California State Workers Begin Furlough Fridays
By Justin Gardner | Related entries in California, Economy, Money
The state is so cash strapped that they’re giving their residents $3.5 billion worth of IOUs on tax returns and making workers go without pay two days out of the month, as mentioned in the title above.
State agencies scrambled in the days before the furloughs took effect to avoid confusion for the public, such as people trying to register vehicles or obtain professional licenses.Among the offices to be closed Friday are those of the Department of Motor Vehicles and Department of Consumer Affairs. The governor’s Office of Emergency Services also would be dark as part of a cash-saving move ordered by Gov. Arnold Schwarzenegger.
Critical and revenue-generating agencies were scheduled to remain open, including fire stations, parks and employment centers that process unemployment insurance claims. California’s unemployment rate is 9.3 percent, a 15-year high.
Schwarzenegger ordered the two-day-a-month furloughs, reducing the average state worker’s salary by 9.2 percent, as he and lawmakers try to solve the state’s $42 billion budget shortfall.
As we all know, California is by far one of our biggest states and has a lot more consumers than most. So what do you think that 9.2% reduction in the average state worker salary is going to do to consumption? What do you think that $3.5 billion in tax refunds IOUs will do to personal spending?
And yet what I’m hearing from many of you in the comments is that states are basically just faking this and it’s all overblown. They just want some pork.
Well folks, here’s the reality.
The economy has shed over 3 million jobs in about a year’s time, and it’s hit states like California particularly hard given their size. And now they have an unemployment rates of 9.3% and an underemployment number (which is a better judge of the employment picture) that’s easily getting close to 15%. So they simply don’t have the revenue to provide the services that they need.
Long story short, they need help and fast.
But you keep convincing yourself that the 1% of the stimulus bill that the Republicans are making hay over is important enough for them to not support it. Because this economic meltdown didn’t happen on their watch or anything. They didn’t have a nice little surplus when they came in and turned it into trillions of dollars worth of debt. They didn’t spend money on a war that was absolutely and completely unecessary.
No, better to say you’re “sticking to your principles” and make fun of tax breaks for Hollywood (which literally make up .0003% of the bill’s spending). Because, after all, we can’t add onto this massive debt! Why…that would be irresponsible! What about our grandchildren? But if you’re proposing tax cuts, well, that we can talk about…
Moving on…
This entry was posted on Friday, February 6th, 2009 and is filed under California, Economy, Money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
February 6th, 2009 at 9:37 am
I don’t think California is “faking it.” But I dont believe they are a lean, mean, efficient operation either. I’ve not heard that California is seriously cutting any of the extravagant benefits they are famous for. Hey, when times are good and you want to pay for those sorts of things, more power to ya, but when times are bad you cannot then scream for OTHER people to pay for those programs. Things are tough all over. This belief that some states seem to be operating under that they should get to continue with “business as usual” is what needs to be changed.
And why do I fear that places like California will wind up with a lot more “stimulus” per capita than places like Iowa or Wisconsin? They benefitted the most from the housing bubble, yet I dont remember them helping out the midwest back then.
Besides, I hate this lie that we are talking about “stimulus” anymore. This is about the broadening out of welfare programs, nothing more. I’m not saying more money for such things wont be needed, but you dont stimulate the economy by having a well funded dole. Lets call things by their rightful name.
February 6th, 2009 at 9:43 am
Oh, and now we have word that chicago has a list of projects they will use “stimulus” money for….but its a secret because, you know, if it were public it would be open for discussion and criticism. In a democracy????? The horror!!!
Alright…so what is the difference between this and simple under the table graft?
Semantics.
February 6th, 2009 at 10:03 am
Welfare would imply free money being given to individuals.
And the bill has money being given to states/organizations to hire people. Thats not welfare at all Rich. Like….at all….
But you know what sucks specifically about this move by California? Every first and third friday while being a pay cut opens up exactly zero options for picking up a part-time job. This isn’t easy now to begin with but lets not make it harder.
February 6th, 2009 at 10:21 am
If only the California legislature could manage to pass a budget — even just 3 months late . . . actually passing one on time (for the first time in several decades) seems like a total fantasy. As for this particular form of savings, the problem with it is that it doesn’t address the real, structural problems with the state’s spending. Which come in two parts:
1) the Legislature has been chronically unable to resist spending every cent that they can get their hands on, with no regard for the fact that the economy has occasional downs not just ups. Thank God the state Constitution requires each individual budget be balanced!
2) the biggest, not to mention fastest growing, part of the state’s expenses is still not unemployment claims. It is building and staffing prisons to hold non-violent drug offenders. Something as simple as a moritorium on arrests (not to mention trials and jailing) for non-violent drug offesnse would have the budget well on the way to balance.
Seriously, you cannot believe what a brainless soap opera California’s government is unless you live here. And pay a modicum of attention to the Sacramento follies. Maybe Louisiana is as bad (I only know what gets into the national press about what goes on there), but I have heard on nothing in any other state which compares.
February 6th, 2009 at 10:54 am
“And the bill has money being given to states/organizations to hire people. Thats not welfare at all Rich. Like….at all….”
Ah….so state agencies are now wealth creating entities. I’ll file that one away somewhere.
February 6th, 2009 at 10:58 am
Must pass stimulus, or California will slide off into the Pacific. State of Fear, anyone?
February 6th, 2009 at 11:50 am
I’m sure California has cash flow problems but I’m equally sure that this “furlough” is a stunt to help ram home the “stimulus package” that will bring lots of newly printed federal dollars into the state treasury to make sure that no significant changes in the way state government is run are needed.
Unemployment is up again, to be sure, but NOT in federal, state or local government. As other employers in manufacturing, transportation, retail, finance, professional services, temps, everywhere slash jobs and lay off workers TWO sectors of the economy showed INCREASES in employment last month: (1) education (meaning private education) and health services, and (2) government, both federal and state government. Small increases, yes, but total payrolls went up when everyone else is losing their jobs. (See BLS jobs report report issued today at http://www.bls.gov/news.release/empsit.t14.htm).
This is no accident. All those spooky layoffs of teachers, cops, etc. that every governor and big city mayor is talking about grimly are cutbacks based on what they say is their next budget will require — typically one that begins in June or next January. Such budget numbers in state and city government are, to say the least, flexible. They are based on assumptions about tax and other revenues. Right now, officials are making very pessimistic assumptions about those revenues and extrapolating doom and gloom.
Perhaps the worst will happen; perhaps not. In any case, NO ONE IS BEING LAID OFF NOW. Why is that? Are there really no DMV clerks, legislative “constituency service” workers, back office administrative employees, school cafeteria workers or big shots in the governor’s office whose services can be dispensed with for a while in light of the unprecedented emergency?
February 6th, 2009 at 12:01 pm
One more thing: That 9.3% unemployment in California should be compared to the unemployment rate for California public employees, which I suspect is close to zero. Shared sacrifices!
February 6th, 2009 at 12:14 pm
Right on, John!
Right now, my co-workers and I are going without 4 days of pay per month. Not feeling too much sympathy for a bunch of government employed, unionized cry-babies that are only losing 2 days of pay each month!! You don’t hear me complaining (except in this specific case) – know what I’m doing?? That’s right, I got myself a part-time job to fill the gap!! Ever hear of “personal responsibility”??
California politicians cannot manage the states finances responsibly, and I’M supposed to be upset?? Maybe the voters in California need to accept their responsibility and VOTE OUT the ones who created their mess in the first place! Their financial problems did not start 19 months ago…it started about a decade ago! They are almost as bad as Michigan—they never learn their lessons!!
February 6th, 2009 at 1:30 pm
When this stimulus eventually passes, which it will once every on-the-fence republican gets an appropriation for his state added to the bill, then all of this economic distress better go away quickly. No excuses for Obama.
If the economy remains in the tank for 4 years, the 1% that gets taken out due to republican pressure will not be the reason.
February 6th, 2009 at 1:46 pm
Yes, it will be Obama’s fault he couldn’t clean up Bush’s mess.
Geez, Jim, c’mon.
You got an idea? I’m all ears. The nation is waiting.
Obama tried to play it nice. He tried to invite the GOP in to help craft a better solution. He has gone much farther than Bush ever did in reaching across the aisle.
But a funny thing happened on the way to that reach–the GOP decided to just tear down any thing to score political points, to “frame” the discussion, as it were.
Its beginning to finally look like Obama is getting it now…he extended a hand and asked for them to contribute. Oh, and don’t think I am giving the Dems a pass. The original bill could have been much better.
Still, we had a brief shining moment where things could have gone either way when Obama defied the folks on the left and invited the GOP to work with him, and they slapped him for it.
The GOP–it’s just a nasty group of selfish me firsters born in the bowels of the 1980s. They will say anything and do anything to achieve power. How the heck did we get here?
February 6th, 2009 at 2:33 pm
Here’s another wrinkle. In the AP story from which Justin quoted, a perseptive state employee makes observation that “the state would have to pay overtime at 24-hour [priosn and hospital] facilities to those workers who backfill the shifts of people on furlough,” because “five state mental hospitals and 33 adult prisons are required to provide constant care to patients and inmates.”
On top of that shifting of expenditures in order to get a big headline story about desperate cuts looming, in my personal experience working in four different state and big city agencies through several recessions and budget crises, public agencies can also shift outlays over time a good deal more than any private, profit-making company.
So for example, an agency can undertake cost-saving measures today, such as a hiring freeze that slows payroll increases, a moratorium on pay rises, closing offices part-time, or suspending work by contractors for a while — all moves that restrain current cash outflow. Then, when the recession ends and tax revenues grow again, or revenues go up due to tax and fee increases, or the feds send piles of freshly printed money, you drop those measures and resume norma; activity. But not just that; you also roll out the pay raises, increases in headcount, new contracts, etc. that you held up for a few months or a year at most. Public employees — from the legions represented by big unions to the hundreds of thousands of managers and political hacks — recoup whatever they missed out on for a brief while.
A word also to gerryf: It’s certainly true that GOP pols will try to take political advantage where they can (as do Democrats), but it’s not true and not fair to suggest that they as a group have not contributed any ideas and/or have responded to Obama’s outreach only by “framing” the discussion to score political points. First, it wasn’t hard to “frame” discussion of a House bill that was never discussed publicy at all, was larded up with pork, included a laundry list of Democrats’ favorite programs, and most important, did not get a huge part of this (printed) money out into the economy in time to provide any fiscal stimulus before the recession is over.
Anyway, right now, a number of Senate Republicans and Democrats (rumored to be from 10 to 20) are, in fact, working together to try to hammer out differences and shape a bill that’s smart, effective and can pass with bi-partisan support.
February 6th, 2009 at 3:28 pm
Ok Justin. Now that you’ve repeated your basic argument for the umpteenth time, without adding any subtlety or responding to any of the valid criticisms others have made, you’ve finally convinced me.
The solution is, as you have always stated “ready, fire, aim!” And the problem was caused by the Republicans failed policies. Tax cuts are bad. Tax hikes are good.
“Moving on?” Nice catch phrase, if only you ever did move on, instead of just repeating the mantra that we must act now, because taking action quickly is of far more importance than identifying which actions are the best ones to take.
Doesn’t it concern you even a little bit that this bill was shpped two weeks or so ago as having a price tag of about 775 to 800 billion, and it’s swelled to over 900 billion? Come on. Not even a little?
February 6th, 2009 at 4:30 pm
kranky,
I think we do have a good idea of what the best actions are to take because it’s widely agreed that government spending carries with it the best bang for the buck. Nearly every single economist I read says that government spending has the biggest multiplier since tax cuts carry with them the risk of the money being saved and not spent.
I’m not saying tax cuts are bad. Nowhere did I say that. But what I am saying is that a seemingly unflinching allegiance to the tax cut philosophy is killing this stimulus. Because whether you remember or not, this bill is made up of almost 35% tax cuts.
No, but that’s not enough for Repubs. No, they’d rather target programs that they can score cheap political points on that only make up one three hundredth of a percent of the total cost. Oh yeah, and then claim its the Dems who are stonewalling.
Am I concerned that the price tag is going up? Actually, no. I think it should be higher because those same smart economists also say that if you don’t spend enough it has a good chance of not being effective. I wish it were over a trillion dollars actually, but I’m willing to have controversial provisions cut out of it…as long as we get moving.
Seriously people, what other indicators do we need? Should the economy shed 800,000 jobs in a month instead of 600,000? Or would you still continue to equivocate about how that’s not as bad as 1974 when compared to the overall population back then. Because behind each one of those numbers is a real person who now has to depend on the government to support them.
In other words, I’d rather have the money spent directly to get them working again than giving nervous tax payers a lot more tax cuts in hopes that they spend that money so businesses will start hiring again.
Also, “Ready, Fire, Aim!” is a great catch phrase. Want to try something accurate now?
February 6th, 2009 at 5:16 pm
@Justin
Well if you only choose to read smart economists that agree with you, and ignore smart economists that disagree with you, you opinion will always be validated.
In case you want to broaden your reading list, here is a list of 300+ economists, including three nobel prize winners, you might want to consider.
February 6th, 2009 at 5:32 pm
I’m with Jimmy on this. Just a lot of Kabuki theater.
This monstrosity started at $800B+ in the house, has ballooned to $900B+ in the Senate, and once they share enough of the pork booty with a couple of Republican Senators, they’ll shave 10% off the top for political cover, pretend they’ve done something fiscally responsible, and this thing will sail through at right around $800B.
Obama gets his first big win by swinging a huge partisan hammer.
Obama – 1.
Thoughtful Careful Governance by Congress – 0.
It is an indicator of how truly bad this bill is, that the Dems had this much trouble holding their own party in line and just picking up two Republicans.
February 6th, 2009 at 8:27 pm
Hi Justin!
My name is Amitha. This is my first comment on this blog. I have been a religious reader of donklephant for a while now but just haven’t commented yet =).
Being a native Californian, I can attest to the fact that as a state, we are pretty troubled. There have been MASSIVE budget cuts all across the board, even to important areas, such as the LA county department of public health.
Given this, it has been really frustrating to see the incessant partisan tussles taking place on Capitol Hill. People need to realize that there are livelihoods at stake. The basis of the debate over the stimulus package should not trace its roots back to bruised egos and power trips. It should be about how best to help the country. As someone who knows several people who will be subject to this new and future furloughs, I can definitely say that we need help and we need it fast.
February 6th, 2009 at 8:31 pm
Whats interesting is that the so called “failed Bush policies that got us into this mess” weren’t altogether different from what Obama and the democrats have proposed for the solution. More borrowing and spending and printing money and shotty lending and nationalizing.
Take it from our favorite economic soothsayer Peter Schiff. You know you want to click. Come on, do it! listen to him say “Unmitigated Disaster”
February 6th, 2009 at 8:58 pm
@Jimmy,
Interesting indeed. And depressing. Even worse, Obama’s behavior in this process can only be described as “Bushian” with economic fear-mongering and partisan hectoring to browbeat the Senate into passing a bill with too much haste, too little consideration, too little oversight, too little understanding of where the money will actually go, and zero understanding of where the money will come from.
Just watched the Schiff clip. Damn. I just wish that, just once, he didn’t make absolutely perfect sense. May have to put together a post and drag him back to the banner level.
We should just go ahead and designate Schiff as our official Donklephant tour guide on the highway to hell.
February 7th, 2009 at 9:18 am
Jimmy/MW — I’d highly suggest reading Schiff’s latests “Bull Moves in Bear Markers”. I’ll some it up:
1) out of US equities
2) out of US dollars
3) and if need be, get out of the US period.
I for one of have my eyes on little hacienda in Brazil — I’ve even got a school picked our for my daughters and enought cash in Perth gold certificates to live down there for a 6 months-1 year. Hopefully the Brazilian bar isn’t that difficult.
February 7th, 2009 at 12:52 pm
[...] to give a home in the sidebar. It’ll serve to remind him that there are plenty of “smart economists” who do not subscribe to failed Keynesian ideological dogma. Towards the end of his life, [...]
February 13th, 2009 at 12:57 pm
The state should hire independent contractors rather than stuffing their payrolls with workers who must continue to receive pay, healthcare benefits, holidays, vacation time, overtime, sick days off and all the other perks that go along with being on the government payroll….even when work is slow and the economy is bad.
With independent contractors, when you don’t need them or can’t afford them, you don’t call them. And if an independent contractor isn’t working up to snuff…you just don’t use him again. Compare that to a state worker who cannot be fired no matter how incompetent.
Plus independent contractors work much more efficiently than state workers because they get no overtime, weekends or holidays. They work however long is needed to get the job done.
And they are far less expensive. No overtime, no paid holidays and no vacations. And once the project is done, you can stop paying them.
One of the main reasons the state is always in the economic poorhouse is the hundreds of thousands of state workers and retired state workers who continue to receive a monthly check and healthcare benefits till the day they die.
Private companies got rid of defined benefits long ago. Only government workers continue to hang on to the gravy train.
March 14th, 2009 at 11:06 pm
Great Article Justin. I love the article and the commentary below. I hope you don’t mind, but I linked to this article on my message boards section at CafeGov.US. It’s a website dedicated to government employees and I was hoping that your article would generate some great dialogue. If you do not approve, please let me know and I won’t do it again. Thanks.
March 19th, 2009 at 12:33 am
Private business don’t offer pensions? Since when?