Fiscal darkness is gathering in California, where as many as three crises could converge in mere months — all while Democrats have put “affordability” at the top of a mythical agenda.
It’s so potentially bad that Gov. Gavin Newsom has been in Washington sucking up to President Donald Trump, playing down that he ordered the legislature to “Trump proof” California and dismissing his 2024 election criticism of the president as “noise.” The governor’s sudden change in rhetoric is because he and California have never been so dependent on Trump as they are now.
Federal money controlled by a malevolent president who could and already has done California real harm may be all that is standing between our state and converging troubles that seem more likely by the day. But that’s only the beginning of our potential problems.
An Edison crisis?
Evidence is mounting that the equipment of Southern California Edison, the region’s largest electricity provider, may have caused the Eaton Fire. This is the blaze named after the canyon behind the foothills community of Altadena in the San Gabriel Mountains. Even the utility has conceded the existence of potential evidence in a filing with regulators at the Public Utilities Commission.
The worth of Edison’s parent company is about $20 billion based on today’s stock price, which is already down a third since the start of the fire. The Eaton fire caused about $10 billion in damage, according to a preliminary estimate. If authorities were to formally attribute the cause of this fire to Edison and the company’s stock price were to continue to tank, the market value of the company would be a fraction of its financial exposure.
Sacramento would then have one of two ugly choices, both beginning with a “b.” Newsom and the pro-affordability Democrats could bail out the company in one way or another. Or they could look the other way and let Edison go bankrupt. But if the history of Pacific Gas & Electric is an example, which went bankrupt after Paradise burned to the ground in 2017, the state went along with a bailout of sorts two years later. Either path will hit the pocketbooks of millions of Californians one way or the other.
An insurance crisis?
Analysts at the University of California at Los Angeles have estimated the total insured losses of the region’s fires in the range of $75 billion. To put that in perspective, that is nine times the claims from the Camp Fire that led to PG&E’s bankruptcy. That is about $2,000 in unpaid insurance claims for every man, woman and child in California.
One way or another, we’re all going to be paying for this, and big time. Insurance companies don’t get their money out of thin air.
The process of digging into our collective pockets has already begun. State Farm, one of California’s largest insurers, already has an emergency request before California Insurance Commissioner Ricardo Lara for an across-the-board, 22% premium increase.
Lara’s choices are equally painful. He can say yes, succumbing to financial reality, letting the cost of insuring our homes go through the roof. Or he can say no, succumbing to political pressure, and gamble that the state’s property insurance industry does not implode.
California relies on these private insurers to manage all of our financial risks, from our homes to our businesses. A collapse of the insurance market would leave millions of Californians fully exposed to paying for future disasters large and small.
A budget crisis?
Even if Edison and insurers were to cover their share of the financial obligations, that could leave nearly $100 billion in public costs unfunded, according to the UCLA preliminary estimate. California’s entire general fund budget, by comparison, is $229 billion. California, the fifth largest economy in the world, would face a financial crisis if this burden fell solely to Sacramento.
This explains why Newsom is busy trying to make Trump his new best friend.
Of all the choices, this should be the easiest one. The United States has little choice but to come to the rescue of its largest state, both in population and economic importance. For Washington, failing to rescue Los Angeles would be a self-inflicted wound, with economic consequences that would ripple across the national economy.
But Trump has already threatened to withhold aid to California unless Newsom bends to his will on unrelated matters such as water policy. The president is busy seeking political revenge in other arenas, such as ferreting out the identities of FBI agents who investigated the Jan. 6 insurrection of the Capitol.
Trump would be downright shrewd to give California every last dime it needs. Even then, Newsom and Sacramento’s Democratic leadership would still be drowning in fiscal crises on energy and insurance that they have largely inflicted upon themselves by avoiding tough policy choices.
Here in our state capital, 2025 is not shaping up to be the year of affordability. Saying so is its own form of political bankruptcy.
Tom Philp is a Sacramento Bee columnist. ©2025 The Sacramento Bee. Distributed by Tribune Content Agency.
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