Press release from the office of Rep. Jared Huffman:

Representative Jared Huffman (D-San Rafael) released the following statement on his plan to vote against H.R. 3746, the legislative agreement to suspend the debt ceiling for 18 months in return for a host of Democratic spending and policy concessions. Specifically, the bill cuts non-defense spending while increasing defense spending; adds unnecessary hurdles for vulnerable Americans to receive vital food and financial assistance; significantly and permanently undermines NEPA, one of our most critical environmental laws; and flouts the opposition of climate activists and environmental justice groups by legislatively greenlighting the Mountain Valley Pipeline, which has a climate impact equivalent to building 26 new coal-fired power plants.

Rep. Jared Huffman

“Agreeing to a one-sided negotiation under threat of default has produced a bad deal and a terrible precedent. While Republicans’ egregious hostage-taking accomplished very little debt or deficit reduction, the temporary social service cuts they demanded fall unconscionably on vulnerable Americans who are struggling just to have food to eat. And those who characterize the environmental rollbacks in this ‘deal’ as merely procedural reforms are being disingenuous. These are permanent, substantive reductions in environmental protection that Republicans and the fossil fuel industry have been seeking for many years. Taken together with the abominable approval of the Mountain Valley Pipeline, this deal is a major step backward from the climate and environmental justice wins we delivered in the last Congress. And since Democrats got nothing on the permitting reform item we actually need (electrical transmission), Republicans will use that as leverage to demand even more environmental rollbacks in the months ahead.”

“Finally, once you normalize extreme hostage taking like this, there’s no going back. MAGA Republicans succeeded in holding America hostage under threat of default in order to extract unrelated demands, and they now have a template. Today’s deal is going to pass, but since it consists entirely of odious concessions to Republicans, it should pass with GOP votes. I will not be voting for what I view as a lousy deal and a terrible precedent.”

Among other things, the bill limits the types of projects subject to NEPA review, allows polluters to conduct their own environmental reviews, and codifies various provisions of the Trump administration’s 2020 NEPA regulations. The bill also approves the disastrous Mountain Valley Pipeline despite several permitting hurdles it still must go through.

Click here for a fact sheet on these provisions (Division C, Title III, Sections 321-324).

Earlier this month, Rep. Huffman joined a letter signed by 83 House Democrats to President Biden, Senate Majority Leader Chuck Schumer (D-N.Y.), and House Minority Leader Hakeem Jeffries (D-N.Y.) urging them to oppose inclusion of environmental rollbacks in any must-pass legislation.

In addition to these dirty energy provisions, this bill would:

• take away Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF) away from hundreds of thousands of older adults and families;

• take back approximately $30 billion of unspent COVID-19 aid that would otherwise be used for rental assistance, broadband, small business assistance, and more;

• rescind $20 billion of the $80 billion that the Inflation Reduction Act allocated to the IRS to pursue rich tax evaders and provide improved customer service; and

• end the student loan payment pause, requiring borrowers to begin repayment 60 days after June 30.

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Workers who lost their jobs during the COVID-19 pandemic and are enrolling in a college class, be warned: Your chance to get as much as $2,500 will likely be gone by June 15.

The Golden State Education and Training Grant Program was created in 2021 to help workers laid off because of the economic consequences of COVID. But now the college grant program is itself slated to be cut due to California’s current fiscal malaise.Seeking ways to plug the state’s estimated $31.5 billion budget hole, Gov. Gavin Newsom proposed in May to completely scupper the relief grant program in the 2023-24 budget year, which starts July 1. That would return an estimated $480 million to the state — nearly all of the $500 million lawmakers and Newsom allotted for the program.And while the Legislature hasn’t officially formulated its budget response to Newsom, which is due by June 15, the budget committee in the Assembly and a key subcommittee in the Senate have approved Newsom’s plan to sunset the program. About 6,000 people have used the program so far; the Legislative Analyst’s Office, a nonpartisan advisor to the Legislature, suggested getting rid of it at the end of the year.

Officials with the agency overseeing the relief grant said individuals who currently qualify for the aid can still apply, but the timeline is tight.

Eligible workers must submit the application for the grant by June 15, said Shelveen Ratnam, a spokesperson for the California Student Aid Commission, said in an email Tuesday afternoon. If workers affected by the COVID-19 pandemic aren’t currently in a college program, they must be enrolled by June 30 to take advantage of the grant, Ratnam added.The aggressive timeline applies to colleges as well — they, too, must verify a student’s enrollment by June 30.After June 30, the commission “will disburse awards to the grantees that have met all the eligible criteria,” Ratnam wrote.

Unlike typical financial aid applications, applying for the relief grant takes less than 20 minutes. But workers seeking the money must satisfy several requirements, including that they:

• lost their jobs “due to” the pandemic;
• weren’t enrolled in a higher-education program when they were laid off;
• currently earn less than $42,800 a year as single wage-earners without kids or more if their families are larger;
• make less than what they did before the pandemic;
• are enrolled at a community college, California State University or University of California academic program, plus a few other eligible training institutions.

The grant program was rolled out to great fanfare with plans of reaching 190,000 people, but so far few individuals have received aid. As of early May, the student aid commission awarded roughly 3,500 students with grants in 2022-23 and 2,600 through a pilot in 2021-22. That amounted to $24 million in grants.

The Legislative Analyst’s Office wrote in February that the relief grant was basically a solution in search of a problem. While many of the employees laid off during the pandemic worked in service and recreation-related jobs and lacked a college degree, this program came too late.

Now, “because the labor market has been very favorable for people looking for jobs, displaced workers are more likely to have the option to find other jobs rather than returning to school.”Plus, students in California are able to enroll in community college for free if their incomes are low enough — the target group of this grant — the analyst’s office wrote. State and federal financial aid can also lead to more education dollars for workers going back to school, the analyst’s report added. Still, those grants are only available for four or six years — and some workers may have used up their financial aid benefits.

Nonetheless, the analyst’s office pushed to “discontinue the Golden State Education and Training Grant program at the end of the current year and remove any remaining funding at that time.”

Other than the training grant, Newsom and lawmakers are signaling that California’s budget for public higher education will grow. The UC and Cal State systems are each expecting more than $200 million in state support for their core academic missions — increases of 5% from the previous year. Newsom and lawmakers also want to commit another $227 million for a new financial aid program mostly aimed at students from middle-class families, among other commitments, such as affordable student housing.

What’s being proposed is a “solid budget,” said Kevin McCarty, a Democratic Assemblymember from Sacramento, at a budget hearing last week. It’s “not perfect, but an A- to continue on our priorities.”

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CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

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PREVIOUSLY

• Appeal of 8.5-Acre Cannabis Project Along the Eel River Triggers Debate About Weed Grows in Remote Humboldt
• Supervisors Add Conditions But Narrowly Deny Appeal of Rolling Meadow Ranch Cannabis Project in Remote SoHum
• Environmental Groups Sue Humboldt County Over Rolling Meadow Ranch Cannabis Project Near McCann
• Environmental Groups Double-Sue Humboldt County Over Controversial SoHum Cannabis Project, Suggest Bohn May Have a Conflict of Interest

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Press release from the Northcoast Environmental Center, Citizens for a Sustainable Humboldt and Redwood Region Audubon Society:

CITIZENS for a SUSTAINABLE HUMBOLDT (CSH), the NORTHCOAST ENVIRONMENTAL CENTER (NEC), and REDWOOD REGION AUDUBON SOCIETY (RRAS) have filed an Appeal from the Superior Court for the County of Humboldt, challenging the actions of the County of Humboldt and the Humboldt County Supervisors in approving Rolling Meadow Ranch, LLC’s application for conditional use permits that allow for an expansive commercial cannabis project in a remote location near the community of McCann. 

The County consistently relied upon Staff’s desired conclusions about the project—not facts—in order to approve this project. As approved, it is an idealized, hypothetical project… with no basis in on-the-ground reality. Significant questions around the availability of appropriate PG&E power, woefully inadequate access roads (magically deemed category 4 equivalent despite their shockingly primitive state, and during winter rains, absolute non-existence), extreme impacts to hydrology and habitat, as well as dire and unacceptable response times in the event of emergency and wildfire, remain unaddressed.      

This is in error of law.

CSH, NEC, and RRAS seek a court order requiring the County to rescind Project Approvals, and, if the Project is pursued, require that it adhere to the County’s regulatory requirements and performance standards, and CEQA’s more stringent Environmental Impact Review.

This out-sized, industrial scale project—a perversion of the intent of the Cannabis Ordinance and the Humboldt County General Plan—was approved by the Humboldt County Planning Commission in January of 2021. Neighbors of this egregious project brought an Appeal of this approval before the Board of Supervisors in March of 2021, only to have it denied by a 3-2 vote, despite enormous public outrage and opposition, and searing critique of Humboldt County Planning Department’s inadequate environmental impacts analysis by the local Fruitland Ridge Volunteer Fire Department (FRVVFD), and California Department of Fish and Wildlife (CDFW). 

Information disclosed during this meeting—and afterwards— pointed to an extraordinary conflict of interest by Supervisor Rex Bohn, who voted against the Appeal and for the cultivation permits, and who later admitted that his son was involved in this project. This appearance of an extremely compromised ethical quagmire was never examined further, and the applicant was given the green light to proceed developing and operating year-round cultivation in sixteen 20,000 square foot greenhouses with five processing structures, requiring up to 30 employees commuting daily in extremely remote, difficult to access wildlands, sprawling along five miles of the Main Stem Eel River Canyon, with no confirmed power supply.

In April of 2021, the NEC, RRAS, and CSH brought a lawsuit against the County for this approval, contesting the inadequate environmental analysis performed by County Staff. They contended that a full Environmental Impact Analysis, the higher level of review under the California Environmental Quality Act (CEQA), was required for a project of this magnitude, in this setting. Substantial evidence in the record supported a fair argument that the project may have unanalyzed impacts… thus triggering the need for an EIR.

Looking at the bare facts of this case, any sane and reasonable person would conclude that this scandalous project, as proposed, has outrageous flaws, inconsistencies, and unanalyzed environmental impacts… but the third judge assigned to the case, Hon. Barry Goode, failed to understand these facts, applied an erroneous interpretation of the law, and ruled against the Petitioners on December 29, 2022.

This miscarriage of justice was the climax of a repeated theme experienced by Petitioners throughout; the original judge assigned to the case failed in her duty to timely read through the material and ascertain the facts of the case, and disqualified herself deep into the process, wasting time and resources. The second judge assigned to the case deferred to the County and the Applicant during the proceedings for the Motion for Preliminary Injunction… in a “kangaroo court” -style, absurdly sycophantic display of capitulation, apparently without reading any of the material in the record… while the Counsel for the Applicant and the County openly and shamelessly misrepresented the project.

These misrepresentations were a consistent tactic on behalf of the Project Applicant; even during the original Appeal hearing, the Supervisors were misled regarding very basic precepts of the law.

CEQA places the burden of environmental investigation on the lead agency and not the public. The County failed in its duty to uphold the law. Therefore, the aforementioned environmental organizations continue in their quest to see justice served, and have filed an Appeal with the State of California First Appellate District Division One Court on the grounds that: 

• The project has not been properly analyzed for significant environmental impacts related to hydrology and water quality.
• Conclusions regarding the use of lignin oil for dust suppression are unsupported by the record in error of law.
• Significant environmental impacts related to power infrastructure have not been analyzed. 
• The project has not been properly analyzed for significant environmental impacts related to fire risk and safety.
• The project conflicts with Humboldt County’s General Plan and SRA Fire Safe Regulations.

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DOCUMENT: CSH, NEC and RRAS v. County of Humboldt, Humboldt County Board of Supervisors

Inspired by the Cal Poly Humboldt crew’s recent #1 showing at nationals? Well, there’s never been a more perfect time to get yourself or your kid into a shell! Saturday is “National Learn to Row Day,” and Karen Sack and Olivia McShea of the Humboldt Bay Rowing Association are here to talk about their free educational events down on the Eureka Waterfront.

Ready to get more serious? Sack and McShea also lay out the three separate two-week summer camps that the rowing association is running over the next few months. More details here. There’s also a camp for adults, which you can find here.

Get on the water! Press play on the video above to hear Sack and McShea make the case that it is a good thing for you to do.

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The following was submitted by the Hoopa Valley Tribe.

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House Speaker Kevin McCarthy accuses President Joe Biden of “playing politics” with the U.S. debt limit by saying, “We got to get moving … we can’t spend more money next year, we have to spend less than the year before.” Yet, on his watch, the Speaker is giving a pass to his Central Valley agribusiness constituents on more than $400 million dollars they owe the U.S. Treasury for environmental damages!

How did we get here? Beginning in the mid-20th Century, the U.S. Bureau of Reclamation dammed the Trinity River and devastated the salmon fishery that sustained the Hoopa Valley Tribe for millennia. The water that once flowed through our homeland to the Pacific Ocean is the core of the Hupa peoples’ well-being and survival. Since 1964, our dammed and diverted water, sheathed in steel tunnels and concrete canals, disappeared south into California’s Central Valley industrial farmlands 450 miles from our homeland.

Reclamation’s Trinity River Division, along with its other Central Valley dams and reservoirs, had catastrophic impacts on salmon fisheries in California’s largest river systems: the Sacramento, the San Joaquin and the Klamath/Trinity. Industrial agriculture in the Central Valley Project (CVP) destroyed or damaged aquifers and wildlife habitat essential to migratory birds in the Pacific flyway.

Speaker McCarthy’s congressional predecessors told the American people that the CVP would replace the groundwater that agribusiness was well on the way to depleting by the time Trinity2 River water began flowing to them in 1964. The Central Valleys’ ground surface began to collapse in the 1940s, eventually subsiding up to 70 feet in elevation as wells mined irreplaceable water.

However, the CVP was never an either-or proposition for agribusiness. Instead, it was both: Take Trinity River and other surface water and keep extracting the groundwater. Aquifer depletion continues unabated.

To reverse the CVP’s destruction, President George H.W. Bush signed the Central Valley Project Improvement Act (CVPIA) into law in 1992. The CVPIA gave all Californians a stake in a healthy environment. It allocated a small percentage of CVP irrigation water to restore fish and wildlife habitats, and charged habitat restoration costs to CVP water and power customers. Further, the CVPIA also established a special federal trust duty to restore the Hoopa Valley Tribe’s Trinity River fishery, and ordered that restoration costs be billed annually to CVP contractors who have profited enormously at the Tribe’s expense.

Since 1993, Congress has expended more than $400 million for CVPIA environmental restoration programs and yet Reclamation has not billed or collected any of it from Speaker McCarthy’s agribusiness supporters. Making matters worse, the Trump Administration’s political appointees added to the Nation’s deficit by rewriting CVP water contracts that made sure Reclamation would never collect these environmental restoration costs.

At a May 16, 2023, Board meeting of the Westlands Water District (Westlands) Director Justin Diener explained what happened. “In 2017, we had so much bureau-related debt service on the water rate that it made the surface water rate so expensive relative to the cost of pumping that it was hard not to use the wells in some circumstances. But the dynamics of refinancing the debt with the bureau [of Reclamation] has reduced our water rates to be much more cost effective.”

In 2020, the Hoopa Valley Tribe sued the Trump Administration after discovering that the “dynamics of refinancing” were actually financial misconduct that violated numerous federal laws, regulations, and Reclamation procedures. The Tribe’s case is pending in the Eastern District Federal Court in Fresno and Westlands has intervened to protect its “refinancing interests.”

Westlands also reckoned with its ongoing depletion of Central Valley aquifers. Director Jeremy Hughes reported, “I mean, really, the big thing, lately—last month—I think has been water quality, the turbidity. I mean these things [pumps] are flushing like they have never flushed before. I mean the water is so dirty it looks like oil, damn near.” Seemingly in a state of denial about the crisis of their own making, and heedless of groundwater depletion impacts on Central Valley municipalities that are home to many of their own employees, the Westlands Board wrapped up the discussion with the statement, “So, no action today [on groundwater]. Just report back on groundwater usage [at the next meeting].”

The story becomes even more absurd: On the last day of the Trump Administration, January19, 2021, Interior Secretary David Bernhardt declared that his administration had completed the CVPIA’s environmental restoration programs. It wasn’t true, but that lie is part of an ongoing3 scheme that our litigation exposed by which Reclamation lets water contractors escape environmental restoration costs. Speaker McCarthy joined that scheme with his sponsorship this year of H.R. 215, which would declare restoration complete even though facts on the ground belie that conclusion.

On December 15, 2022, Secretary Haaland rescinded the Trump decision and filed testimony opposed to H.R. 215.

Now it is time for Secretary Haaland and the Biden Administration to finish the job. They need to do three things to achieve fiscal responsibility and environmental justice, and protect our Tribal fishing rights.

First, withdraw the Trump administration’s water contracts and rewrite them as required by Congress under the CVPIA.

Second, recover the funds owed but never paid by CVP contractors.

Third, use the recovered funds to restore salmon and meet federal trust responsibilities to the Hoopa Valley Tribe.

California lawmakers are considering a measure this session that would tax short-term rentals to fund affordable housing projects, a proposal that has revived dormant tensions at the state Capitol over the rise of companies like Airbnb and Vrbo and their responsibility for the state’s constrained housing supply.

Senate Bill 584 by state Sen. Monique Limón, a Santa Barbara Democrat, would impose a 15% tax on short-term rentals — the homes and rooms that owners rent out like hotels for 30 days or less at a time — starting in 2025. This statewide surcharge, an addition to the local transient occupancy taxes that most communities already require, could generate an estimated $150 million annually to build or rehabilitate low- and middle-income housing.

“One of the things that I get asked very often by my local cities and counties is: ‘Where is the money to build the housing?’” Limón told CalMatters. “I see this bill really saying everyone has a role to play.”

The Senate could vote on the measure as soon as today; it must pass by the end of the week to continue on this year.

While legislators have made a few unsuccessful attempts to regulate vacation rentals over the past decade, these fights largely played out at the local level, where the effects of their surging popularity with travelers is more immediate.

But the prospect of a tax that rental platforms worry would put them at a disadvantage to hotels has sent them scrambling, with Airbnb rallying its hosts in recent weeks to oppose a bill it argues would “hurt the local tourism economy.”

“While the bill aims to boost housing affordability, it does so at the expense of regular Californians who are struggling to keep up with the rising costs of living,” the company wrote in an email alert last week urging hosts to reach out to lawmakers.

Limon’s proposal already faced higher hurdles as a tax measure, requiring a two-thirds vote of both houses of the Legislature. Now it must contend with a shaky economy, which has stoked apprehensions about increasing taxes among even some Democrats, including Gov. Gavin Newsom.

“It doesn’t mean that we don’t raise the difficult question of what is the solution,” Limón said.

An invitation to invest

Limón unveiled her bill in March as a way to create a steady stream of money to help local governments meet ambitious housing development targets set by the state.

The short-term rental tax would fund grants for public entities and nonprofit providers to create affordable housing projects — primarily through new construction, but also by fixing up existing buildings — that would be permanently set aside for low- and middle-income renters.

The measure, which is sponsored by the State Building and Construction Trades Council, an umbrella organization for construction worker unions, would also require certain wage and labor standards for projects.

Limón said she is not villainizing short-term rentals, but rather inviting them to be a part of fixing a statewide housing crunch they have exacerbated. If the industry has ideas, she said she’s open to alternatives to the 15% tax rate, which was suggested by a Senate committee where the bill passed earlier this month.

“This is a conversation about investment. And I think it’s unfortunate that those that are being asked to invest in solving a problem for the communities where they do work or business, see it as” a punishment, Limón said. “So if a 15% investment, you know, is not the number, then what is?”

Another vacation rental boom over the past few years, fueled by the coronavirus pandemic, has reignited debates across California about whether locals are being priced out of their communities, leading to a wave of new bans, permit caps and other restrictions.

Recent research has found a reallocation of long-term housing units into short-term rentals, leading to an upward pressure on prices. A 2020 study by a team from the National Bureau of Economic Research; California State University, Northridge; and the University of Southern California pegged the number at an annual increase of $9 in monthly rent and $1,800 in home prices in the median neighborhood. That is often driven by large-scale operators from outside of the communities; a 2017 analysis of short-term rentals in New Orleans found that nearly half of permitted units were registered to fewer than a fifth of operators.

But the industry disputes that vacation rentals comprise enough of California’s housing stock to have a significant effect on affordability.

A 2022 report by the Milken Institute, an economic think tank, noted that only about 1% of housing units in the state are short-term rentals — though it’s far higher in some popular tourist destinations — which it concluded “cannot be considered a meaningful driver of California’s housing shortage.” The report was backed by the Travel Technology Association, an industry group that includes short-term rental platforms among its members.

Falling behind the competition

Alongside opponents such as the California Chamber of Commerce and other business groups, Airbnb and Vrbo have raised concerns that Limon’s proposal would give hotels an unfair advantage over mom-and-pop vacation rental operators who rely on hosting for supplemental income. Local transient occupancy taxes, for stays at hotels and short-term rentals, can exceed 14% in some places.

“SB 584 would harm California’s travelers, its vacation rental community, and the network of small businesses that depend on them,” Alyssa Stinson, California government and corporate affairs manager for Vrbo’s parent company, Expedia Group, said in a statement. The state should “find sustainable, balanced solutions to address California’s housing needs without threatening its tourism economy.”

Airbnb declined to discuss its position on the bill. In its alert to hosts, the company claimed the tax would “make vacations more expensive” and burden “everyday Californians who rely on the income from home sharing to afford everyday costs or stay in their home.”

Dan Johnson, who rents out the first floor of his San Diego home as a suite for visitors, said he was “pissed off” when he found out about the tax proposal last week from the Airbnb email and he has reached out to more than half a dozen senators asking them to vote against it.

Johnson, 62, an environmental consultant who also develops infill housing on formerly contaminated sites, said he started hosting through Airbnb and Vrbo a year and a half ago as he and his wife prepare for retirement.

“As you move away from a steady paycheck, it’s nice to have a supplemental income,” he said. “It gets a little scary, right?”

Though he supports Limon’s goal of addressing housing affordability, Johnson said he believes that short-term rental owners are being picked on to solve a problem they didn’t create because they don’t have a powerful lobby at the Capitol.

If the tax is adopted, Johnson worries that operators like him will not be able to pass the price increase along to customers if they want to remain competitive with hotels and they will be forced to reduce their rates.

“The only place this is coming from is our pocket,” he said.

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CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

State Farm made national headlines last week when it said it would stop selling new home insurance policies in California. As California’s largest single provider of bundle home insurance policies — the company had 20% of the market in 2021 — the news struck some as the beginning of a fresh emergency, with insurers abandoning a fire and flood ravaged state.

But the retraction of California’s biggest home coverage provider is only the latest development in a wildfire-fueled crisis that has smoldered beneath the surface of the state’s insurance market for years.

After the disastrous fires of 2017 and 2018, the number of Californians who were told by their insurer that their policy wouldn’t be renewed jumped up by 42% to almost 235,000 households. The two severe wildfire years wiped out decades of industry profits.

Last year, American International Group let thousands of customers know their home insurance policies would not be renewed, and Chubb, a high-end insurer, said it would continue to non-renew some of its customers.

And late last year, thousands of condo owners also found themselves among the uninsurable as the state’s regulated insurers dropped suburban homeowner association members in droves across San Diego County’s wildfire-prone shrubland.

“State Farm sort of publicly said what they were doing, but I think for the last few years, we’ve all seen insurers restricting and pulling back their business in California,” said Seren Taylor, vice president of Personal Insurance Federation of California, an industry trade group that counts State Farm as a member.

State officials emphasized that State Farm’s current policyholders will not lose coverage

“It’s important to note that current customers will not lose their insurance,” wrote Michael Soller, deputy insurance commissioner at California’s Insurance department, in an email to CalMatters. This decision will affect people who are shopping for home insurance, in that they will have one fewer provider to choose from.

State Farm in a press release blamed high construction costs that make it extra expensive to rebuild after a home is destroyed in California, growing natural disaster risk — particularly from wildfires — and “a challenging reinsurance market.”

Insurance companies frequently purchase their own insurance — known as “reinsurance” — to minimize the risk of getting hit with millions of dollars of costs all at once, as might happen during a catastrophic wildfire or a major hurricane.

Reinsurance premiums have spiked in recent years in disaster-prone states like fire-ravaged California and storm battered Florida, Louisiana and Texas. California law prohibits insurers from passing along the cost of reinsurance to customers. Industry groups are lobbying to change that.

“This is tough for legislators,” said John Norwood, a lobbyist for independent insurance brokers. “Because the solution is prices going up.”

How California regulates home insurance

High rebuild costs, increasingly severe wildfires and high prices of reinsurance are all risks that insurance companies might be willing to take on.

But only for the right price.

Increases in insurance premiums in California are approved or denied by the state’s elected insurance commissioner, Ricardo Lara. Industry groups have long argued that Lara’s office has not allowed providers to set prices commensurate with the cost of doing business in fire-prone California.

“We have very inexpensive home insurance in California,” compared to other states, said Michal Wara, a lawyer and climate scholar at Stanford Law School. “But the thing is, five years ago, we realized ‘oh yeah, actually in California you can burn down 50,000 houses overnight.’”

We have very inexpensive home insurance in California. But the thing is, five years ago, we realized ‘oh yeah, actually in California you can burn down 50,000 houses overnight.’
— Michael Wara of Stanford Law School

The consequences of a continued drip-drip decline of insurers from California could be far more costly in the long run, warns Dan Dunmoyer, president of the California Building Industry.

As an illustration, he points to California history. After the 1994 Northridge Earthquake dealt roughly $42 billion in damage across Southern California, many home insurers opted to stop doing new business in California entirely.

Because home insurance is a basic requirement for most home loans, the exodus of insurers caused the state real estate industry to grind to a halt, Dunmoyer recalled.

“The whole world stopped,” he said. “That’s the worst case scenario. We’re not quite there yet.”

Last resort for California homeowners

Another sword hanging over the state’s insurance industry: The possible demise of the FAIR Plan, the limited insurance plan Californians can turn to when no standard private company will cover them. It’s funded by levies on private insurance companies that do business in the state.

“A lot of other insurers have stopped selling,” said Amy Bach, executive director of United Policyholders, a consumer group. “If you talk to an agent or broker today, they’re going to tell you it can be pretty hard to find insurance” outside of the FAIR plan, Bach said.

As the risk of catastrophic wildfire ramps up across California, that risk falls disproportionately on the FAIR Plan. And if an especially severe fire season renders the plan bankrupt, the tab will fall on those insurers still doing business in the state in proportion to their share of the market, said Wara, from Stanford.

State Farm, as the largest insurer, would have to chip in the most. That’s one reason the company might have decided to not issue new policies anywhere in California rather than just limiting new policies to places with low wildfire risk. “State Farm is saying ‘we want less of that,’” Wara said.

That problem isn’t unique to California.

In Texas, the increasing severity of Gulf Coast hurricanes has driven tens of thousands of homeowners onto that state’s chartered backstop insurer leading to talk of an inevitable crisis.

In Florida, the crisis may have already arrived. This week, Florida’s insurance commissioner authorized a $1.25 billion line of credit to that state’s insurer of last resort — now the single largest insurer — in preparation for the coming storm season.

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CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.