Budget cuts could be devastating to Calif. economy

May 27, 2010 6:21:57 PM PDT
Budget cuts in Sacramento could have a devastating impact on jobs. According to a study out Thursday, another 331,000 people could be thrown out of work and the state's unemployment rate would rise another 1.8 percent. (It is already more than 12 percent.)

The study by the UC Berkeley Labor Center projects that steep job losses will result from cutbacks primarily in state health and human services.

"Many of the state's health and human service programs bring in substantial federal matching grant dollars that act as a stimulus on the local economy," UC Berkeley Labor Center economist Ken Jacobs said.

Jacobs says that means state budget cuts will counteract federal stimulus spending designed to create jobs.

He does not think anyone in Sacramento has thought about the consequences.

ABC7 asked Gov. Arnold Schwarzenegger's press secretary for a reaction.

"The real problem with our state budget is the fact that we're spending $32 billion on state employee compensation. If we didn't do that, if we just did a fraction of that, we could pay for the programs we have to cut," Aaron McLear said.

The Labor Center study is quite dismal. However, there is some good news. One Hayward factory, Plastikon, just hired 50 people.

One of Plastikon's biggest customers was NUMMI. The plastic injection company made interior and exterior body trim. When nummi closed, Plastikon laid off 70 employees.

But the company recently hired 50 people because Toyota is having them make parts for the Tacoma pick up, which is now produced in Texas.

Tesla is already a customer, but its new venture with Toyota will be making only 20,000 vehicles a year to start, and that will not be enough to bring on additional workers.

"Of course 20,000 does not affect us like when they were making 500,000 vehicles; 20,000 is a very small number," Plastikon President Fred Soofer said.

So employees are worried.

"It's very scary, I hope NUMMI starts again," Tina Chanan said.

So the employment picture remains uncertain.

And it could get much worse if the state budget cuts, as analyzed by the UC Berkeley Labor Center, push the jobless rate from 12 to almost 14 percent.


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