California faces significant policy challenges in 2025. Some of these, including K–12 education, housing, and homelessness, have been ongoing issues within California for years. Will California make progress on any of these fronts? I am skeptical, and here I explain why.
Despite the state’s spending about $131 billion on K–12 education in fiscal year 2023–24, California student performance remains significantly below federal education standards. The National Assessment of Educational Progress (NAEP), which is a congressionally mandated project that measures student learning performance across states, reports that in 2022 (the most recent year for which data are available), only 23 percent of California 8th graders tested at a proficient or advanced level in math and just 30 percent in reading.
To get a sense of student achievement, here is a sample 8th-grade mathematics question: “Andrea works in a flower shop and is making bows. Each bow requires a four-foot piece of ribbon. She has 158 feet of ribbon on a roll. What is the greatest number of these bows that Andrea can make from the roll of ribbon?”
This is a simple division problem. Division should be mastered by grade 4. Yet four grades later, only about 44 percent of students nationally answered this question correctly. California student achievement is below the national average, which suggests that California 8th graders understand basic division at an even lower level.
California’s deficient student learning outcomes bode poorly for our economic future. In 2014, a group of California students in poorly performing schools filed an equal-protection lawsuit arguing that the quality of education they were receiving was significantly worse than that provided in high-performing school districts. The trial judge in Vergara v. California agreed with the plaintiffs and overturned several statutes governing teacher tenure, protection against being fired, and seniority provisions, which he believed were reducing educational quality.
Teachers’ unions derided the decision, and the state filed for an appellate review. Although an appellate court overturned the decision, it made no argument that the statutes the trial judge took issue with were a “good idea.” Rather, it viewed the lawsuit more narrowly than did the trial judge, concluding that there was no constitutional violation.
Without policy reforms that modify teacher tenure, reduce the financial burden associated with dismissing a teacher for cause, and increase opportunities for merit-based pay for high-performing teachers, I worry that student learning outcomes will continue to flounder. The state supreme court voted 4–3 against hearing the Vergara case in 2016, a decision that was reported as a victory for teachers’ unions. Associate state supreme court justice Goodwin Liu was one of the three justices who voted to hear the case. He noted that the issue affected millions of California students and suggested that the lower court likely erred in its decision. At that time, Silicon Valley entrepreneur David Welch, who financially supported the plaintiffs’ case, hoped that the state legislature would address these issues. Since that time, I am unaware of any legislation advanced by the Democratic supermajority in the legislature for such reforms, all of which would likely be opposed by teachers’ unions. And teachers’ unions are one of the most powerful political lobbies in the state.
Housing represents a substantial challenge for many Californians and has been for years. According to the California Association of Realtors, the median price for a single-family home in the third quarter of 2024 was more than $880,000, a price point they estimate can be afforded by only 16 percent of California households. California has attempted to increase housing supply and improve affordability by passing many new housing laws. A UC Berkeley housing research center has tracked more than 100 new such laws passed between 2017 and 2022, and more were passed in 2023 and 2024. Yet despite all these new laws, building remains sluggish. Private California residential building permits issued in 2024 through October are below those that were issued during the first 10 months of 2017.
What has gone wrong boils down to the basic economic principle that high costs reduce supply, and the cost of supplying housing is extremely high in California. For low-income households, California needs to build housing that costs less than $250,000 per unit. This can be facilitated by building in areas away from the most expensive coastal land and adopting less expensive building technologies, such as factory-built homes, which are built on average for about $87 per square foot. But such an effort would likely require modifying the California Environmental Quality Act (CEQA), which can be used to block and delay new residential investment. With a Democratic supermajority in both legislative houses, CEQA reforms, such as those outlined by the nonpartisan Little Hoover Commission, should be straightforward to implement. But without regulatory reform or an emphasis on building in less-expensive areas using low-cost building technologies, I doubt costs or prices will decline significantly.
Homelessness remains a major challenge for California. Ninety-three percent of Angelenos agree that homelessness is a problem within Los Angeles, and 63 percent note that see people experiencing homelessness every day. Homelessness continues to rise in the state, increasing from around 116,000 unhoused individuals in 2015 to nearly 186,000 this year. This 60 percent rise occurred despite substantial state spending on homelessness, including $24 billion spent between the five fiscal years 2018-2023.
Earlier this year, the California state auditor reviewed some of California’s homelessness programs and expenditures. The auditor stated, “The State lacks current information on the ongoing costs and outcomes of its homelessness programs. . . . Another significant gap in the State’s ability to assess programs’ effectiveness is that it does not have a consistent method for gathering information on the costs and outcomes for individual programs.”
With broad, bipartisan support, the state legislature recently passed a bill to implement further accountability mechanisms for California’s homelessness spending But the bill was vetoed by Governor Gavin Newsom, who argued that similar measures are already in place. That may be true, but those existing measures have not been functioning adequately. And if those measures are ever to be effective, then the state must overhaul how it manages its homelessness programs and the reporting of their outcomes. The head of the California Interagency Council on Homelessness, the agency that was criticized by the auditor, indicated it would implement the auditor’s recommendations “where possible” but also intimated that budget limitations would constraint such efforts.
These three intractable problems suggest that California needs very different visions to successfully address these policy challenges. But I don’t see major changes to the long-standing status quo in any of these areas. Perhaps Sacramento can make significant progress this year—even when it hasn’t been able to before. Or perhaps we will have another disappointing year like so many previous years.
