Gavin Newsom had scarcely been inaugurated as governor when two crises erupted – a strike by teachers in the Los Angeles Unified School District and a declaration by Pacific Gas and Electric Co. that it would file for bankruptcy.
United Teachers of Los Angeles is demanding salary increases and smaller class sizes, while PG&E is facing at least $30 billion in claims for wildfire damages, including the virtual destruction of Paradise in Butte County.
They are obviously early tests of the new governor’s skills of negotiation and mediation. However, the woes of the nation’s second-largest school district, with more than a half-million students, and the nation’s largest private utility, with 16 million ratepayers, also are symptoms of a larger societal malady.
As California evolved into the nation’s most populous state, with 40 million residents, it developed large private and public organizations to provide their services, including the two now in crisis.
One could add the nation’s largest public university systems, the University of California and the California State University System, its largest public pension trust fund, the California Public Employees Retirement System, and several of the nation’s largest banks.
The California-based digital revolution also spawned immense technology corporations such as Facebook and Apple. And, of course, its state government, which disburses upwards of $300 billion a year, is second only to the federal government in size.
The state is a laboratory, testing whether bigger service institutions are better institutions. The crises in LA Unified and PG&E imply that they are plagued by a form of arrogance that could be called “too big to fail.”
The term arose in the last decade to describe immense banking institutions whose cupidity sparked the deepest recession since the Great Depression and were rescued by infusions of cash from the federal government.
The attitude entices those who run big institutions to make decisions on the implicit assumption that if they backfire, someone will bail them out.
It’s very evident in LA Unified, whose unions have consistently demanded and won contracts that the district could not afford, driving it to the brink of insolvency. Its teachers union is now demanding a package that would cost $1 billion more a year even though its superintendent, Austin Beutner, says the district is already on track to spend $24 billion over three years while receiving just $22 billion in revenue.
The 2018 wildfire damage claims now facing PG&E follow those of 2017, which the Legislature last year allowed it to cover with bonds that its ratepayers will repay over years, boosting consumer rates that were already among the nation’s highest.
It would take a book to catalog the arrogant excesses of California’s other big institutions such as the University of California, CalPERS and state agencies like the Department of Motor Vehicles. And then there are the sins of Silicon Valley that have lately emerged, particularly those of Facebook in mishandling their users’ private information.
The syndrome will continue to plague the state unless its leaders stop being enablers, refuse demands for handouts and bailouts and force big institutions to face the consequences of their irresponsible acts.
If they are too big to be allowed to fail, it’s time to make them smaller and/or more accountable to customers, ratepayers and taxpayers. That broader issue is also a test for Newsom, who professes a commitment to fundamentally reforming how vital services are provided.