by Ken Jacobs, Laurel Lucia and T. William Lester May 2010
When it comes to jobs and the economy, not all solutions to California’s budget shortfall are equal. Most measures designed to reduce the deficit will have a depressing effect on employment and economic growth in the state, but the magnitude of that impact will vary significantly depending on which measures are enacted.
In this brief, we estimate the economic impact of Governor Schwarzenegger’s proposed 2010–2011 budget using IMPLAN 3.0, an industry-standard input-out- put modeling software package. We further compare the economic impacts of these cuts with an alternative approach that mixes spending cuts with targeted revenue increases sufficient to avoid cuts in programs that bring in a federal match.
We estimate that the Governor’s proposed budget would result in a loss of 331,000 full-time equivalent jobs, increasing the unemployment rate by 1.8 percentage points.1 More than half of the jobs lost would be in the private sector. Because many of the jobs lost are part time, the actual number of Californians affected would be much greater. The number of jobs estimated to be lost is much greater than the entire employment growth for the state projected by the Legislative Analyst’s Office for 2011.2