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Gov.’s Revised Budget Plan Would Hurt Jobs, Economy, Study Finds

Gov. Arnold Schwarzenegger's (R) proposed budget plan would result in the loss of 331,000 full-time jobs and raise California's unemployment rate by 1.8 percentage points, according to a study released Thursday by UC-Berkeley's Center for Labor Research and Education, the San Francisco Chronicle reports (Buchanan, San Francisco Chronicle, 5/28).

Proposed Health, Social Service Cuts

The governor has proposed cutting:

  • $750 million from the state's In-Home Supportive Services program;
  • $532 million from Medi-Cal, California's Medicaid program; and
  • $15 million from Healthy Families, California's Children's Health Insurance Program.

Schwarzenegger's budget plan also calls for the elimination of CalWorks, California's welfare program (California Healthline, 5/26).

Study Details

The UC-Berkeley study -- funded by the Service Employees International Union -- found that Schwarzenegger's proposed cuts would lead to more than $36 billion in lost economic output and $1.9 billion in lost state and local tax revenue.

According to the study, of the 330,000 full-time-equivalent jobs that would be lost under Schwarzenegger's plan, 261,000 would be the result of the $5.4 billion in cuts to health and human service programs. The study also found that almost a quarter of the budget savings from those cuts would be negated by lost local and state tax revenue.

The researchers said a more balanced approach that includes $5.4 billion in targeted revenue increases from upper-income households, corporations and a new oil severance tax would save nearly 250,000 jobs and $18 billion in lost economic output.


Study co-author Ken Jacobs said, "Cuts to CalWorks, In-Home Supportive Services and health services for low-income populations hurt the economy more than the equivalent amount of revenue increases ... because these cuts would result in the loss of billions of dollars in federal matching funds and take dollars out of the pockets of low-income residents, who are most likely to put them back into the economy immediately" (Maclay, UC-Berkeley release, 5/27).

Creditability of Study?

Schwarzenegger spokesperson Aaron McLear questioned the credibility of the study because it was funded by SEIU.

Jacobs said that researchers used established methodology and that their results were in no way influenced by the union (Russ, Capital Public Radio, 5/27).

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