Three days after immensely destructive and deadly wildfires broke out in and around Los Angeles, Gov. Gavin Newsom proposed a $322.3 billion state budget with a positive revenue forecast “based on an assumption of continued but slowing economic growth.”

The new 2025-26 budget is already outdated because the fires, which are still growing, will have a heavy impact on both the income and outgo sides of the budget, by reducing economic activity in Southern California and increasing pressure for fire suppression and recovery aid from Sacramento.

The fires struck as California’s economy was still recovering from the brief but sharp recession that hit the state five years ago when Newsom ordered shutdowns to battle the COVID-19 pandemic. About 3 million workers were idled, and recovery has been mediocre at best. California’s unemployment rate, 5.4% in November, the latest month for which data are available, was the second highest of any state, with more than a million unemployed workers.

A broader federal Bureau of Labor Statistics measure of unemployment or underemployment provides an even dimmer picture. The U-6 rate, as it’s dubbed, counts “total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.”

(Marginally attached workers are people who aren’t working or looking for work but who want a job and have looked for one in the last 12 months.)

California’s current U-6 rate is 10%, by far the highest of any state and more than twice the national rate. It’s even higher — 11.8% — in Los Angeles.

Beacon Economics, in an analysis of the latest data, says that employment growth in California has trailed the nation in recent years: “Since February 2020 (the start of the pandemic), total nonfarm employment in the state has grown 2.5% compared to a 4.6% increase nationally.”

“There are a mix of influences both driving and constraining the state’s job growth,” Justin Niakamal, Beacon’s research manager, commented. “On one hand, California is seeing comparatively high incomes, strong consumer demand, and high economic output, but our critical lack of housing supply has led to the state’s well-known labor force contraction, and that is most certainly holding back job growth.”

The wildfires are obviously one uncertain factor in how California’s economy fares over the next few years — but not the only one.

Newsom’s budget, without mentioning him by name, cites Donald Trump’s recapture of the White House as “the most immediate risk to the forecast,” listing Trump’s vows to impose tariffs on imported goods and deport undocumented immigrants.

“California would also be especially vulnerable to tariffs as the ports of Los Angeles, Long Beach, and Oakland and the logistics industry that is concentrated in the Inland Empire are highly dependent on foreign trade,” the budget declares, adding, “To the extent that existing workers are deported and potential new workers banned or discouraged from immigrating, many sectors of the U.S. and California economies could face labor shortages, leading to price increases in the goods and services produced by these sectors.”

However, even if the fires had not occurred and Trump not been elected, the state would still face a declining labor force, as a new report from the Public Policy Institute of California notes.

“In the last two decades, the share of the population participating in the labor force has fallen five percentage points (from 67% to 62% today) due to the aging of California’s population,” PPIC analyst Sarah Bohn writes. “As the population continues to age and the state faces a shrinking workforce, preparing Californians who can and want to work will become more essential.

“California’s current economic realities reflect the volatile macroeconomic conditions we’ve weathered since the pandemic as well as long-term challenges that have been brewing for decades,” she continues.

New York
CNN
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Prominent right-wing media personalities are calling on the federal government to withhold or place conditions on aid for victims of the devastating Los Angeles wildfires, blaming California’s own policies for the scale of the devastation and response.

As firefighters slowly gain control of the wildfires raging near Los Angeles and thousands of residents return to find their homes in ashes, pro-Trump personalities are blasting state and local officials for “woke” policies that they fault for the disaster.

On Fox News, the network’s hosts have lined up behind the politicized approach, taking pot-shots at the state for its progressive values. Host Sean Hannity told viewers California doesn’t “deserve one federal dollar” because of its immigration policies and placed blame on the state’s forest management.

“Any aid has got to insist that the science of forestry be implemented so you, the American people, you don’t have to keep bailing people out,” Hannity said Tuesday night. “They’ve got to clear out the brush and do things like, oh, control burns and maybe not put a little shrub above the safety of people’s lifeblood, their home.”

Fellow Fox prime time host Jesse Watters suggested that California, with its higher state income tax rate, shouldn’t need additional funding but that officials had squandered tax dollars on unrelated issues.

“Will American taxpayers rebuild L.A. without strings attached?” Watters asked his audience Tuesday night. “L.A. spent more on homeless than firefighters, and both problems are getting worse. They lost $55 billion in Covid money, lost it. They spent $20 billion on a high-speed train that doesn’t go anywhere.”

Glenn Beck, who hosts a podcast and program on The Blaze, blamed the wildfires on the state’s homeless population and railed against the state’s preparation for the extreme winds that fanned the flames.

Gov. Gavin Newsom “and the leaders of California can’t admit that their own disastrous policies, NOT climate change, fueled these fires, they shouldn’t get a DIME of federal aid without serious conditions attached,” Beck wrote on X.

Scientists said this week that climate change contributed to the explosive growth of the wildfires, with the region experiencing exceptional dry conditions that fueled the flames. Other regions are also grappling with alarming fire behavior. Texas saw its largest wildfire on record last year and Canada experienced its worst wildfire season on record in 2023.

On Fox, host Laura Ingraham questioned California’s ability to properly disburse funds, telling Sen. Tommy Tuberville in an interview that “the money will be going to friends and people who are politically connected or have the same environmental agenda even though today (Mayor) Karen Bass and yesterday Gavin Newsom said, ‘Oh, no, we’re going to streamline a lot of this permitting.’”

“I don’t think they have any credibility on any of that,” Ingraham said. “Not with our tax dollars.”

Republican Sens. John Barrasso and Bill Hagerty have called for public hearings to investigate Democrats’ alleged “gross mismanagement” in the state following the fires, which as of Wednesday afternoon had scorched more than 40,000 acres and killed at least 25 people.

“There can’t be a blank check on this,” Barrasso told CBS News’s “Face the Nation” on Sunday. “I expect there will be strings attached to money that is ultimately approved, and it has to do with being ready the next time because this was a gross failure this time.”

House Speaker Mike Johnson joined the budding chorus of conservatives calling for conditional relief on Monday, telling CNN that he, too, thought “there should probably be conditions on that aid.”

Republican calls for California wildfire relief to have “strings attached” are by no means a novel idea. When wildfires surged across the state in 2018, then-President Trump reportedly withheld disaster relief funds given the state’s Democratic lean. However, Trump reversed course after he was informed that he had a larger voter base in the impacted county than in some states, a former official said.

The next year, Trump posted on social media that “billions of dollars are sent to the State of California for Forest fires that, with proper Forest Management, would never happen. Unless they get their act together, which is unlikely, I have ordered FEMA to send no more money. It is a disgraceful situation in lives & money!”

Right-wing media personalities have regularly cast California in a negative light, using it as a punching bag to stir outrage over progressive policies that if allowed to spill beyond its borders would devastate the country.

“So why pick fights with California?” said University of California, Berkeley political scientist Henry Brady. “Well, watch Fox News. California is the boogeyman. California has cities out of control. California is doing all these crazy things with climate change. We are the people who have sanctuary cities and the place where people are woke beyond belief.”

“Punishing California is something that is, from their perspective, a positive good,” he added.

Trump himself has used his Truth Social platform to spread misinformation about the fires and stoke a feud with Newsom, falsely declaring last week that the governor had “refused to sign the water restoration declaration put before him,” allowing the fires to spread.

Trump’s media allies similarly picked up on his talking points, with Ingraham saying on her show, “we know where California liberals choose to spend billions, and we do know that their environmental fanaticism has shoved common sense thinking out the door.”

“Now, while the winds are horrific, experts insist that bad forest management can make a bad situation worse,” Ingraham added. “And Trump called this out six years ago … He’s right. Incompetence kills.”

On the campaign trail, presidential candidate Trump rekindled threats that, if elected, he would make wildfire aid to the state conditional if Newsom didn’t agree to divert more of the state’s water supply to farmers.

“If he doesn’t sign those papers, we won’t give him money to put out all his fires,” Trump said in September. “And if we don’t give him all the money to put out the fires, he’s got problems.”

The wildfires that have ravaged Southern California over the past week have wiped out entire neighborhoods, destroying and damaging thousands of homes in Los Angeles County. If analysts’ estimates of the damages prove correct, it could be the largest wildfire insured loss in United States history.

As insurance companies operating in the area expect a barrage of damage claims in the coming days and weeks, Newsweek looked at insurers that previously declined the most claims.

Why It Matters

The California Department of Forestry and Fire Protection, or Cal Fire, estimates that the Palisades fire, which was 19 percent contained on Wednesday morning, has destroyed 2,191 structures and damaged 397 more since it started on January 7. The Eaton fire, which was 45 percent contained as of Wednesday morning, is estimated to have destroyed 4,627 structures and damaged 486 others.

Experts expect the losses linked to the fires to be enormous. According to the latest estimates by forecaster AccuWeather, the total damage and economic loss caused by the fires could reach between $250 billion and $275 billion. That put the fires on track to be among the costliest natural disasters in U.S. history.

Many homeowners who lost their homes to the fires will count on their insurers to help them rebuild. A claim rejection might ruin their chance to get back on their feet after tragedy struck.

What To Know

Newsweek has looked at how many damage claims the biggest insurers in California for market share closed without payment nationwide in 2023, using the latest data made available by Weiss Ratings.

Los Angeles-based Farmers Insurance had the highest rate of closures with no payment at the national level of all insurers operating in California. The insurer, which according to the California Department of Insurance (CDI) had a 14.9 percent market share in the Golden State in 2023, closed a total of 257,189 claims across the country with no payment that same year—equal to 49.7 of all claims closed in 2023.

Two USAA affiliates had the second-highest rate of claim denials. USAA General Indemnity Co denied 48 percent of all claims closed in 2023 across the country, for a total of 273,994 claims closed without payment; USAA Casualty Ins Co closed 428,116 claims with no payment, also equal to 48 percent of all claims closed that same year.

Newsweek reached out to USAA for comment via email on Wednesday.

Allstate Insurance closed 893,407 claims with no payment in 2023 at the national level, equal to 46.4 percent of all claims the company closed that year.

In 2023, Allstate was the sixth-largest insurer in California, with a 6 percent market share in the state; USAA followed with 5.7 percent.

State Farm General, the largest insurer in California in 2023 with a market share of 21.22 percent, denied 37.8 percent of all claims closed that same year nationwide without payment, for a total of 29,624.

Farmers, USAA and Allstate all sell more policies out of state than State Farm.

Still, these companies’ denial rates were much higher than the national average. By comparison, home insurers across the country denied an average of 37 percent of claims in 2023, according to Weiss Ratings. Weiss Ratings is an independent rating agency founded in 1971.

What People Are Saying

Weiss Ratings founder Martin D. Weiss said in September 2024, when the 2023 report was released: “There’s nothing normal about these high denial rates. They’ve been creeping up steadily for nearly two decades and have now reached alarming levels, especially among some of the biggest providers in disaster-prone states like Florida and California.

“The public can’t even begin to cope with the property insurance crisis until both the industry and their regulators provide full transparency, a change in standard operating procedure that may not be possible without strong ‘Truth in Insurance’ legislation.”

A spokesperson for State Farm told Newsweek last week: “Our number one priority right now is the safety of our customers, agents and employees impacted by the fires and assisting our customers in the midst of this tragedy.”

A spokesperson for Farmers told Newsweek last week: “We are currently focused on assisting customers who are impacted by the devastating fires and strong winds affecting Southern California. Our specially trained Farmers Catastrophe Response Team members have already begun to provide assistance to customers and we are urging local residents to remain vigilant.”

A spokesperson for Allstate told Newsweek last week: “Right now, we’re focused on helping our customers recover and rebuild their lives. We’re supporting customers who have filed claims and have teams ready to move into California once it’s safe to help on site. Allstate policyholders affected by the wildfires can file their claim through the Allstate® Mobile app, online, by calling 1-800-54-STORM, or their local agent. We’re here for our customers.”

What’s Next

The scope of the damages caused by the fires is yet to be defined and will depend on when firefighters will manage to contain and extinguish the flames. Dangerous winds kept Southern California at risk on Wednesday, though firefighters have made progress against the blazes.

According to the National Weather Service in Los Angeles, winds will calm down later this week.