With its number of homeless people nearly doubling over the last year, the city of Norwalk, California, enacted a forty-five-day moratorium on the construction of homeless shelters, transitional housing, and permanent supportive housing. When this forty-five-day moratorium expired last week, the city extended it by ten months despite legal threats from Gov. Gavin Newsom and state Attorney General Rob Bonta. Norwalk’s city council approved the extended moratorium unanimously to assess the impact of rising homelessness on the city’s quality of life, safety, and public health.

Norwalk is a relatively poor city, generating less than 60 percent of the tax revenue per resident than its neighbor, Los Angeles. And it spends substantial amounts on its homeless population. Over the last five years, the state has provided nearly $29 million in funding for homeless programs in Norwalk, which works out to roughly $30,000 per homeless person annually. And like nearly everywhere else in California, homelessness has increased.

Norwalk’s conundrum raises the question that is the elephant in the room of California state and local government budgets: Just what do Californians owe the homeless? Here is a simple way of addressing this question, which will clarify why California homelessness continues to grow despite enormous state and local spending.

Consider homelessness as part of the state’s social safety net. A safety net is society’s mechanism of providing insurance to its members against risks that are largely uninsurable from private markets. For example, governments typically don’t offer auto insurance, life insurance, or business insurance, because these are widely available from private insurers. But governments do offer unemployment insurance, because job loss is a significant event that individuals wish to insure against but which is not available privately.

Creating a functional safety net requires choosing which events will be covered and what the budget will be. Importantly, it includes incentivizing individuals so they do not abuse the system. Unemployment insurance does all of this: it is available only to those who lost their job through no fault of their own, it only partially replaces earnings and........

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