CALIFORNIA SUMMIT REVIEWAn Action Plan for Growth and Innovation

April 2017

Matt Horton, Carlo De La Cruz, Carolyn Karo, and Rebecca Simon with Jason Barrett and Kevin Klowden

CALIFORNIA SUMMIT REVIEWAn Action Plan for Growth and Innovation

April 2017

ACKNOWLEDGMENTS

The authors would like to thank the supporters and partners of the Milken Institute California Center and the panelists at the 2016 Milken Institute California Summit, who made this publication possible. Their insights and involvement are essential to our work.

ABOUT THE MILKEN INSTITUTE

The Milken Institute is a nonprofit, nonpartisan think tank determined to increase global prosperity by advancing collaborative solutions that widen access to capital, create jobs, and improve health. We do this through independent, data-driven research, action-oriented meetings, and meaningful policy initiatives.

ABOUT THE CALIFORNIA CENTER

The Milken Institute California Center is leading the way in identifying solutions to keep the state’s economy vibrant. By focusing on the connection between government policy and the state’s economy, we can ensure that the steps we take today will improve the future of California and the world at large. We see California as a global incubator for innovation in policy, technology, and business.

©2017 Milken Institute

This work is made available under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License, available at http://creativecommons.org/licenses/by-nc-nd/3.0/

1CALIFORNIA SUMMIT REVIEW 2016 An Action Plan for Growth and Innovation

Enhancing California’s Role as a Global Crossroads for Trade and Investment

Global trade and foreign investment have helped make California’s economy one of the most remarkable success stories of the post-Great Recession era. Although investment and trade continue to rise, the state faces a new landscape of increased competition and uncertain multinational agreements. The small-business and trade leaders on our opening panel delved into these issues and discussed how to energize exports from the Golden State.

If You Lived Here, You’d Be Home by Now: Addressing California’s Housing Shortfall

Despite periods of booming construction, the state hasn’t kept pace with housing demand and has overemphasized the single-family category. Consequently, renters and homebuyers are confronted with some of the nation’s highest costs. Our panel of developers, policymakers, and financial experts presented the stark challenges involved, but also the huge opportunities for strategic investment, construction, and development throughout the state.

Infrastructure Investment: Mapping a New Business Ecosystem (By invitation only)

As traditional infrastructure financing sources disappear, how will state and local leaders muster the resources and political will to repair and rebuild our century-old infrastructure grid? During this private session, key stakeholders and leaders in development, infrastructure, and financing offered proposals, including new public-private-partnership financing models, to accelerate construction and delivery.

California’s Evolving Workforce: New Approaches to Career Technical Education (By invitation only)

At this private session, industry leaders focused on practical steps to strengthen career technical education while mitigating wage inequality and sustaining California’s innovation-based economy.

2016 CALIFORNIA SUMMIT SESSIONS

The “California’s Creative Disruption” panel. From left: Dave McClure, Eva Ho, Paul Kedrosky, Jeff Wong, Gunnar Lovelace, and Rob Freelen.

Carol Galante discusses housing affordability during “If You Lived Here, You’d Be Home by Now.”

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The Autonomous Future

In a series of dynamic presentations, industry leaders in transportation and technology presented projects in development, focusing on innovations around driverless cars, Hyperloop transportation systems, and unmanned missions to Mars and beyond.

Building a Renewable California

The state’s prolonged drought highlighted the symbiotic relationship between water and energy in California: We need energy to move and manage water—two-thirds of the state’s rain and snowfall occurs in the north, while two-thirds of the state’s water is consumed in the south—and we need water to make energy. From innovative pricing models to behavior modification, leaders of utility companies and trade groups joined policymakers to look at ways to build a renewable California.

Senior Regional Leaders Meeting (By invitation only)

Leaders from across Southern California shared insights on issues affecting their industries and communities. They identified priorities for the next decade, notably the need to maintain robust investments in early-stage research in the public, private, and university spheres to accelerate long-term innovation and advance the state economy.

A Hard Sixth: Keeping California Strong in a Competitive Global Economy

The California economy grew 4.1 percent in 2016, putting it in sixth place globally. Despite this distinction, critics paint a picture of prohibitively high taxes and regulatory barriers that constrict growth and stifle job creation. Concluding the Summit, policymakers and business leaders shared insights and proposals on improving California’s business climate while expanding opportunities for small businesses and middle-skill workers.

California Cities: Engines of Growth

California’s cities are leading the way to a more resilient and sustainable future through clean-energy initiatives and efficient mass transit. These policy laboratories must deliver effective governance and services on a mass scale while being accountable and accessible to residents of diverse communities. This session brought together a former California governor, mayors, and other civic leaders to discuss the future of the state and its engines of growth—cities.

Six speakers discussed the state’s competitiveness during “A Hard Sixth.” From left: Scott Minerd, Gabriel Patek, Institute Chairman Michael Milken, U.S. Rep. Mimi Walters, state Sen. Kevin de Leon, and Marcus Thygeson.

The “New Skills at Work” panel. From left: Ze Frank, Patricia Ramos, Kari Dohn Decker, Jillian Arnold, Chris Erwin, and Matt Horton.

3CALIFORNIA SUMMIT REVIEW 2016 An Action Plan for Growth and Innovation

Harnessing Data to Combat Homelessness (By invitation only)

California’s economy remains the nation’s largest, yet the state continues to struggle with the deepening crisis around homelessness. Regrettably, our state leads the nation in that area, too, and military veterans show up disproportionately in the homeless population. This private session focused on how technology, data, and broader cooperation among stakeholders can combat homelessness in Los Angeles and other urban areas.

Should CEQA Be Reformed? (By invitation only)

The California Environmental Quality Act (CEQA) was designed as a tool to help activists protect the state’s fragile ecosystems, yet decades of litigation abuse has imposed a de facto barrier to development in many parts of the state that are in dire need of investment. During this private session, participants focused on the current realities and challenges involved in reforming or replacing CEQA.

New Skills at Work: Preparing a 21st Century Entertainment Workforce

Maintaining California’s leadership in entertainment production requires not only a robust supply of workers with relevant skills and industry experience, but an emphasis on creating opportunities in new media. Panelists who are part of Hollywood’s creative machine discussed the current landscape and how the state and region can maintain their competitiveness in a globalized industry.

Beyond Prop. 30: Is Comprehensive Tax Reform the Key to California’s Future? (By invitation only)

Comprehensive reform of the state’s tax structure, marked by an overreliance on income and capital gains revenue, is no longer a luxury for California’s state and local government. Rather, it’s a necessity in the interest of fiscal stability, planning, and the provision of services. Participants in this private session addressed the complex political and fiscal realities involved in transforming the tax code.

California’s Creative Disruption

The technology industry, often also known as Silicon Valley, has disrupted “old” business models from transportation and housing to entertainment and media. During this session, experts looked at how new models of work and collaboration are rapidly changing the way industries and companies operate in California.

Gains and Pains: The Cost of Providing Californians a Living Wage

This panel explored whether the minimum wage increase will drive business from the state, as some critics argue, or help the underemployed move up the economic ladder. Participants discussed the larger impact on the workforce, including how many new jobs will be created or may benefit from the wage boost. Assemblyman Marc Levine, top, speaks

at the “Infrastructure Investment” panel. Above, state Sen. Robert Hertzberg discusses tax reform during

“Beyond Prop. 30.”

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5CALIFORNIA SUMMIT REVIEW 2016 An Action Plan for Growth and Innovation

PREPARING FOR AN INNOVATIVE FUTURE

INTRODUCTION The theme of the Milken Institute’s fifth annual California Summit, “Preparing for an Innovative Future,” showcased the Golden State’s continuing role as the epicenter of American innovation while highlighting the policies or practices leaders should embrace to propel economic growth. California’s GDP has risen to the sixth largest in the world, due to robust job growth, innovation and entrepreneurship clusters, and expanding trade and foreign direct investment. Yet challenges persist related to the state’s business climate and inadequate investment in human capital and infrastructure, as well as continued drought and energy concerns. At the national level, the benefits of global trade have been called into question and funding support for California infrastructure is uncertain, threatening our state’s long-term economic foundation.

The topics at the 2016 Summit ranged from the state’s business climate, infrastructure, and trade to innovation, education, and human capital. Speakers and other participants offered an array of insights into leveraging California’s trademark early-investment approach to address these systemic issues. The Summit hosted a variety of vibrant discussions concerning the role of civic leadership in stimulating growth through innovative urban policies. Participants delved into how to use California’s business infrastructure to incubate innovation and expand the job base through trade and foreign investment. Strategic investment, transformative ideas, and global impact were at the center of the day’s agenda.

Below, we summarize the key points explored at the event, which are central to the state’s future. They will inform the California Center’s 2017 agenda and drive its collaboration with state leaders.

INSIGHTS AND RECOMMENDATIONS

Investing in Human Capital, a Better Business Climate, and InfrastructureParticipants recognized California’s cities as the natural hub for policy and civic leaders to collaborate with business and communities to accelerate development while protecting the environment. Cities are largely the site of policy experimentation, where new ideas are implemented. They are policy laboratories where public-private partnerships drive the innovation economy forward, generating multiplier effects that influence the nation and the world.

This experimentation embraces all forms of forward-looking organizations and technology that represent our state’s thought leadership: universities, startup firms, digital media platforms, boundary-breaking aerospace, autonomous transportation. But participants emphasized that if California is to continue to nurture a pioneering spirit, then policy and business leaders must remove barriers to development in the state’s business climate, skills base, and infrastructure. Moreover, because the benefits of growth have not been evenly shared across our population, Summit participants called for a more inclusive economic environment. The state’s housing supply must be expanded and skill levels raised. An environmentally sustainable energy grid would generate jobs as it preserves quality of life.

Reflecting on worsening income inequality during the “California Cities: Engines of Growth” panel, former Gov. Gray Davis remarked that “allowing the pie to grow should be as American as apple pie.”

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BACHELOR’SDEGREE

MASTER’SDEGREE

DOCTORATE

+17.4%GDP PER CAPITA

Add one year of college to the region’s workforce, and

GDP per capita jumps 17.4%

Source: Milken Institute.

Investing in education to address inequality

From the labor sector’s point of view, 2016 was a landmark year in achieving long-sought gains. With the Legislature’s passage of a gradual increase in the state’s minimum wage—eventually reaching $15 per hour—low-wage workers will emerge from 30 years of stagnation in real wages and purchasing power. There are some unknowns involved since California is the largest and most diverse state to undertake such a policy, but Summit attendees expect to see broad benefits accrue to the state economy.

And while this represents a victory for the underemployed, systemic economic inequality persists. A concerted effort is needed to teach the skills, and generate the opportunities, Californians will need to secure the high-paying jobs that the state’s tech-based economy is producing. California, the world’s high-tech innovation leader, is better suited than most states to education policies that support middle-skill and higher-wage job growth. Unequal access to career preparation, as measured by academic degrees obtained or years of education, has played a substantial role in wage inequality. But increasing opportunities for postsecondary career technical training, or CTE, can narrow the gap.

The imperative for a stronger tech focus in schools, community colleges, and universities is especially relevant in light of the forecast that an estimated 1.9 million jobs will require a middle-skillset credential by 2025. Career technical training will bolster California’s innovation-driven industries—particularly those that rely on early-stage R&D, such as information technology, biotech, manufacturing, aerospace, and autonomous vehicles. All are grappling with shortages of professionals in midlevel occupations.

In addition to investment in middle-skill job growth, Summit participants suggested that more effectively addressing the state’s infrastructure needs would ultimately improve key quality-of-life indicators, economic equity, and growth. For example, the state’s policy and regulatory apparatus is struggling to expand residential development to meet demand. This lack of supply does not simply affect homeowners, renters, and builders. It also drains the state economy. Among all the barriers to development, the California Environmental Quality Act (CEQA) was the prime target of criticism. Many view the law as a burden that generates too much litigation and delays projects.

7CALIFORNIA SUMMIT REVIEW 2016 An Action Plan for Growth and Innovation

300

250

200

150

100

50

0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: Rose Foundation.

The number of CEQA lawsuits filed, 2002-2015

The California Center’s 2016 analysis of development costs and construction delays, titled “The CEQA Labyrinth: Fixing the Flaws in a Good Law,” found that the most frequent targets of CEQA lawsuits are transportation, solar energy, and multifamily housing projects. This leads to higher housing costs, more sprawl, and fewer renewable energy projects—which, like CEQA itself, were designed to protect the environment.

Whether this reputation is warranted or not, regulatory frameworks like CEQA are often used by anti-development groups to halt or significantly delay approvals. Over the long term, without a suitable balancing mechanism to prevent such regulatory abuse by interest groups, CEQA and other local regulatory hurdles may be contributing to the rising cost of land and housing. Policymakers’ inability to support development and enable California families to secure affordable housing will have cascading effects for years, including dampening consumer spending and prompting workers to leave the state.

Although the state has seen development expand in the multiunit and higher-end categories, the growth has not been spread across the state. Housing is desperately needed in some severely underserved markets. “California loses $140 billion a year due to its housing shortage,” panelist Jonathan Woetzel said during the session titled “If You Lived Here, You’d Be Home by Now: Addressing California’s Housing Shortfall.” Woetzel is a senior partner at McKinsey & Co. and director of the McKinsey Global Institute in Asia.

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0

500

1,000

1,500

2,000

2,500

3,000

0

50,000

100,000

150,000

200,000

250,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

1 unit 2 units 3 & 4 units 5 units or more # of structures with5 or more units

Source: U.S. Census.

Building permits by housing type, 2005-2015

As part of the broader infrastructure conversation, Summit participants encouraged leaders to embrace innovative approaches to financing while exploring technology-driven means of expediting development. Currently the state’s funding approach has struggled to keep up with the demands of general operations and maintenance. Our infrastructure system appears to be no match for the growing demands of water management in particular. Drought has tested it, as well as the megastorms and other extreme weather conditions that were previously thought of as centennial events but are becoming more regular occurrences.

Indeed, underinvestment and deferred maintenance may be the primary systemic risk to California’s service, knowledge, and agriculture-based economy. Despite conservation and considerable reductions in consumption, residents and businesses are facing higher prices for their water and energy. Government and utilities know they need to better communicate that the necessary interventions—replacing broken elements, modernizing outdated technologies, and realigning the entire system to today’s climate patterns—come at a cost.

Still, government has made limited efforts to invest in technology and innovation by way of technology labs and partnerships with companies and universities. We are at a time, however, when public-private investment in infrastructure is more crucial than ever. One challenge is the multitude of agencies in the water infrastructure space, whereas energy supply and distribution is more centralized and easier to coordinate. As noted during the Summit, the higher-volume water agencies have become more open to collaboration with the private sector. The big urban providers, which in aggregate serve nearly two-thirds of the state’s population, have the capacity and resources to work with private companies to marshal the level of investment needed to reach California’s goals by 2025.

9CALIFORNIA SUMMIT REVIEW 2016 An Action Plan for Growth and Innovation

As the state continues to enjoy swifter job growth than the nation at large, Summit participants expressed caution about the structural imbalance at the core of the tax and revenue system—our persistent reliance on income tax, which accounts for two-thirds of the state’s spending power. Those tax revenue flows, largely targeting high earners, have proved to be as volatile as the state’s up-down-up economy in recent years. Although concerned about the need to diversify revenue streams and support job growth, Summit participants stressed the potential benefits of regulatory reform to ease infrastructure development and aid small business, expanding on the state’s post-recession gains.

Cultivating Innovation California’s unique position in the global innovation landscape is no accident, but the product of an ecosystem that invests aggressively in infrastructure and human capital and has refined processes that transform setbacks into successes. Attendees brainstormed on how to extend and expand the culture of creativity and risk-taking, coalescing around the following recommendations:

� Shift the focus to incrementalism. Relative to a decade ago, California venture capital views the world thru a different lens—evolutionary, not revolutionary. The companies VCs invest in, likewise, tend to exert their impact in incremental steps. Summit panelists discussed how the private and government sectors can work together to apply a startup methodology to statewide problems, with a focus on policy experimentation, efficient delivery of services, and small improvements. The need to work with government, not around it, was emphasized, because the private sector alone cannot effect systemic change.

� Support trade promotion and finance. Despite the political discord surrounding the benefits or shortcomings of cross-border trade, California is an essential part of the global trade network as host to the largest port complex in the United States. More than 40 percent of container goods shipped to this country pass through the state. As California works to reach the growing middle class of the Pacific Rim nations, we must enable small and medium-sized businesses to expand their export capabilities. Both foreign and California leaders should facilitate the education of potential exporters and connect them with mechanisms to reduce risk through trade financing and insurance.

� Maintain adequate levels of research and development. As research in information technology and medicine becomes increasingly international, California’s ability to foster private investment and risk-taking, along with the renowned expertise at its universities, provide further opportunities for partnership. But still, in 2016, California ranked 11th among states in federal R&D dollars per capita, fourth for industry, and 19th for academia. This highlights the opportunity to raise the bar.

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")

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")

")

")

")

")

")

")")

")

")

")

")

")

$66

$70

$34

$27

$456

$1

$639

$ 583

$6,982

$2,364

$1,328

$21,130

$13,780

$12,564

$20

$244

$39 $23

$58

$83

$359

$125

$199$171

$222

$146

$2,033

R&D intensity

1 - 2 percent

2 - 3 percent

3 - 4 percent

4 - 5 percent

More than 5 percent

R&D spending in millions

Less than 1 percent

Source: Milken Institute (2015), “California’s Innovation-Based Economy: Policies to Maintain and Expand It.”

R&D spending and intensity in California metropolitan statistical areas

Improving the Business Climate Tax reform is critical to addressing the state’s long-term revenue imbalance. When business is booming, it enjoys a bump in revenue. But in times of economic stress, as during the Great Recession, the state searches for funds, including investment to reinvigorate the economy. Summit participants encouraged state leaders to consider the 2016 controller’s office report that calls for a reformed tax structure to address the following needs: (1) volatility of revenue (2) predictability of revenue (3) sufficiency of revenue (4) progressivity of tax liability. The state has generally done a good job with the third and fourth items, but the 2007-09 recession shed light on the need to focus more on the first two challenges by establishing a system that cures its addiction to income tax.

Regulatory streamlining and reform are to be encouraged and more transparency required in regulatory laws, especially when applied beyond their original intent. With no balancing mechanism to prevent systemic obstructionism or delays, the development process has become onerous, leading to rising costs. In the sphere of development, for instance, difficulties in the construction and entitlement process can be addressed through policy reform at the local and state levels. Potential solutions to the problem of high building costs include streamlining entitlement and permitting and using modular or pre-fab construction

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11CALIFORNIA SUMMIT REVIEW 2016 An Action Plan for Growth and Innovation

techniques. Participants discussed new models such as auxiliary dwelling units, which might reduce displacement while expanding the supply of housing. Additional recommendations presented:

� The public and private sectors should collaborate to create Enhanced Infrastructure Financing Districts, coordinating available funding and better utilizing comprehensive development plans to support future growth.

� Mitigate the stifling effects that no-growth or limited-growth policies have on the state’s economic strength. Coordinate funding sources to incentivize and facilitate private investment that increases housing density and improves affordability.

� Encourage coordination among government agencies and developers to identify local land assets that can be developed.

� Encourage private financing by structuring incentives for developers to build transitional, rather than just affordable, housing to reduce homelessness.

21st Century Infrastructure Innovation is critical to solving the state’s utility issues. However, government and private-sector priorities and approaches don’t always match up. Venture capitalists and entrepreneurs are looking at how to expedite bringing new products to market, and some are developing technologies aimed at enabling individuals, families, and communities to generate their own energy (a process known as microgeneration) and conserve water in cisterns. They argue that when better conservation and generation technologies are in place, we’ll rely less on macro-level systems, and therefore less infrastructure investment will be needed. Local and state governments may seek to maintain ownership of the system, but important safety and security issues will arise if large populations lack regular and reliable access to energy and potable water.

Rank among states (1 = Best, 51 = Worst)

Index component 2012 Rank 2014 Rank 2015 rank

Government and fiscal policy 49 49 47

Security 20 11 20

Infrastructure 46 49 49

Human resources 41 41 38

Technology 6 7 8

Business incubation 2 4 10

Openness 3 4 4

Environmental policy 37 29 32

Overall competitiveness 24 26 35

Source: Beacon Hill Institute.

Government regulation and insufficient infrastructure impede competitiveness

State competitiveness index, California rankings

Combining a range of funding sources and leveraging the public-private partnership model is a potential way forward. California is currently benefiting from similar alliances, with growing levels of foreign direct investment in its cities, sustained levels of trade at its ports (i.e., Los Angeles, Long Beach, and Oakland), and new opportunities with the modernization of Los Angeles International Airport. As projects are developed, including those in transportation, energy, and water, efforts should be made to attract more foreign investment by standardizing rules and expectations for projects across the state. In essence,

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the patchwork of regional project planning should give way to a unified marketplace in infrastructure finance to encourage investment from private firms and foreign funds.

Yet for investments to have a greater impact, cities should take advantage of the once-in-a-decade opportunities that come with rebuilding urban space. For instance, while a transit hub is getting a makeover, San Francisco is redeveloping communities surrounding the facility to improve livability. California’s need for investment in its aging infrastructure is apparent, and overlooking available funding sources, at a time when traditional sources are not measuring up, will only worsen a deteriorating condition.

� The need for streamlining reforms in the state’s regulatory and local zoning practices has never been clearer, but action will require a myriad of policy and market reforms to spur housing supply across types, from single-family to transit-oriented multifamily development in urban areas. It will also require collaboration among advocates and policymakers at the state and local levels, accompanied by concerted investment from the private sector and sustained political will for California to address the state’s infrastructure and housing development needs.

� Consider tiered water rate structures (sometimes called “increasing block price schedules”), which provide incentives for customers to conserve water. The lowest-priced block or tier typically corresponds to an amount of water sufficient to meet basic indoor needs like drinking and bathing. Each subsequent tier charges a higher per-unit price for additional consumption, which discourages nonessential uses such as watering lawns and filling swimming pools.

� Many agencies are exploring hybrid pricing models and developing or expanding ways to promote conservation. For example, “holistic” programs targeted to low-income families that look at a household’s entire resource use may yield environmental benefits as well as cost savings for consumers. Solutions would include the installation of energy-efficient appliances, low-flow shower heads, and other devices in the home. More regional and utility-specific models are expected to be unveiled.

� Reconcile the tension between resource conservation and community development. Should policies be crafted to influence or even deter population growth in specific regions? For example, it took San Diego eight years to complete a water-transfer program with the Imperial Valley. Was that an efficient use of time and resources? Would investment in desalination plants draw more residents to the coast, bringing new development to pristine areas that once had limited access to potable water? These are questions for policymakers to consider as they make difficult choices about California’s future infrastructure.

Support Effective Development of Career PathwaysThe California Community Colleges system was given an important assignment under the Master Plan for Higher Education: preparing students for transfer to a four-year university. However, this legacy has left the system struggling to fulfill its career pathways and workforce development mission. Even at a time of rising demand for career technical education graduates, CTE’s proportion of community college enrollment declined from 31.3 percent in the 2000-01 academic year to 28.2 percent in 2014-15. Also, CTE course levels are difficult to sustain due in part to expensive equipment requirements—especially the purchase of machine tools, medical equipment, digital editing bays, and other gear. Rebalancing the system’s dual mission and allocating resources accordingly will communicate the value of CTE programs in the career objectives and earning potential of nontraditional students and adult learners.

Across sectors and organizations, Summit participants agreed that science, technology, engineering, and math (STEM) education and CTE are important pathways to expanding opportunity and supporting innovation-driven industries. Focusing on information, communications, and technology (ICT) skills, as well as STEM, is vital. That’s particularly true in underserved communities, which need to see accelerated deployment of broadband Internet connections to shrink the “digital divide.”

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13CALIFORNIA SUMMIT REVIEW 2016 An Action Plan for Growth and Innovation

Additionally, stakeholders discussed the importance of a well-rounded education model during the Summit, including interdisciplinary learning and access to internships, fellowships, and apprenticeships. Particularly in sectors such as entertainment and media, more employers are looking at how their prospective workers think as opposed to seeking a specific skillset.

� Support a funding mechanism that sustains community colleges’ capacity to create and maintain CTE courses and programs that respond to the needs of the region’s industries. A new, sustainable funding stream for equipment and facilities can be created through partnerships with industry clusters. Perhaps a formula could be developed in which regional businesses match any increase in state CTE funding above the average of non-CTE programs. Additional financial incentives may be provided to institutions based on the percentage of graduates hired in the private sector.

� Focus curricula on regional needs and industry clusters. Given the vast differences in the composition of industries around the state, it is essential to base education programs on regional needs. For example, the entertainment cluster in Los Angeles requires programs in graphic design and special-effects production while the information and communications technology sectors in the San Francisco Bay Area demand programs aligned with their needs.

� Engage the private sector. In addition to partnerships for funding, companies should consider program grants, internships and apprenticeships, feeder programs, and right-to-first-interview programs with educational institutions that serve disadvantaged communities. Program maintenance and expansion must be performance-based. Employers need to consistently communicate the skills that need to be taught to ensure curricula are aligned with future demand. Still, they are looking for abilities beyond the strictly technical. They want people with soft skills, who are adaptable, willing learners, and adept communicators. Speaker forums, multistakeholder convenings, and regular meetings among industry and education leaders would provide opportunities for dialogue.

� Embrace multiple pathways to economic opportunity. The long-term impact of raising the minimum wage remains uncertain in regard to income inequality, business creation, employment, and the overall effects on the state economy. Yet we do know that in the short term, the policy offers a boost to those earning the lowest wages. A general associate degree results in average annual wages five years later of $38,500, while a CTE associate degree yields $66,000, a premium of 71.4 percent. Indeed, one way to address income inequality is increasing wages. But coupling this with expanding education and skills training will provide opportunity to more Californians.

AA - Career TechnicalEducation

$66,000

AA - GeneralEducation

$38,500

Source: Salary Surfer, 112 California Community Colleges.

Annual earnings five years after receiving CTE and general associate degrees

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ACTIONS FOR 2017

The recommendations and key issues raised during the 2016 California Summit are shaping the California Center’s agenda this year. The Center is particularly focused on the following topics discussed:

Housing and Homelessness: With its research, partnerships, and public and private engagements, the California Center is pushing for solutions to the housing shortfall at both the local and statewide levels. In addition, the Center is working with partners to develop effective means for sharing data and broadening coordination on homelessness issues in Los Angeles County.

Infrastructure: Recognizing that one key to a sustainable, affordable way of life for many Californians is modern transportation and energy infrastructure, the California Center is focusing on innovative mechanisms for encouraging investment to address the growing gaps in infrastructure funding. We are particularly focused on transporting goods and people and building an electricity grid that more effectively manages the expanding role of renewables. In addition, the Center will continue to be engaged in issues related to efficient, innovative water management.

Human Capital and Innovation: The California Center remains committed to supporting California’s ability to produce innovative research in technology, medicine, and other fields, leveraging the talents of a highly trained workforce. The state’s leadership in this arena is essential not only to its global competitiveness but its ability to produce well-paying jobs. The Center continues to work with community colleges, universities, employers, and policymakers to raise skill levels and enlarge the supply of skilled workers. In addition, the Center will release its analysis of job trends in the entertainment industry and the Los Angeles region’s ability to produce enough skilled workers for the sector’s future needs.

When it comes to innovation and risk-taking, California leads the nation, and we should continue to experiment with a range of policies and approaches that tackle the toughest issues of our time. The California model is about challenging commonly accepted norms, embracing failure as a building block of future success, and investing in quality of life for the state’s diverse population. But it’s not just about taking care of those here today. Our state and the California Center along with it emphasize the value of preparing for future generations and setting the standard for other states as well as nations around the globe.

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