The milestone comes as SpaceX completed what analysts are calling the largest initial public offering (IPO) in U.S. history. Investor demand pushed the company’s valuation beyond $2 trillion during its first day of trading, instantly elevating Musk’s fortune to an estimated $1.1 trillion on paper.

The achievement marks a remarkable rise for a company that began in 2002 with the ambitious goal of reducing the cost of space travel and eventually making humanity a multi-planetary species.

Today, SpaceX operates the world’s most active launch program, provides satellite internet service through Starlink, transports astronauts and cargo for NASA, and is developing the massive Starship rocket system intended for missions to the Moon and Mars.

From PayPal Millions to Trillion-Dollar Wealth

Musk’s journey began long before rockets dominated headlines.

After co-founding Zip2 and later helping create X.com, which evolved into PayPal, Musk reinvested much of his fortune into a series of high-risk ventures including Tesla and SpaceX. At various points, he reportedly came close to exhausting his personal finances while attempting to keep both companies afloat.

Those risks have since transformed into one of the largest accumulations of wealth in modern history.

While Tesla helped establish Musk as the world’s richest person, financial analysts say SpaceX has now become the largest contributor to his fortune. Reuters calculations estimated that Musk’s SpaceX holdings alone were worth hundreds of billions of dollars before the company’s public offering. Following the IPO, those holdings surged dramatically in value.

Historic SpaceX Launch Activity

The financial milestone arrives during one of the busiest periods in SpaceX history.

The company continues conducting frequent launches from facilities in Florida, California and Texas, deploying Starlink satellites while supporting government and commercial missions around the globe.

SpaceX’s reusable Falcon 9 rocket has become the workhorse of the modern space industry, regularly launching satellites, scientific payloads and astronaut crews. Meanwhile, development continues on Starship, the largest and most powerful rocket ever built.

NASA has selected a version of Starship to help return astronauts to the Moon under the Artemis program, while Musk has repeatedly stated that the vehicle is central to his long-term vision of establishing a permanent human settlement on Mars.

The company has also expanded beyond traditional spaceflight. Through Starlink, SpaceX now provides internet connectivity to millions of users worldwide, including customers in rural and underserved regions where conventional broadband infrastructure is limited. Starlink has become one of the company’s most important revenue-generating businesses.

Not Everyone Is Convinced

Despite the enthusiasm surrounding the IPO, some analysts caution that SpaceX’s valuation reflects enormous expectations about future growth.

Research firm Morningstar recently estimated the company could be worth less than half of its IPO valuation, citing concerns about competition in artificial intelligence, the long-term economics of satellite broadband and the challenges associated with future projects.

Others argue that investors are betting not only on current operations but on Musk’s vision for future industries that do not yet fully exist, including orbital data centers, advanced artificial intelligence systems and eventual Mars colonization.

Even supporters acknowledge that much of Musk’s wealth exists on paper through stock ownership rather than cash holdings. Like other billionaire fortunes, the value can fluctuate significantly with market conditions.

A New Chapter in American Business

Whether SpaceX ultimately justifies its record-breaking valuation remains to be seen. What is certain is that the company has already reshaped the global space industry.

Reusable rockets, routine commercial launches and privately developed spacecraft were once considered unlikely goals. Today they are standard features of a sector largely transformed by SpaceX’s innovations.

For Musk, the trillion-dollar milestone represents more than a personal financial achievement. It underscores the growing influence of private technology companies in industries once dominated exclusively by governments.

As SpaceX continues launching rockets, expanding satellite services and pursuing missions beyond Earth, the company appears poised to remain at the center of both financial markets and the future of space exploration for years to come.

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The boards at the California Public Employees’ Retirement System and the California State Teachers’ Retirement System are facing campaigns from groups that want them to pull money out of companies associated with the Trump administration, scale back investments in fossil fuels and break with private equity firms over their labor records.

The list includes electric car maker Tesla, surveillance company Palantir, private companies that operate immigrant detention centers, ExxonMobil, Chevron and private equity firm Apollo Global Management.

To some extent, divestment campaigns are routine business at CalPERS and CalSTRS, which hold assets worth a combined $1 trillion and are headquartered in the capital of a deep blue state. 

But the combination of Trump-era politics and a concerted push by labor in the Legislature to force the pension funds to open the books on private equity holdings is attracting the focus of a more diverse mix of advocates.

“It’s politics,” said Richard Costigan, a Republican who served on the CalPERS board from 2011 to 2019 as an appointee of Democratic Gov. Jerry Brown. “When you look at Palantir and Tesla, it’s driven by politics. Seriously, why would you not invest in Palantir?”

The rebuttal: Despite their earnings and stock value today, the companies affiliated with the Trump administration’s immigration enforcement program are taking on serious reputational risk that could backfire on the funds. Separately, they say putting money into fossil fuel companies poses hazards both for the environment and for pension systems banking on long-term investments.

The pension funds “should be aligning their investments with the values of their state, the values of their members, and the long-term interests of their members,” said Richard Brooks, the climate finance program director at the advocacy organization Stand.Earth.

He recently released a study tallying CalPERS and CalSTRS investments in companies that participate in the Trump administration immigration sweeps, such as Palantir and private prison companies CoreCivic and GeoGroup. 

“I see a disconnect right now,” he said.  

Staff at CalPERS and CalSTRS oppose divestment and they consistently fight legislation that would tie their hands. Both systems are underfunded and owe tens of billions more than their assets, a crisis that in 2012 led the Legislature and then-Gov. Jerry Brown to pass a law mandating less generous pension benefits for employees hired after that year. 

But CalPERS and CalSTRS have pulled money out of industries in the past. CalPERS divested from firearms in 2013 and from tobacco in 2016. They’re also barred by state law from investing in coal as well as in businesses connected to Iran.

They’re governed by boards of directors that are made up of public employee union leaders, appointees of state Democratic leaders and the state controller and state treasurer, both of whom are Democrats. 

In short, they’re people who are aligned politically with the mostly liberal groups that are pressing them to change policies. 

That doesn’t mean it’s an easy call for them to withdraw investments from any industry.

“It’s so tricky. How do you divest from all of that is anti-union? The quick answer is you can’t,” said Kenny Waggoner of Ducenta Squared Asset Management, who advises union benefit plans.

He gave an example of a real estate investment trust with stakes in large warehouses — the kind operated by Amazon. Members might question an investment in a company with a reputation for fighting unionization, but the rent from the warehouse might be the best return available to support their pensions.

Here’s a look at the main friction points before CalPERS and CalSTRS.

Tesla volatility

A long–running campaign to persuade CalPERS to break with electric car maker Tesla peaked in September when the pension board commissioned a risk assessment on whether it should own stock in the electric car maker.

Tesla delivered returns for CalPERS over time. It’s considered one of the “magnificent seven” tech stocks that drive markets today.  

The company’s critics characterize it as a volatile risk under Trump ally Elon Musk, pointing to Tesla’s drop in sales last year along with regulatory challenges it’s facing with its self-driving cars. CalPERS as a Tesla shareholder has consistently voted against Musk’s pay packages.

“Tesla’s past gains don’t erase the present picture,” CalPERS board Mulissa Willette said at the meeting where she requested the risk analysis. 

In March, the board held a closed-door discussion on “owning Tesla”. Afterward, a board member said in open session that CalPERS would not sell off its holdings in the company. 

“While we are unable to provide specifics regarding the discussion, we can note that the company has been one of the top 10 drivers of performance in our global equity portfolio and is a key holding for our climate transition portfolio,” CalPERS board member Kevin Palkki said. “After our closed session discussion, we collectively agreed to make no changes at this time.” 

Immigration and surveillance

Palantir, a California company that supported the U.S. military during the wars in Iraq and Afghanistan, became a focus of public pension divestment campaigns during Israel’s assault on Gaza because of its work with the Israeli Ministry of Defense. The Berkeley Unified School District, for example, in September passed a resolution calling on CalSTRS to divest from the company. 

Now Palantir is facing more scrutiny because of its work with the Department of Homeland Security, which is carrying out the Trump administration’s immigration crackdown.

The climate advocacy organization Stand.Earth called attention to CalPERS’ and CalSTRS’ holdings in Palantir and six other companies working with Homeland Security in a study it published last month highlighting public pension investments in companies that Stand.Earth described as enabling “repression and violence”.

Fossil fuels

California lawmakers were close to forcing CalPERS and CalSTRS to divest from fossil fuels three years ago when a bill to do that passed the state Senate. But it didn’t become law.

Both of the big pension funds opposed the bill, although one of their board members, state Treasurer Fiona Ma, supported it.

Advocates and public employees who don’t want their pensions to support industries that drive climate change have pressed the funds to divest from oil and gas for a decade. 

California’s third largest public pension fund, the University of California Retirement Plan, divested from fossil fuels in 2020. At the time, its leaders cited financial reasons, finding that fossil fuels have a poor long-term outlook.

The UC Retirement Plan is in better shape than CalPERS and CalSTRS. The UC plan’s assets are worth 92% of what it owes over time to its beneficiaries, while CalPERS’ and CalSTRS’ portfolios are worth about 80% of what they owe.

Labor’s attention on private equity

Two bills in the Legislature this spring pit unions against unions in questions over how CalPERS and CalSTRS should do business. 

One would compel the funds to release more information about their private equity holdings, a change that CalPERS staff contends would so severely undermine its ability to invest with those firms that it would have to increase its charges to employers by more than $6.1 billion a year. 

The measure by Democratic Sen. Dave Cortese of San Jose has support from unions that represent grocery store workers and hotel employees, none of whom have pensions in CalPERS or CalSTRS. Public sectors have not yet taken a stand on the proposal  

The second one, carried by Democratic Assemblymember Robert Garcia, would direct the funds to commission a study on their labor standards for construction and development projects. The State Building and Construction Trades Council has urged CalPERS and CalSTRS to heighten their existing labor standards and is supporting the bill.

The California School Employees Association, whose members have CalPERS pensions, is on the record opposing the trades’ bill. 

“CSEA’s position is that investment and divestment decisions regarding CalPERS funds should be made by the CalPERS Board and its investment professionals, not by the Legislature,” Aaron Latham, the union’s spokesperson, said in a written statement. 

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The emails suggest that Amazon employees were coordinating with vendors to encourage major retailers like Walmart and Chewy to raise prices on products listed on their platforms. In one instance, Amazon is accused of increasing prices on a popular set of dog treats and working with the manufacturer to persuade Chewy to match the hike. Amazon allegedly sent the manufacturer a list of products with price increases, instructing them to ensure Chewy followed suit. Just two days later, the manufacturer reportedly confirmed that the price increase had been applied on both platforms.

In another case, Amazon reportedly sent links to Levi’s showing that Walmart was selling Dockers khaki pants at a lower price than Amazon. The next day, Levi’s allegedly told Amazon it had coordinated with Walmart to raise the price of the pants to $29.99, which was then mirrored by Amazon shortly after.

Bonta’s office argues that these actions demonstrate Amazon’s attempt to manipulate the market by colluding with vendors and other retailers to raise prices for consumers, an allegation that the company strongly denies.

“The evidence uncovered today is clear as day: Amazon is working to make your life more unaffordable,” Bonta said, criticizing Amazon for price-fixing. “The company is price-fixing, colluding with vendors and other retailers to raise costs for Americans beyond what the market requires.”

In response, Amazon dismissed the claims, accusing Bonta’s office of a “transparent attempt to distract from the weakness of its case.” The company stated that it remains proud of offering low prices to customers and would address the allegations in court.

Walmart, Levi’s, and Chewy, while mentioned in the filings, are not named as defendants in the case.

These revelations are part of an ongoing antitrust lawsuit filed by Bonta’s office in 2022, accusing Amazon of manipulating prices across various online platforms to create an artificial price floor that limits competition while allowing Amazon to retain its competitive edge. Bonta contends that by controlling prices in this manner, Amazon can present itself as offering the best deals, even as it benefits from reduced competition.

The newly unsealed records were part of a motion filed in February by Bonta, seeking an injunction to halt Amazon’s alleged price-fixing practices. Amazon’s trial is scheduled to begin in January 2027, and the company continues to deny the core allegations, arguing that its practices encourage competition rather than stifle it.

This is not the first time Amazon’s pricing practices have come under scrutiny. In a separate release, the Guardian reported last week on additional court documents showing how Amazon’s tactics allegedly pressured smaller companies to raise their prices in order to compete on its platform.

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In 2020, voters approved Proposition 22, a ballot initiative that exempted Uber and other app platforms from labor law and allowed them to keep classifying their workers as contractors instead of employees. The measure included a promise that drivers would have an appeals process.

Rideshare Drivers United, a drivers group that says it has about 20,000 members in California, said Monday that because Uber has violated Prop. 22 by not delivering on all its promises, it should not be allowed to continue to assert that its drivers are independent contractors. 

“Uber has not met the conditions to take advantage of Prop. 22,” Shannon Liss-Riordan, a Massachusetts-based lawyer who has challenged Uber and other gig companies for years and is representing the California group, told CalMatters.

Many deactivated drivers report that they struggle to appeal their cases. They say they are initially sent to sites where they appear to be talking with bots, then eventually reach agents who are working from a script and appear to be in another country. Rarely do they reach people who are empowered to truly help them, they say. 

Liss-Riordan said at a news conference in San Francisco that she is seeking a declaration from the court saying that the company is violating the law it wrote, which she said should help drivers who are pursuing individual arbitration of their cases. 

“We’re going to seek back pay and other damages for them if they were unfairly deactivated, and we’re also going to be seeking their rights under the labor code,” she said.

Among the promises of Prop. 22: guaranteed minimum earnings of 120% of minimum wage for active ride or delivery time; health care stipends for those who qualify; occupational accident insurance and accidental death insurance; and “mandatory contractual rights and appeal processes,” according to the initiative’s text. The text does not specify what the requirements for an appeals process should be.

Devins Baker said he has driven for Uber and Lyft in the Bay Area for eight years and was deactivated by Uber right before Christmas in 2024. 

He told CalMatters that he thinks Uber deactivated him after he had to brake hard to avoid hitting a person who darted across the freeway, causing his passenger — who was not wearing a seatbelt — to fall out of his seat. 

“I don’t know because we never find out which passenger complained,” Baker said, adding that he thinks some people report drivers to try to get a free ride from Uber.

Baker got emotional during the news conference, saying he is trying to “keep it together” and is scrambling to find other ways to make money so he will not become homeless.  

Uber spokesperson Ramona Prieto called Liss-Riordan an “opportunistic trial lawyer” in an email to CalMatters and said the company will “fight this publicity stunt in court.” Prieto said the company provides drivers with a clear appeals process, and pointed to a company blog post from last week that explains what drivers can expect when they challenge deactivations. 

‘It has turned my life upside down’

Another deactivated driver from the Bay Area, Mirwais Noory, said Uber kicked him off the app in November 2024 over what the company said were safety concerns. He said he tried to show Uber dashcam video to plead his case, to no avail.

Getting deactivated caused financial hardship as he tries to support four children, he said. He has found work as a security guard since then, and now occasionally drives for Lyft. 

“I’m the only one with income,” Noory told CalMatters. “It has turned my life upside down.”

Jason Munderloh, chair of the Bay Area chapter of Rideshare Drivers United, said at the news conference: “Once they’re deactivated, there is no unemployment insurance (because drivers are not considered employees). This leads to poverty and desperation.”

“The minute someone joins RDU, their first concern is pay and the second is deactivations,” Nicole Moore, president of Rideshare Drivers United, told CalMatters ahead of the news conference.

Uber, a multibillion-dollar company based in San Francisco, was the lead backer of the $205 million Prop. 22 campaign that was also funded by DoorDash, Lyft, Instacart and Postmates. Uber spent a total of $59.5 million in cash and in-kind contributions, and Postmates — which Uber bought in a deal that was completed in 2020 — spent $13.3 million.

The lawsuit filed Monday in San Francisco Superior Court is the latest of many legal challenges against Prop. 22, which CalMatters has found has no state agency assigned to enforce it. The state Supreme Court upheld the gig-work law in 2024.

The plaintiffs also allege Uber deactivates drivers based on grounds not specified in its “Platform Access Agreement,” and that the company does not provide drivers with enough information about their earnings to determine that they are receiving 120% of minimum wage.

Separately, Uber is facing a lawsuit by the state Justice Department and the cities of San Francisco, Los Angeles and San Diego over thousands of wage-theft claims that predate Prop. 22. A trial for that lawsuit as well as a similar one against Lyft is scheduled for December 2027.

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In a unanimous vote, justices told a lower court to revisit a ruling that upheld reduced payments to solar panel owners for selling excess power back to utility companies. Justices did not rule on whether the changes to the solar program were legal, requiring the court of appeals to determine this.

“They basically said the lower court kind of punted on the whole substance of the [solar payments] decision,” Bernadette Del Chiaro, vice president for California at the Environmental Working Group, said. “I do think they’re clearly stating this needs to be reviewed.”

At issue is a 2022 decision by state regulators to reduce by about 75% payments to solar panel owners for excess power. The change was intended to help make bills affordable for all customers while still encouraging the adoption of renewable energy sources. Three environmental groups that brought the lawsuit — the Center for Biological Diversity, The Protect our Communities Foundation, and the Environmental Working Group — argued in the case that the state utilities commission’s decision left out crucial considerations around benefits to customers and disadvantaged communities. 

“We don’t need [to be in] an affordability crisis if we have more local generation,” Roger Lin, senior attorney fro the Center for Biological Diversity, said.

Utilities pay solar panel owners for their excess power under a program known as “net energy metering.” In previous iterations of the program – “NEM 1.0” and “NEM 2.0” – utilities paid solar customers a retail rate for their extra energy, which is the same price the utilities charge other customers when they resell that energy. This was changed under the current iteration of the program – “NEM 3.0” – which instead gives customers the “avoided cost,” which is how much utilities save by not buying that power on the wholesale market. 

Customers who joined the program after mid-April 2023 receive the new rate, while customers under the prior two versions will continue to receive the old rate for the duration of their contracts, which is typically about 20 years.

Utility commissioners ruled in favor of power companies, which argued that older versions of the program created an unfair cost burden on customers. Those without rooftop solar, utilities said, have to pay more than their peers for routine maintenance to the grid. The groups bringing the lawsuit said this idea is overblown.  A court of appeals upheld regulators’ decision, relying on a legal standard that gives significant deference to decisions made by the California Public Utilities Commission.

Thursday’s decision said the court of appeals “erred” by using this standard.

Whether or not the change in how solar panel owners are paid is legal will be left to the lower courts. But the decision this week could have farther-reaching implications for state utility regulators.

“We appreciate the Court’s careful attention to the appropriate standard of deference for reviewing CPUC decisions,” Terrie Prosper, utility commission spokesperson, said. “We are pleased that the CPUC’s decision will remain in effect as an important part of controlling electricity bills.”

Advocates said the decision reinforces that the utilities commission must ensure that its decisions fit squarely within the law.

“For too long, they really have operated in a black box behind a shroud of complexity,” Del Chiaro said. “Consumers and the planet have consistently lost out as a result of that.”

The fallout from the utilities commission’s 2022 net metering decision included an 82% drop in customers requesting connections for rooftop solar installations, and industry groups expected a loss of about 17,000 jobs during the first year of the change. 

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The Trump administration told states to provide the data by July 30 or risk losing federal funding to administer the program. California receives $1.3 billion annually to distribute about $12 billion a year to 5 million residents who rely on the food vouchers, called CalFresh in California. About 13% of the state’s population receives the aid.

“The purpose of what the Trump administration is doing here is to target immigrant communities,” said Michigan’s Attorney General Dana Nessel, during a press conference today. She said Trump’s actions “send a chilling effect to American citizens, and to tell them that if they apply for programs that they are perfectly entitled to under law, their most personal and sensitive data is going to be shared with all kinds of people, and it’s going to have the impact, and I think it already is, of scaring people away from seeking these increased incredibly important programs.”

Residents without lawful legal status in the U.S. are not eligible for SNAP benefits. However, during Trump’s first term, he proposed eliminating benefits even for “mixed-status” families where at least one person in a household lacks legal status. 

In another example of policies that put California at odds with the Trump administration’s effort to crack down on immigrants living in the U.S., the state has tried to expand food benefits to some immigrants without legal status. In 2022, California became the first state in the nation to offer about $165 a month in food benefits to about 35,000 immigrants, mostly to recent green card holders. That expansion was part of the California Food Assistance Program, or CFAP, a state-funded version of food stamps.

Advocates for that effort argued many farmworkers toil in fields for decades at low wages, providing food to the rest of the nation, and then are unable to buy enough to eat, especially when they become senior citizens. 

Why states are suing

Attorneys general that are filing the suit argue that the Trump administration’s policy is “arbitrary and capricious,” violates the 10th Amendment that protects states’ rights as well as various privacy laws.

“We’re seeing a number of different cases recently where there’s this Spending Clause violation, where new conditions that Congress never put on the funding are being added by the executive branch after the fact,” said California Attorney General Rob Bonta. “They can’t do that.” 

The suit will be filed today in the federal Northern District of California. It is the 35th time in 27 weeks that California has sued the Trump administration. 

“SNAP applicants provide their private information on the understanding, backed by long-standing state and federal laws, that their information will not be used for unrelated purposes,” Bonta said.

The Trump administration has tried to tap several state databases to quickly amass troves of sensitive personal information about hundreds of millions of people. Using that information is part of Trump’s effort to fulfill his campaign promise of carrying out the largest mass deportation effort in U.S. history. 

His administration says collecting the data is aimed at preventing waste and fraud. Trump issued an executive order in March that ordered his administration to have “unfettered access to comprehensive data from all state programs that receive federal funding.” In May, NPR reported that the administration sought Social Security numbers, addresses and, for one state, citizenship data, for SNAP recipients. The orders came from the U.S. Department of Agriculture and DOGE, the previously Elon Musk-led White House office that sought to slash government spending and was met with numerous lawsuits.

Bonta said the Department of Agriculture “has never once asked states to turn over private and sensitive data on such a massive scale.” Now, it seeks five years of data about recipients, according to the attorneys general.

California has already sued Trump for his administration’s efforts to collect personal data from people who rely on government services. The Department of Homeland Security, which oversees immigration enforcement, obtained access to people’s data held by the Internal Revenue Service and the U.S. Health and Human Services Agency, including private medical information and other personal details about Medicaid recipients.

Nessel added that California and New York, the states leading the suit, contribute more in taxes to the federal government than they receive in federal services. 

“That’s our money,” Nessel said. “We paid tax dollars to the federal government, then the federal government, you know, routes that money back to us in the form of these essential programs.”

She added: “And so when you cut off programming like SNAP, it just goes into the pockets of Trump’s friends and billionaires, but we already paid for this stuff.”

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The upbeat findings were part of the annual “Southern California Economic Update” published by the Southern California Association of Governments.

“The outlook for the near-term future is positive for the Inland Empire,” Chief Economist for the Inland Empire Economic Partnership Manfred Keil said. “First, steady growth in the U.S. economy is expected over the next six to 18 months, driving increases in spending. Second, migration to the region will increase as households move from the coastal areas and elsewhere in search of more favorable housing costs, which will trigger continued growth in population-serving industries such as healthcare, retail trade and leisure and hospitality services.”

Keil joined SCAG Executive Director Kome Ajise and others for an Economic Roundtable in Riverside Thursday to spotlight key points from the SCAG report.

“The risk of recession is sharply lower than it was a year ago,” Ajise said. “Consumers continue to drive the state and regional economies with their spending, and business investment in equipment and software is sharply higher. This should extend into 2025 as interest rates soften.”

Analysts said significant developments in logistics, healthcare and energy projects, along with steadily increasing tourism, will result in economic positives over the coming year. Labor growth and capital investment are assured.

“Housing construction and sales should rebound as the cycle of interest rates turns lower,” according to the report.

The Inland Empire ranks as the 12th largest metropolitan statistical area nationwide, within 200,000 residents of the Boston-Cambridge MSA, which is ranked No. 11.

“Challenges remain,” the report stated. “Comparing wages to gross domestic product, the Inland Empire ranks 300th out of 390 MSAs. Also, proposed hefty tariffs on imported goods, in particular from China, could reduce imports and negatively impact the region’s logistics industry.”

The full report is available at scag.ca.gov/news/2024-southern- california-economic-update-now-available-online.

The post Inland Economy On Solid Ground Going Into 2025 appeared first on The Hemet & San Jacinto Chronicle.

The upbeat findings were part of the annual “Southern California Economic Update” published by the Southern California Association of Governments.

“The outlook for the near-term future is positive for the Inland Empire,” Chief Economist for the Inland Empire Economic Partnership Manfred Keil said. “First, steady growth in the U.S. economy is expected over the next six to 18 months, driving increases in spending. Second, migration to the region will increase as households move from the coastal areas and elsewhere in search of more favorable housing costs, which will trigger continued growth in population-serving industries such as healthcare, retail trade and leisure and hospitality services.”

Keil joined SCAG Executive Director Kome Ajise and others for an Economic Roundtable in Riverside Thursday to spotlight key points from the SCAG report.

“The risk of recession is sharply lower than it was a year ago,” Ajise said. “Consumers continue to drive the state and regional economies with their spending, and business investment in equipment and software is sharply higher. This should extend into 2025 as interest rates soften.”

Analysts said significant developments in logistics, healthcare and energy projects, along with steadily increasing tourism, will result in economic positives over the coming year. Labor growth and capital investment are assured.

“Housing construction and sales should rebound as the cycle of interest rates turns lower,” according to the report.

The Inland Empire ranks as the 12th largest metropolitan statistical area nationwide, within 200,000 residents of the Boston-Cambridge MSA, which is ranked No. 11.

“Challenges remain,” the report stated. “Comparing wages to gross domestic product, the Inland Empire ranks 300th out of 390 MSAs. Also, proposed hefty tariffs on imported goods, in particular from China, could reduce imports and negatively impact the region’s logistics industry.”

The full report is available at scag.ca.gov/news/2024-southern- california-economic-update-now-available-online.

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The gloomy headlines illustrate how the press and corporate leaders often oversimplify big-company departures from California, leading citizens and state officials to under-examine the factors that lessen the impact of corporate departures and overstate their importance. The same type of doomsaying has played out with other big companies whose headquarters are leaving or have left the state, including Tesla, Oracle and SpaceX. 

In Chevron’s case, discussions of the exit tended to miss or downplay a few key points. Despite talk tying the move to regulations and climate-change litigation in California, CEO Mike Wirth said repeatedly that the relocation was about moving to “the energy capital of the world,” not policy differences with state officials. Also, Chevron already had three times as many workers in Texas as in California at the time it decided to move. And few observers bothered to note the major operations Chevron would retain in the state, including refineries and oil fields.

With other exits, pundits often don’t examine the true effects on state tax revenue. Or take into account the fact that some companies leave key people in California or eventually return. And expansions by companies or startups that pop up here don’t get as much attention, either, the governor and some economists say.

“This is a long narrative in California — about businesses moving out,” said Ted Egan, chief economist for San Francisco. “At the same time, you need to talk about businesses starting up.” 

Understanding the nuances of corporate exits is important because the departures can influence state policy and affect confidence among consumers and businesses. For example, the prospect of tech companies fleeing the state was raised this year by opponents of a California bill, eventually vetoed by the governor, that would have made tech companies test for critical harms from large artificial intelligence systems. Similarly, when Democratic Assemblymember Alex Lee of San Jose proposed a wealth tax last year, the California Chamber of Commerce said in a letter to him that the tax would likely contribute to “California’s business and resident exodus.” It did not pass. The Chamber used identical language in 2022 when successfully opposing various tax increases to fund a single-payer state health care program.

Despite complaints about high taxes, expensive housing and burdensome regulations — grousing that has been going on for decades — the state remains the national leader both for tech startups and for its share of big companies.

“I agree California is a more onerous place to do business,” said David Neumark, a UC Irvine economics professor who has studied relocations. “But it’s not like we’re some basket case.”

When leaving looks like staying

Some companies that recently made high-profile headquarters exits from the state have also either added more California employees or kept the lion’s share of workers here. Any remaining employees in California will continue to pay the state’s personal income tax.

Take Oracle, for example. The tech company announced in 2020 that it was moving its headquarters to Austin from Redwood City, leading to headlines like “Oracle Moves Headquarters to Texas, Joining Valley Exodus” and worries over “California’s higher operational costs and hefty taxes,” not to mention “steeper cost of living,” according to a couple of articles about the news. And yet Oracle as of this past spring still had almost triple the office workers in California than it has in Texas, 6,900 vs. 2,500, Bloomberg reported. A company spokesperson did not return a request for comment. But Redwood City’s data showed the company was still its biggest employer as of 2023. Though Oracle eliminated about 3,000 jobs in Redwood City over the past decade, it retains about 3,757 workers there, or more than 7% of the city’s workforce. 

Oracle continues to pay taxes in California, though because tax records are confidential, it’s hard to know exactly how much. That includes not just sales taxes but corporate income taxes too; moving a headquarters does not necessarily mean a company escapes those.  

“Corporations’ tax has very little to do with where their headquarters or employees are located,” said Brian Uhler, deputy legislative analyst with the state. “For a multinational business, they earn profit in California and outside California. California attributes profits to the state based on what share of a company’s national sales occur here.”

The state taxes corporations based on their sales, property and investments. So if a company earns revenue from sales or transactions in California, the company will pay taxes here regardless of where its headquarters is based. Companies also have to pay employment taxes for their workers based here. And certain types of companies, such as banks and other financial institutions, pay higher or additional taxes.

Another tech company that continues to contribute tax revenue to the state: Hewlett-Packard Enterprise, which announced it was relocating its headquarters to Texas in 2020. Even so, company spokesperson Adam Bauer said last month that the company has about 3,700 employees in Texas and about 3,600 in California. And on the company’s website, there were recently more job openings in California (45) than in Texas (34), including a few sales positions, a Northwest account executive and a “supplier relationship owner” for Nvidia, which is based in California. 

A third company that “left” California without really leaving is Tesla, which has actually grown in the state since its departure. The electric car maker moved its headquarters from Silicon Valley to Austin in 2021. CEO Elon Musk told shareholders that the company’s factory in Fremont was “jammed” and that housing costs in the state were high, making it tough for workers to live near the facility. Musk had also clashed with local health officials about COVID-related shutdowns. The New York Times framed the relocation as a “Blow to California.”

But three years later it doesn’t seem like a particularly severe blow. In 2022, the year after the move, the company “grew to 47,000 employees” in California, it said in a blog post, and ”our production footprint continued to increase.” Then, the next year, Tesla announced it would put its engineering and AI headquarters in Palo Alto, reportedly expecting to locate 1,400 employees in Hewlett-Packard’s former headquarters there. 

California’s Tesla experience makes it hard not to wonder how impactful two other recently announced Musk-related relocations will be. In July, the billionaire said he was moving the headquarters of social media company X and rocket builder SpaceX to Texas from California. Musk cited a law recently signed by Gov. Gavin Newsom that bans the state’s school districts from requiring parents to be notified of a change in their child’s gender identification. Musk has a transgender daughter and has been publicly critical of transgender people’s rights to choose preferred pronouns. He called the law “the final straw” on top of  “many others that preceded it, attacking both families and companies.” 

It’s not clear how many California X and SpaceX employees will actually end up in Texas. A source told the Washington Post that the 120 employees at X headquarters in San Francisco will move to Musk-linked offices in San Jose and Palo Alto, but since then the company has reportedly said in legal filings that it will move X’s headquarters to Bastrop, Texas. LAist quoted experts saying that moving SpaceX to Starbase, Texas, will be complicated and time-consuming since the company’s headquarters in Hawthorne is a huge aerospace facility. X and SpaceX did not respond to requests for additional information.

Similarly, Chevron spokesperson Randy Stuart said the company has not yet decided which of its positions in San Ramon will relocate to Texas. The relocation is not effective until Jan. 1 and the company expects it will take five years to migrate most corporate functions to Texas. Some 2,000 Chevron employees work in California versus 7,000 in Texas but that includes people outside of headquarters working on Chevron’s operations in this state, including crude oil fields, technical facilities and two refineries, which range from the San Joaquin Valley to Richmond to El Segundo. 

Growth can be hard to notice

While big departures like Musk’s get a lot of attention, expansions and new businesses within California tend not to.

In a recent Instagram post, Gov. Gavin Newsom tried to combat what he labeled “misinformation” about California’s economy by touting in-state expansions by well-known companies such as Visa, Ford Motor, Nintendo and Disneyland. He added that “the world’s leading AI companies are expanding right here in California.”

The governor may have a point about those expansions. There weren’t very many headlines — if any — about Visa recently opening a big new office in San Francisco; Ford’s plans to roll out a new electric-vehicle development center in Long Beach early next year; Nintendo’s intention to open a store in San Francisco next year; and Disneyland’s multibillion-dollar expansion over the next decade that promises jobs and community benefits for the city of Anaheim. 

Statewide, about 291,000 new business entities have registered in California this year, according to the secretary of state’s office, compared with 215,000 a decade ago. And that number does not include sole proprietorships, which do not register with the state.

Egan, San Francisco’s chief economist, noted that new AI companies are taking office space in San Francisco, helping the city’s slow recovery from the pandemic-induced boom in remote work. PitchBook, which keeps track of capital markets, recently ranked San Francisco the top city in the world for startups. New York and Beijing were second and third. And a report from PitchBook and the National Venture Capital Association showed that the Bay Area and Los Angeles combined had a total of 746 venture capital deals in the fourth quarter of 2023, compared with 402 deals in New York, the runner-up.

In addition, for the first time since 2014, California as of June has the highest number of Fortune 500 companies, 57, while Texas and New York have 52 each. Newcomers to Fortune magazine’s annual ranking of the world’s biggest companies based on their revenue included California-based companies DoorDash, Workday, Prologis and Clorox. 

Sarah Bohn, labor economist at the Public Policy Institute of California, said the headquarters moves “warrant attention, at a minimum. These moves make headlines, and that’s an important force for how people are feeling about doing business in California.”

Bohn said she is currently doing research to quantify the effects of corporate departures, but that it’s important to remember that there are always businesses moving out of, starting up in, or dying in the state. 

Neumark, the UC Irvine professor, is working with Bohn on that research. He also co-authored a couple of research papers that examined the issue in 2004 and 2007, so he knows the concern about businesses leaving the state is not new. Neumark saw the same worries back then, during the Arnold Schwarzenegger era. There was a lot of talk about companies moving out of California and some “crazy political stuff,” he said. That included the actor-turned-governor showing up at a Las Vegas business with a van marked “Arnold’s Moving Co.” to symbolically help that company move back to California.

Neumark and his fellow researchers found in 2007 that California did not lose a significant number of workers due to business relocations, only about 11,000 jobs a year out of more than 18 million jobs from 1992 to 2004. In the same period, total employment in the state rose by around 106,000 jobs per year, driven by the creation and expansion of new businesses, according to data presented in the paper. The researchers found no evidence of a mass business exodus, saying that the net losses in the number of businesses that left and jobs lost as a result were negligible: 0.05% of businesses in California moved to other states during each of the two worst years, 1993 and 1994; and 0.1% of jobs were lost to relocation during each of the two worst years, 1997 and 1998. He mentioned that a substantial portion of California’s economy is service-oriented, “and restaurants and hospitals don’t move to other states.” 

Complaints from departing corporations

There is no denying that some business executives are fed up with the state. 

After Chevron’s exit last month, the president of moderate business group Bay Area Council, Jim Wunderman, said in a written statement: “It’s an embarrassment for California that we’ve lost so many global companies because of misguided policies that make it incredibly difficult to do business here.”

In an interview with CalMatters, Wunderman said it’s time for a “reckoning.” He said lawmakers and officials need to rethink policies that make it hard to build housing, or drive up the cost of energy. “I understand we’re going through an energy transition. Do we have to do it in a way that we exacerbate economic problems in the state?”

He pointed to a bill, recently signed into law by the governor, that aims to curtail traffic and air pollution from warehouses. “We’re constantly regulating things to make it more difficult for businesses. (The warehouse bill) particularly affects the Inland Empire, whose economy is built around that industry.” By possibly reducing the number of job opportunities at warehouses, Winderman said the new law could hurt the very people it’s trying to protect.

California’s flat corporate income tax rate of 8.84% of a company’s net income is the sixth highest in the country, according to the right-leaning think tank Tax Foundation. Conservative legislators also criticized a recent decision by the governor and Legislature to suspend certain business tax deductions and limit tax credits for three years to close the budget deficit, saying such suspensions have become too common. 

On the other hand, the state’s corporate tax rate has actually declined over the past few decades, with state lawmakers slashing it from 9.6% to 9.3% in 1987, then to its current rate in 1997. The California Budget & Policy Center, a left-leaning think tank, said in a 2022 analysis of state data that corporate tax breaks have lessened the tax burden on California businesses over the years.

Ahmad Thomas, CEO of Silicon Valley Leadership Group, which advocates for big tech companies, said, “The challenge we have is the cost of doing business and operating in California continues to increase. How do we mitigate that?”

Thomas said California’s “competitive advantage continues to be chipped away at year after year by competition” that is global. He mentioned that there needs to be “more innovative solutions… around our cost structure connected to our tax policy,” as well as more affordable housing. 

He wants industry and policymakers to work together to drive down the cost of living here, while trying to minimize additional taxes to businesses.

Still, business leaders get something in exchange for grappling with those challenges: access to capital, a skilled workforce, world-class universities and more.

“Full stop, I believe there is no better place to locate, grow and scale a company than in California,” Thomas said. 

And not all state policies and laws drive business away. They help create them.

Bohn of the Public Policy Institute of California said the state continues to have policy levers, such as tax credits, that it can use to target businesses it wants to keep in the state.

partial homecoming that California legislation and policies on clean vehicles helped spur the company’s rise to electric-vehicle dominance. It is the most valuable automaker in the world and responsible for the bulk of Musk’s wealth, which reportedly will soon stretch beyond $1 trillion. Tesla’s success wouldn’t have happened without California, where the company has received at least $3.2 billion in direct and indirect subsidies from the state, with the bulk of those being tax credits for zero-emissions vehicles, according to estimates from Newsom’s office reported by the San Francisco Chronicle. 

At the press conference, Musk stood stiffly by as Newsom bragged about the state’s pivotal role. But then the billionaire also made an admission that might startle those who think California businesses are beset by red tape and entitled workers: Tesla’s Fremont factory is the most productive automotive plant in North America. 

“It will probably be about 600,000 or more cars this year,” Musk said. “California is a tremendous manufacturer as well as a place of engineering innovation.”

That’s a point, Newsom added, “which is, again, often so lost.”

The post How to stay calm when Elon Musk says he’s leaving California — and other lessons from business relocations appeared first on The Hemet & San Jacinto Chronicle.

But local government groups oppose the legislation, and business groups warn that it would place onerous requirements on warehouse developments and cities, threatening trade and jobs. Gov. Gavin Newsom has until the end of the month to sign or veto the bill.

Assembly Bill 98 passed in the final hours before the Legislature adjourned Saturday, after lawmakers swapped out language from an agricultural bill for the new warehouse restrictions. 

The bill would tighten building standards for new warehouses; ban heavy-duty diesel truck traffic next to sensitive sites including homes, schools, parks and nursing homes; and require local governments to update truck routes to avoid residential streets, said Assemblymember Eloise Gómez Reyes, a San Bernardino Democrat who co-authored the bill.

The measure would also add minimum distance requirements between homes and warehouses, along with buffers featuring walls and landscaping. The bill would also require replacement of two new homes for every one that’s demolished to make room for new logistics centers, along with 12 months rental payment to displaced renters.

Reyes said the bill would counter the environmental and health effects of explosive warehouse growth in the Inland Empire, where 4,000 warehouses occupy a billion square feet combined and generate more than 600,000 truck trips per day.

“We have tried to do as best we can, remembering that it’s the health of the residents of California that has to be the state’s top priority,” she told CalMatters Monday. “Everything else is secondary.”

Although the bill was pushed through the Legislature in the last week of session, Reyes said it’s the product of years of effort and “not something that happened overnight.”

Reyes introduced a separate bill earlier this year that would have created bigger buffers between warehouses and sensitive sites, but it failed in committee. She said this bill is a starting point for better health protections in warehouse planning. 

“I think what we have put together is a common sense approach and it’s a very important first step,” she said. 

However business leaders objected to its rushed passage, arguing that it could put a chokehold on trade, endanger jobs and spike consumer costs. The very fact that an earlier bill didn’t make it out of committee shows that the issue deserved more time and attention, said Paul Granillo, president and CEO of the Inland Empire Economic Partnership.

“Anything that is put together in that short a time, in smoke-filled rooms is not good policy; and AB 98 is not good policy,” he said. 

Granillo said the restrictions could increase the cost of everyday goods and push business out of state. 

“This type of legislation just signals to people that would invest in creating jobs in California that California is not a job-friendly state,” he said.

Melissa Sparks-Kranz, a lobbyist for the League of California Cities, said the bill’s cost to local governments would be prohibitive, forcing cities to spend between $100,000 and several million dollars each to develop the new traffic plans, with penalties of $50,000 for delays in those updates. The league is urging Newsom to veto the bill; the California State Association of Counties is also against it.

Granillo added that the bill’s standards for setbacks and truck routes strip local governments of their land use authority. “The idea that the state thinks it can come up with a solution that will work in all cities of California is ludicrous,” he said.

The California Chamber of Commerce, however, called the bill a “valuable compromise” that could provide a backstop against more extensive legislation and litigation affecting warehouse projects.

Warehouse developments have long been a mixed blessing to communities in Riverside and San Bernardino Counties, offering steady employment and economic growth, but worsening the region’s haze of pollution and imposing heavy traffic on neighborhood streets. 

Riverside and San Bernardino rank first and second among the counties with highest ozone levels and among the top dozen for particulate pollution. Activists link the proliferation of warehouses to unusually high rates of asthma and cancer.

Local and state officials have tried to thread the needle between environmental protections and economic growth, but sometimes they leave community members, particularly those in low-income communities of color, with the sense that they are cut out of the conversation. 

Those concerns made for an unlikely alignment between industry groups and environmental justice advocates. The Jurupa Valley-based Center for Community Action and Environmental Justice also opposed the bill, arguing that it didn’t go far enough to control persistent air pollution from the warehouse boom.

Although the legislation set minimum setbacks of 300 to 500 feet from warehouse docks to the property line of sensitive sites, it fell short of the 1,000 feet recommended to avoid the worst diesel exposure, said Ana Gonzalez, the center’s executive director. And it calls for warehouses to use zero-emission engines when “operationally feasible,” which she said leaves loopholes for developers.

Gonzalez admitted that she was surprised to join industry groups in opposition: “It put us in a muddy place, because we never thought we would be on the same side opposing a warehouse or environmental justice bill.”

Other groups said the bill strikes a balance between environmental and economic interests, even if it didn’t please either side.

James Thuerwachter, a lobbyist for the California State Council of Laborers, which represents workers in the construction industry, said the bill accommodates job creation and environmental regulation. 

“AB 98 brings innovative solutions to tackle immediate air quality, safety, and supply chain issues, while also bringing our distribution process into the 21st century,” he said in a state Senate Appropriations Committee hearing last week.

While the bill didn’t meet all her expectations, Gonzalez said it sets baseline environmental health standards that community groups can use to push for greater protections.

“Our organization feels that if the governor signs this bill, there is an opportunity to build from here and do better,” she said.

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