Good morning, California. It’s Wednesday, February 17.

Housing costs key factor

Goodbye, Silicon Valley. Hello, Silicon Slopes.

The tech hubs of San Francisco and San Jose fell precipitously in this year’s ranking of U.S. cities’ economic performance released Wednesday morning by the Milken Institute, a nonpartisan think tank that’s published the index every year since 1999. San Francisco and San Jose, which ranked Nos. 1 and 5 last year, respectively, fell to Nos. 24 and 22. Meanwhile, the Provo-Orem region in Utah captured the No. 1 spot, and Salt Lake City rose to No. 4. Utah, the report notes, “has been a recipient of the tech sector’s out-migration from the more expensive coastal cities of California,” attracting companies like Qualtrics, Vivint and SmartCitizen.

The report — which ranked cities based on jobs, wages, high-tech growth, housing affordability and household broadband access — found that the pandemic’s shift to remote work has likely affected California more than any other state. With companies like Salesforce, Twitter, Square, Dropbox, Yelp and Pinterest permitting most employees to permanently work from home, downtown San Francisco is reeling. And Silicon Valley companies Hewlett Packard Enterprise and Oracle recently decamped to Texas, though Google is still planning to expand its offices in San Jose and San Francisco.

  • Kevin Klowden, executive director of the Milken Institute Center for Regional Economics: “The pandemic has had an outsized impact on cities where the economic effects of the current recession are exacerbated by high housing costs.”

Of the 10 cities that saw the biggest drop in rankings, three were in California: Salinas, Santa Cruz and Oakland. The report attributed this partly to “extremely high housing costs” due to their proximity to the San Francisco Bay Area, noting that many residents don’t have “jobs and salaries in high-tech industries to compensate for high costs of living.”

But costs can be prohibitive even for those who do. After CJ Paillant, a product manager for a Silicon Valley software company, lost his job early in the pandemic, his $5,400 monthly rent payments began piling up. He and his roommate now owe $43,805 in rent, CalMatters’ Laurence Du Sault reports.

  • Paillant: “I got stuck in my luxury apartment. Now I’ve got to raise this money. My life feels like a movie.”

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The coronavirus bottom line: As of Tuesday, California had 3,412,057 confirmed cases (+0.2% from previous day) and 47,107 deaths (+0.1% from previous day), according to a CalMatters tracker.

Also: CalMatters regularly updates this pandemic timeline tracking the state’s daily actions. And we’re tracking the state’s coronavirus hospitalizations by county.


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1. A hidden debt crisis

Image via iStock

Despite losing an unprecedented 2.4 million jobs last spring, California closed out 2020 with one of the nation’s lowest rates of personal debt, a 10% increase in new mortgages and soaring real estate prices. What gives? It turns out that wealthy Californians’ economic gains are likely cloaking the experiences of suffering residents — millions of whom are staggering under types of debt that go unaccounted in national measures, CalMatters’ Jackie Botts and Laurence Du Sault report. And the true scope of debt resulting from the pandemic may take months to emerge: Although Gov. Gavin Newsom banned water and electricity shutoffs during the state of emergency, an estimated 1.6 million California households are late on water payments. And although the Golden State banned evictions through the end of June, hundreds of thousands of residents are behind on their rent.

2. Contracts raise conflict-of-interest questions

Illustration by Anne Wernikoff for CalMatters; elements via iStock

Blue Shield, the health insurance giant now running the state’s vaccine distribution system, isn’t the only Newsom donor that received a high-dollar no-bid contract amid the pandemic. At least a half-dozen companies that made substantial contributions to Newsom received no-bid contracts ranging from $2 million to over $1 billion or other significant opportunities, a CapRadio investigation found — raising questions about potential conflicts of interest, though state law permits the normal bidding process to be bypassed in a state of emergency. The donors include:

  • Blue Shield, which contributed $342,000 to Newsom and his ballot measure campaign, received a $15 million contract to lead vaccine distribution.
  • UnitedHealth, which contributed $220,400 to Newsom and his ballot measure campaign, saw its subsidiaries receive at least $492 million worth of pandemic contracts.
  • Bloom Energy, which contributed $85,200 to Newsom, received a $2 million contract to refurbish ventilators.
  • BYD, whose president contributed $40,000 to Newsom, received a $1.3 billion contract for masks.

These aren’t the only emergency contracts to have raised eyebrows. In March, California wired nearly half a billion dollars to a mask vendor that had been in business for three days, only to claw back the money hours later. And under then-Secretary of State Alex Padilla, California awarded an emergency $35 million voter education contract to a firm tied to Joe Biden’s presidential campaign — a bill State Controller Betty Yee still refuses to pay.

3. 2021 likely another vote-by-mail year

Photo illustration by Anne Wernikoff for CalMatters

From CalMatters political reporter Ben Christopher: Every active, registered California voter will get a mail-in ballot before any election that takes place this year once Newsom signs into law a bill passed by the state Legislature on Tuesday. That means two special elections to fill legislative seats vacated by now-Secretary of State Shirley Weber and now-Los Angeles County Supervisor Holly Mitchell — as well as a potential election to recall Newsom — will be mostly vote-by-mail affairs. The bill was passed on a party-line basis, with Democrats voting in favor and Republicans voting against. It comes on the heels of a viral tweet falsely claiming that California requires signature verification on petitions to recall Newsom, but not on mail-in ballots. Weber’s office confirmed that county elections officials verify signatures on every mail-in ballot, initiative, referendum, recall petition and candidate nomination document.


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CalMatters commentary

CalMatters columnist Dan Walters: Newsom wants to overhaul California’s immense health care system for the poor — but many state programs sound good on paper and fail to deliver promised benefits.

Reopen schools now: It’s time to put our children’s well-being at the center of this discussion and get them back in the classroom, argues Leda Dederich, a Berkeley public school parent.

Update school safety guidelines: Though we know the virus doesn’t live on surfaces overnight, the state is still prohibiting students from sharing books one day to the next, writes Debora Rinehart, an Oakland teacher.

Bolstering health care workforce: Lawmakers should modernize nursing education regulations to increase simulation-based training for students, argues Garrett Chan of HealthImpact.


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Other things worth your time

A Silicon Valley entrepreneur started a vaccine company. Then he hosted a superspreader event. // MIT Technology Review

Inside Silicon Valley’s safe space. // New York Times

‘Breaking point.’ Families flee Sacramento-area public schools as campuses stay closed. // Sacramento Bee

California to review carbon trading program as part of climate roadmap. // CalMatters

Bay Area cities go to war over gas stoves in homes and restaurants. // California Healthline

Regulators on Poseidon desalination plant received calls that are likely prohibited. // Orange County Register

George Gascón leaves powerful California District Attorneys Association. // The Appeal

LAUSD board to consider replacing police officers with ‘school climate coaches.’ // Los Angeles Daily News

Why many Native Americans want a Fresno County town renamed. // Fresno Bee

How Fresno became a laboratory for a national debate on minimum wage. // New York Times

California cities rethink the single-family neighborhood. // KQED

San Jose may house homeless residents along Guadalupe River. // Mercury News


See you tomorrow.

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Emily Hoeven writes the daily WhatMatters newsletter for CalMatters. Her reporting, essays, and opinion columns have been published in San Francisco Weekly, the Deseret News, the San Francisco Business...