With fiscal crisis and a fragile economy the focus of concern in California, it is easy to overlook the state’s other challenges. But three troubling trends deserve attention because they threaten the well-being of Californians and the state’s prosperity for years to come. These threats also present opportunities—for state leaders and residents to step up and forge a new vision for California.

First, the state’s education system is failing to keep up with the changing demands of the state’s economy. California—which built the most admired public higher education system in the country— now lags other states in the production of college graduates. This is happening at a time when changes across industries require more highly educated workers than ever and as the Baby Boom generation—a relatively well-educated one—is being replaced by demographic groups with historically low rates of college completion. Projections suggest that, if current trends continue, the state economy will require one million more college graduates in 2025 than the state can produce. If we fail to change this trend the result is likely to be a less productive economy and less tax revenue for the state.

California also faces growing challenges in managing its natural resources. Managing water has always been difficult. After all, this is a state where much of the state’s population relies on water brought in from distant rivers or Sierra Nevada watersheds. Today, population growth and the fragility of the water system’s hub in the Sacramento-San Joaquin Delta compound the challenges. Climate change is expected to amplify them further, increasing the risks of flooding and the frequency of droughts. Climate change poses threats throughout the state—to air quality and public health from hotter inland temperatures and to coastal homes and habitat from rising sea levels.

As difficult as these challenges are, we can meet them. In higher education, for example, our work at PPIC has demonstrated that modest investments can yield significant results. Gradually increasing college enrollment rates, community college transfer rates and graduation rates could, together, reduce the workforce skills gap by half in 2025. This won’t be a tough sell for the state’s residents: the PPIC Statewide Survey finds that nearly 60 percent of Californians believe that a college degree is critical for success, and 73 percent of Latinos—who will soon replace whites as the largest ethnic group in the state—hold this view.

In water management, the state has the tools to secure a safe, reliable water supply and improve conditions for fish and wildlife. They include water marketing, "banking” water underground and reusing highly treated wastewater. California has been a leader in implementing policies to curb greenhouse gas emissions—an effort the state’s residents supported even through the Great Recession. Policymakers will need to tap into that enthusiasm to do the hard work of preparing for some of the effects of climate change that are inevitable.

Of course, the difficulty in reversing these trends is that they require tough tradeoffs—and public trust in the leaders charged with making those tradeoffs. This raises the third and most difficult challenge for the state’s future: Californians deeply distrust state government. While they are deeply divided along partisan lines on many key issues, Californians are united in their pessimism about the state of the state and its governance system. This lack of faith in government leads residents to be suspicious of potential solutions their leaders offer, especially when tax dollars are involved.

There is no simple way to rebuild the civic contract. It requires a sustained campaign—one led by a broad range of leaders across the state in business, labor, education, civic, philanthropic and nonprofit organizations—to engage Californians in answering the question: What kind of government do we need and what are our obligations in achieving this vision?

The task is enormous, but there is reason for optimism. Californians are in a mood for change. They approved two electoral reforms—an open primary and newly drawn districts—that saw their first test in June. In that election, voters approved another reform, one in the term limits law for state legislators. It will take time to see how this reform spirit will play out. But California has long been a state on the cutting edge of change. If leaders across all sectors team up with residents committed to building a better future, we can change these troubling trajectories, too.