Who knew that an El Nino year would bring torrential downpours of money to the Golden State? Thank that other global phenomenon, the AI explosion, which has supercharged VC investment in California to degrees heretofore unknown. Meanwhile, nobody can afford anything, and we have four sizzling new Berkeley white papers to tell us exactly why. Hollywood is reeling (see what we did there?), the California exodus has slowed to a trickle even as our Sun Belt competitors continue to pull away, and Darth Vader finds San Diegans’ lack of faith in surveillance tech disturbing. All this and more in another rollicking issue of Bear Essentials. Read on!

THE LEAD: $366 BILLION. JUST DON’T ASK FOR A ONE BEDROOM.

Don’t look now, but California is slurping up venture capital with the ferocity of a nuclear-powered Dyson. Golden State firms have raised a dizzying $366 billion in 2026, more than triple the other 49 states combined and nearly twice California’s own record set (checks notes…) last year. The usual suspects are gobbling up the majority of the dough, with OpenAI and Anthropic accounting for more than 50% of the total haul. But that’s not even the most staggering stat: More than 4,000 California startups have landed VC funding this year. The firehose of cash is spewing far and wide.

The boom is jacking up San Francisco housing prices to horror-show levels, minting multi-millionaires left and right while casting a gilded lifeline to our beleaguered state budget. Last May, the state finance department projected $126 billion in personal-income tax revenues for the fiscal year that ended June 30. The actual number came in $21 billion higher than that. For those of you keeping score at home, that’s slightly more than the entire annual budget of the state of Oregon.

The proposed “billionaire tax” still looms over the proceedings, threatening to drive out founders and those who aspire to nine-zero bank accounts. But so far, the Bay Area’s talent, capital and dealmaking gravity have proven to be virtually unstoppable. As the Bay Area Council Economic Institute’s Sean Randolph put it, “It’s just where the action is.”

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🤫 Everything you should know

🏘️ - PROGRESSIVE ON PAPER — Instead of tossing another hot take onto California’s affordability bonfire, UC Berkeley political scientist Sam Trachtman decided to go the academic equivalent of beast mode, publishing four white papers through the Berkeley Economy & Society Initiative examining why the country’s richest state (see our lead story) has become brutally expensive to live in. Trachtman’s conclusion is that California helped engineer its own crisis. Somewhere, Ezra Klein is smiling…

Trachtman traces the problem to decades of growth restrictions, costly regulations, and underperforming state programs. Even as the VC dollars seemingly arrive by helicopter drop, California has the nation’s highest poverty rate after adjusting for living costs. In poll after poll, it’s the reason people cite for leaving. He calls some of the state’s policy approach “regressively funded progressivism,” which is a mouthful, but accurate when worthy goals are financed in ways that disproportionately hammer poorer households.

His answer is less ideological than mathematical. California needs more housing, energy and infrastructure. “If California wants to be an affordable place, a place of opportunity, we need to be a place that fosters growth,” he says. “One thing that’s important to consider is that, increasingly, California is a one-party state without robust political competition. That means there’s less pressure on whatever party is in power to make sure their programs and policies are designed and implemented well.” — UC Berkeley

🎬 - EVERY CONTINENT BUT ANTARCTICA — Roughly 120 film incentive programs are now sweetening the pot for producers bidding out their projects. Basically every continent except Antarctica has decided it would now like to be Hollywood, too. The troubling results are turning up in payroll. L.A. County shed more than 42,000 entertainment jobs between 2022 and 2024. That’s more than a blip. Politico compares the position of this year’s candidates for governor and Los Angeles mayor to politicians in coal country being asked whether the mines are coming back, an unkind comparison that is also roughly accurate. 

It will be tough to win a subsidy auction against 120 thirsty rivals, several of them sovereign nations with friendlier exchange rates and fewer opinions about parking. What we can fix is the expensive stuff that has nothing to do with talent, starting with permitting timelines and the cost of keeping a crew standing around waiting for a signature. The soundstages are already built and the crews already live here. That advantage depreciates every year we decline to support it. — Politico Magazine

📉 - THE GRAPES OF MATH — California’s population shrank again last year, though calling it an exodus would require a fairly aggressive calculator. SmartAsset, using Census Bureau estimates, found the state said goodbye to about 9,500 residents between July 2024 and July 2025, a decline of 0.02%. Only Vermont, Hawaii, West Virginia and New Mexico posted steeper drops.

We still have roughly 39.4 million people, but the direction of travel matters. Fast-growing states such as South Carolina, Idaho, North Carolina and Texas all expanded by more than 1%, widening the demographic gap between the Sun Belt’s magnets and California’s stalled growth.

The slowdown is national, too. U.S. population growth fell to 0.5%, largely because net international migration has fallen off a cliff. Census Bureau official Christine Hartley called that decline “the main reason for the slower growth rate we see today.” Well, that and literally everything Dr. Trachtman outlined in his quadra-opus above. — USA Today

🎙️ 💬 🎧 - ON THE POD: OC BUSINESS REPORT

Nobody's confusing this one with Serial. Episodes run eight to fifteen minutes and hand the mic to whoever's actually running the place. One week it's a certified family law specialist, the next it's the PR guy for The Coach House, the long-running San Juan Capistrano music club. This is small business as it actually exists in Orange County, unglamorous and almost entirely invisible from Sacramento. If you've ever wondered what the 4 million small businesses everyone campaigns on are doing all day, start here. — OC Business Report

📹 🙋🏽‍♀️ 📣 - THIS WEEK IN PUBLIC COMMENT

The Empire endorses license plate readers. A man in full Vader costume told the San Diego City Council that Flock cameras are a “necessary force,” required to track rebel scum from playground to playground. Our feelings on Flock cameras notwithstanding, kudos to the Dark Lord of the Sith for bringing some levity and (dark) energy to the proceedings. — The Hill

🏃‍♂️ 💨 ✋ FAST FIVE

1. 🚄 High-speed rail hits the wall in December 2027. The Inspector General found the Authority could exhaust its funding by then and needs up to $9.5 billion through 2031-32, then faulted the business plan for declining to make that cliff obvious to the people paying for it. — CapRadio
2. 🌊 The levee that soaks instead of blocks. Palo Alto finished a gently sloping, plant-covered levee this year that absorbs waves rather than repelling them, and it held in January while conventional seawalls nearby were overtopped. — Grist
3. 🗳️ Forty-eight is not fifty. Berkeley’s Institute for Governmental Studies has Prop 40, the one-time billionaire tax, up 48-41 in its latest poll, and undecided voters on ballot measures usually break against change. — Sacramento Bee
4. 🤯 A paperwork fight is holding up 2,300 homes. A developer at the old Alameda Naval Air Station has $48 million in hand and a September deadline for the tax credits that would fund the next phase, but the local housing authority won't sign off on moving 25 federal rent subsidies into the building. So, 2,300 homes wait on 25 signatures. Cool. — SF Chronicle
5. 🏛️ Every project should be so lucky. A bill about human remains was gutted and rewritten to protect the Midway Rising housing-and-arena project from CEQA lawsuits, which works beautifully for one project and does nothing for the hundreds without a sponsor in Sacramento. A free idea: Fix it for everyone! — Voice of San Diego