How fiscal cliff would be felt in California

December 10, 2012 7:22:06 PM PST
As the deadline nears for Washington to come up with a deficit-reduction agreement by the end of the year, it's becoming clear California has a lot at stake if the fiscal cliff isn't averted.

More than 200,000 jobs could disappear. The state could lose as much as $4.5 billion in federal funds, and the Legislative Analyst's Office estimates the state budget may shrink by $11 billion over two years.

Jason Sisney from the Legislative Analyst's Office said: "Most people think the economy would be drawn into a recession, and just like in any recession, that would affect the state's economy and revenues and result in billions of dollars of less tax revenue for the state."

Southern California, home to the state's most high-value contracts, could be hit especially hard by cuts to defense spending -- a loss of 135,000 jobs next year, according to George Mason University.

Another recession is the last thing activists from the Alliance of Californians for Community Empowerment want. They're urging leaders to come to an agreement.

"The economy, if it continues to slow as much as it is now, it'll be hard for me to find a job, if I find one at all," said Jimell Moore.

Because California voters approved Proposition 30 last month, the statewide sales tax will go up one-quarter of a percent and high wage earners will have to pay more in state income taxes.

And if the Bush tax cuts are allowed to expire, a typical family of four's federal income tax liability will also go up another $2,200 a year.

Denise Davis says she won't be able to afford the double whammy. "Eating, paying the rent and the bills and stuff, it's hard," she said.

No deal on avoiding the fiscal cliff also means about 400,000 Californians are set to abruptly lose their unemployment benefits extension. And thousands of low-income families whose programs rely on federal funding -- such as Head Start, Women Infant and Children and domestic violence shelters -- could see their services cut.

"It's incredible to think about what we'll have to do in California to connect the dots for those families that would lose federal benefits," said Jessica Bartholow of the Western Center on Law and Poverty.

Advocates for the poor are also worried about what a possible deal might look like because federal entitlement programs are on the table and California has already cut much of the safety net.


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