Once again, California, the world's fifth-largest economy, is leading the way. The state is developing its own distinctive political economy, "California Capitalism," through fiscal responsibility, innovation, and cross-sector partnerships to foster inclusive, sustainable, long-term growth. 

Since its last employment peak before the 2008 financial crisis, California has added more than two million payroll jobs, the unemployment rate has fallen to a record low of 3.9%, and average per capita income has increased almost 25%. Since the expansion began in 2010, California has added 3.4 million jobs, more than 15% of the nation's total. With almost four million small businesses, California also leads the country in new business formation, reflecting the fact that it receives more than half of all US venture-capital funding. Whereas national economic growth is projected to slow in 2020, California will continue to outpace the rest of the country, owing to forward-looking tax credits and its diverse set of global industries - from manufacturing, agriculture, and trade to technology and entertainment.

But "California Capitalism" is not just about raw economic growth. For policymakers, the real focus is on job quality, regional inclusivity, and environmental sustainability. Hence, one of the state's immediate concerns is to address a simmering housing and homelessness crisis. After creating a $1 billion affordable-housing fund last year, Governor Gavin Newsom's 2020-21 budget proposal includes an additional $750 million in emergency funding for the homeless, to encourage California companies to invest their own resources and work alongside state and local governments to address the housing problem.

California continues to lead the country in environmental and climate policies, too. With its commitment to achieve carbon neutrality by 2045, the state is deploying a variety of tools to slow the pace and reduce the risks of climate change. The proposed budget calls for $12.5 billion of additional government investment over five years in pursuit of these goals, around $4.8 billion of which would come under the state's innovative cap-and-trade system.