt to make it easier for local school districts to also take on debt, the state needs to adopt stricter standards for when capital projects—and school closures—are necessary.  

The post California Proposition 2 would issue $10 billion in public education facilities bonds appeared first on Reason Foundation.

California Proposition 33 would remove state laws preventing local governments from adopting rent control policies.  

Fiscal Impact 

California Secretary of State Shirley Weber says that the passage of Prop. 33 would result in “a potential reduction in state and local revenues in the high tens of millions of dollars per year over time. Depending on actions by local communities, revenue losses could be less or more.” 

Proponents’ Arguments 

Proponents of Prop. 33 argue that rents across the state are too high, causing homelessness and making those with lower incomes struggle to afford housing. They say that local governments need to be able to impose rent controls to prevent rents from rising any higher, and decisions about rent control should be made by local governments.

Opponents’ Arguments 

Opponents argue that Prop. 33 would not increase funding for affordable housing, force local governments to build more affordable housing or provide immediate relief to homeless people.  

They point out that research on rent control programs around the country shows that “extreme rent control stifles new housing construction, perpetuating shortages and driving up costs for renters.” Moreover, Prop 33 “allows local politicians to tell single-family homeowners how much they can charge to rent out their homes—even if they just want to rent a single room. Homeowners will be subject to regulations and price controls enacted by local politicians.” 

Some legislative leaders and unions also oppose Prop. 33, saying it contains a ‘Trojan horse’ provision allowing cities that want to block new development to “impose steep affordability requirements that would effectively freeze growth,” according to Politico. Make no mistake: This ballot measure will end housing production in California full stop,” Assembly Appropriations Chair Buffy Wicks told Politico.  

Discussion  

California’s housing crisis is severe, with the cost of housing almost doubling since 2010. At the same time, homelessness has skyrocketed—in 2022, there were 437 unhoused Californians per 100,000 Californians statewide. This is the proponents’ third attempt to get a version of Prop. 33 passed, as voters rejected the previous two attempts. California does have some limited state and local rent control rules, but they do not set hard limits on the rents owners can charge.  

The primary cause of price hikes is a shortage of housing supply. Demand is simply outstripping affordable and available housing units. Effective policy should focus on adding housing units in the private market to meet demand. California has passed many laws in the last few years to attempt to increase the supply of housing. Unfortunately, one certain effect of rent control is reducing the supply of rental housing available now and built for the future, an outcome that would severely undermine the past few years’ reforms. 

As with much economic research, the conclusions on rent control can be a bit hard to sort out. Economics 101 tells us that in a free market, rent control’s price cap decreases profitability, inevitably leading to less rental housing being available. However, some studies disagree. This article reviews many studies that find positive effects of rent control, mainly for those who live in rent-controlled units whose costs are frozen. The research is clear that some people do benefit from rent control.  

However, a 2012 University of Chicago survey of a diverse panel of economists found that 81% agreed that local rent control ordinances have not had a positive impact on the amount and quality of rental housing. A very recent comprehensive survey of the effects of rent control concludes: 

[A]lthough rent control appears to be very effective in achieving lower rents for families in controlled units, its primary goal, it also results in a number of undesired effects, including, among others, higher rents for uncontrolled units, lower mobility and reduced residential construction. These unintended effects counteract the desired effect, thus, diminishing the net benefit of rent control. 

The Brookings Institution has concluded, “Rent control appears to help affordability in the short run for current tenants, but in the long run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood.” 

San Francisco is a great example with long experience using rent control. A study by Stanford University researchers in 2017 found: 

[Rent control] reduced their supply of available rental housing by 15%, by either converting to condos/TICs, selling to owner-occupied or redeveloping buildings. This led to a city-wide rent increase of 7% and caused $5 billion of welfare losses to all renters. … Taken together, we see rent control …  increased property investment, demolition, and reconstruction of new buildings, conversion to owner-occupied housing and a decline in the number of renters per building. All of these responses lead to a housing stock which caters to higher income individuals. Rent control has actually fueled the gentrification of San Francisco, the exact opposite of the policy’s intended goal. 

These well-known negative effects of rent control are why many states have taken direct action against rent control ordinances on the local level. 

Figure 1 color codes the United States by the legal status of rent control by state.  The map is from the National Apartment Association, a non-profit trade association of apartment communities, owners and vendors.

Figure 1: Legal Status of Rent Control by State  

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