How Matt Mahan Thinks He Can Save California

California's fiscal and outcome crisis: More spending, worse results

Matt Mahan argues that California is at an inflection point, experiencing a severe disconnect between government spending and tangible outcomes. Over the past six years, state spending has surged by 75%, an increase of $150 billion, yet critical metrics like crime rates, homelessness, and educational performance have stagnated or declined. Mahan points to the high-speed rail project as a prime example of this dysfunction: $14 billion spent over two decades has yielded no completed product. He attributes this not to a lack of funds, but to a systemic incentive problem where government prioritizes process, endless environmental reviews, and bureaucratic procedures over accountability and results. This 'bureaucratized paralysis' extends to housing, where fees can add 20% to project costs, and a litigious environment, even for non-residents suing under environmental laws, stifles progress. Mahan's core message is that California has a money problem, but rather an accountability problem, which he aims to tackle by focusing on measurable outcomes and efficient resource allocation.

The crisis of homelessness: A failure of policy and compassion

California's standing as a leader in poverty and homelessness is a direct result of policy failures and a misguided approach to addiction and mental illness. Mahan highlights that while housing costs are a macro issue, the state has been lax in addressing behavioral health crises. He criticizes the ideology that prioritizes an individual's right to suffer on the streets over intervention, leading to an estimated 50,000 deaths on California's streets in the last decade, many from overdose and suicide. He contrasts this with San Jose's more effective approach, which shifted from expensive, slow housing projects to more rapid, cost-effective solutions like sleeping cabins, resulting in a one-third reduction in unsheltered homelessness. This approach, though initially facing opposition from advocates, demonstrates that prioritizing outcomes and practical solutions over ideological purity can yield significant results. The current system has created conditions of fragility where a job loss or medical bill can quickly lead to street homelessness, exacerbated by a lack of sufficient shelter and treatment beds.

Housing affordability crisis: Regulation, litigation, and lack of supply

The core of California's housing crisis, Mahan contends, is a fundamental supply problem exacerbated by a complex web of regulations and a highly litigious environment. He notes that when barriers to market investment are removed, housing costs stabilize, as seen in other cities. However, California's building codes are cumbersome, and the threat of lawsuits from trial lawyers, often motivated by fees rather than genuine defects, makes building new housing, particularly condos, prohibitively expensive and risky. This has eliminated a crucial entry-level option for homeownership for young people. The situation is so severe that Mahan suggests reframing it as a 'regulation crisis' rather than solely a 'housing crisis.' The impulse to add more rules, more processes, and more fees, often under the guise of safety, creates an impossible environment for construction, while trial lawyers benefit from the ensuing litigation. This system rewards activity and performativity over actual positive outcomes, discouraging legislative action that could genuinely lower housing costs.

The influence of organized interests and a broken incentive structure

Mahan identifies well-resourced, highly organized advocacy groups, including public sector unions, trade associations, and trial lawyers, as major defenders of the status quo in Sacramento. He points out that organized labor, particularly public sector unions, is the largest spender on lobbying and elections. While acknowledging that some unions are pragmatic, he faults 'spineless politicians' for caving to aggressive demands. This dynamic prevents necessary reforms, such as adopting evidence-based curricula in schools or improving accountability in public services. The incentive structure for elected officials, Mahan argues, is skewed towards catering to these organized interests rather than focusing on public outcomes. This leads to a government that is more responsive to lobbyists than to its constituents, resulting in dysfunction that isn't necessarily overt corruption but a systemic misalignment of incentives. He believes this situation is driving a populist backlash and that the Democratic Party must wake up to deliver results for the people.

The energy crisis: Green policy with unintended economic consequences

California's pursuit of green energy policy, while well-intentioned, has led to significant economic drawbacks and arguably worsened the environmental problem. Mahan critiques the approach of regulating energy sources out of the state, citing the closure of refineries which has forced California to import more gas from further away, increasing its carbon footprint. This regulatory strategy, combined with a 70 cents per gallon gas tax, contributes to California having some of the highest gas prices in the nation. He advocates for innovation and smarter grid management, suggesting incentives for EV owners to charge during off-peak hours when power is abundant, and investing in infrastructure rather than shutting down essential industries. Mahan proposes temporarily suspending the gas tax to provide immediate relief to working families, recognizing it as a regressive tax that disproportionately harms lower-income individuals. He believes California can achieve environmental goals and economic prosperity simultaneously through innovation.

The public employee pension time bomb: A fiscal liability

California faces a substantial fiscal challenge with its public employee pension systems, CalPERS and CalSTRS, which collectively manage around $1 trillion. These funds have underperformed the S&P 500, yielding about 7% annually compared to the S&P's 11%. This has created a projected shortfall of $250 billion to $1 trillion in meeting future benefit obligations. Mahan, drawing from his experience as Mayor of San Jose, where unfunded pension liabilities consumed 19% of the general fund, emphasizes that politicians historically swept this issue under the rug. San Jose implemented a pension reform plan that involved moving towards a defined contribution model for new employees, requiring higher contributions from both employees and employers, and establishing shared risk for underperformance. This glide path approach is designed to eventually clear the debt. He stresses the need for realistic return expectations and faster adjustments to underperforming returns, suggesting that future retirees might need to accept a defined contribution model similar to the private sector, a politically challenging but necessary shift.

Insurance market collapse: Wildfires, risk, and regulatory failure

Reforming government: Zero-based budgeting and accountability

Mahan advocates for a fundamental restructuring of government operations in California, proposing zero-based budgeting as a method to ensure that state funds are optimally used to achieve necessary outcomes. He notes that despite stagnant population growth, state spending has increased 75% in six years, with a corresponding rise in state employee headcount. This indicates a sprawling bureaucracy that prioritizes process and incremental growth over efficiency and results. As governor, while legislative partnership is essential, Mahan believes he can drive change through strong executive leadership, including the budget process, veto power, executive orders, and appointments. He emphasizes transforming state agencies by holding administrators accountable for achieving specific, measurable outcomes, rather than just maintaining bureaucratic processes. This approach would involve grounding agency operations in data, gathering real-world feedback from local entities, and being prepared to bring in new leadership if aggressive goals are not met. He believes this pragmatic, results-oriented approach is essential to rebuilding public trust.