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Economic forecast
Budget Blunders
Sacramento Business Journal - by Kathy Robertson Staff writer
Dennis McCoy | Sacramento Business
Journal
Peggy Goldstein, vice president of the California
Association of Health Facilities, speaks at a rally at the Capitol
in September to urge lawmakers to pass a budget. View Larger |
The Sacramento region lost 2,700 state- and local-government jobs in August, a small yet ominous sign of more bad economic news to come.
That’s 13 times the average decline of about 200 jobs each August during the past 18 years in those sectors, according to the state Employment Development Department. And the drop-off hits a sector of the economy that generates more than 20 percent of local wages.
That doesn’t bode well for the economy. Hit hard by the housing bust, the four-county region has relied for years on stable, well-paid government jobs. The decline helped drive the local unemployment rate in August to 7.4 percent, the highest point since early 1996.
Government was a mainstay of the Sacramento region in terms of overall jobs, eclipsed by the booming service industry a decade ago. State employees work regular hours. Many dress well and drive nice cars. They dine in local restaurants, go to the movies and join health clubs, contributing big bucks to the communities in which they live, work and play.
Temporary and part-time workers took the hit first.
About 10,000 part-time and seasonal employees statewide had their jobs axed by the governor in July to save cash until a new budget was signed. Now it appears that most will be out of work until June, and questions loom about even worse budget news next year.
State officials were unable to give an accurate figure of how many of these workers live in Greater Sacramento, though the number is likely substantial because most state agencies are headquartered here.
The stop-gap state budget signed Sept. 23 got past-due payments flowing and sent legislators home to campaign in their districts, but it did little to solve California’s financial problems.
Local county officials, businesses and interest groups are still sorting through the current mess, trying to figure out what hit them and where.
“My department has indicated it will be the middle of October, when we get our allocation of state money, before we’ll know the final impact.” Sacramento County budget officer Linda Foster-Hall said.
At its budget hearing Sept. 3, the county extended its current budget until 60 days after the state adopted its own spending plan. The unprecedented 85-day state budget delay moved that date to Nov. 18.
“We’re already starting on real background stuff for ’09-’10 — and we don’t really have this one done yet,” Foster-Hall said. “Will there be drastic cuts like layoffs? I honestly don’t know.”
Taxes by any other name
Gov. Arnold Schwarzenegger signed the $103.4 billion general fund budget Sept. 23 after threatening a veto but getting a couple of changes he wanted.
Lawmakers bolstered the rainy-day fund and axed a 10 percent tax-withholding provision on Californians’ paychecks in favor of stiffer penalties on corporations that are late in paying $1 million or more in taxes.
Fortune 500-sized companies are the ones likely to be that far in arrears, said Denise Azimi, a spokeswoman for the state Franchise Tax Board. Greater Sacramento doesn’t have any locally based companies that size.
The spending plan addresses the state’s $15.2 billion shortfall with a mix of spending cuts, borrowing and accounting tricks that will hit some local businesses hard. The governor vetoed $510 million more in general fund expenses, most of them in health care and social services to the poor.
Business leaders dispute the notion that the budget contains no new taxes.
Taxes will increase or accelerate on companies that suffer business losses or invest in research and development, according to an analysis by the CalChamber, formerly the California Chamber of Commerce. Limited liability corporations, the self-employed and small businesses will also be hit.
Under the new budget, employers who have suffered net operating losses of more than $500,000 due to the downturn will not be able to use this deduction for two years and employers who rely on the research and development tax and numerous other business tax credits will lose half the value of those credits over the next two years.
“While there is some improvement of tax policy by conforming treatment of business operating losses to long-standing federal practice, it is a minimal trade-off for such an enormous increase in business taxes,” CalChamber president and chief executive officer Allen Zaremberg said in a prepared statement.
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