People living in California have very few reasons to smile after the formal announcement made by the Office of the Governor that almost 20,000 state workers will be eliminated from the state’s job market. Governor Arnold Schwarzenegger said that the notices will be sent to those affected as early as this week. Half of those who will be laid off will be eliminated from their jobs as early as July 1.

How could California lay off 20,000 state employees?

This major job cut doesn’t come as a surprise after the collapse of $40-billion budget which the state lawmakers failed to pass. If the budget had been approved, it will help close the budget deficit. The approval of the budget fell one vote short which resulted to the California government clamoring to think of ways on how to rack up their cost savings. The $40-B package was supposed to shrink the state’s deficit and at the same time cut spending.

The State of California, which has the eight biggest economy in the world, took a heavy blow which resulted in the decline in the state’s revenues caused by the collapse of housing and real estate, increasing unemployment rates and a rapid decrease in consumer spending.

• Reuters – Strapped for cash, California will eliminate 20,000 jobs
• Bloomberg – California tries to fix budget deficit
• Market Watch – California budget disapproved, fell one vote short

Who and what in California is most affected by this?

Overall, state workers have the elimination of overtime pay and some paid holidays to look forward to.

Public Works Projects
Public works projects will also be halted until a new budget proposal is fixed causing infrastructure to slow down and this move will affect more workers. The newest employees in a company or agency will be the most probable target of the lay off.

Department of Health and Human Services
Aaron McLear, the Governor’s Press Secretary, specifically pointed out that the Department of Health and Human Services and Corrections will definitely be affected, among other agencies.

Department of Corrections
Department of Corrections employees are on the list for pink slips due to budget cuts. This comes after a previous announcement that California may have to cut the inmate population by up to 40%.

Taxpayers
Since the state is clamoring to save itself from going bankrupt, it decided last year that it will delay the $3.5-billion payments it owes to its taxpayers, counties and contractors. This will also affect the poor and disabled who rely on benefits and programs from the state and college students who are supported by state grants and scholarships.

Poor
State programs to help those in poverty are in line to be cut

Disabled
The plan eliminates the cost of living increases for the disabled

Elderly
California budget cut also eliminates cost of living increases for the eldery who are receiving Supplemental Security Income/State Supplementary Payment

Education
The plan includes reducing spending on education by $8.6 billion over two years, the cutting of overtime pay and laying off teachers, which will lead to an increase in class size.

• CNN – California will cut jobs from state agencies
• Mercury News – California taxpayers will need to wait for their tax refunds
• Bloomberg – Lack of budget will also affect public works in California

Pros and Cons of California job cuts

One advantage in this scenario is that the job cuts would benefit California, saving the state almost $750-million annually. Unfortunately, this advantage will be at the expense of those 20,000 people whose jobs will be cut. The job cuts will also provide the much-needed cash for the already cash-strapped state. Facing the brink of bankruptcy, the officials of California chose cutting people from their jobs, rather than see the full collapse of their state. Unemployment rates will increase in the state, affecting a lot of people and consumer spending will definitely be down.

Tags: 2009 Stimulus Package, Economy, Forex Market, recession, US Dollar

This entry was posted on Thursday, February 19th, 2009 at 5:03 pm and is filed under Discussion, Economy, Politics. 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.