Any time there is a layoff, reduction in force, furlough, or paycut, the local economy feels the impact. Workers with loss of pay have a hard time paying for a place to live, feeding the family, and keeping the car running. A new study by Ken Jacobs from the UC Berkeley Center for Labor Research and Economy, The High Cost of Furloughs, quantifies the impacts.
The study finds that a one-day a month furlough would save more General Fund money than current three days a month furlough. In FY 09-10, the estimated General Fund savings from the furloughs is just $738 million, not the $2.01 billion estimated reduction in wages and benefits. The FY 09-10 furloughs will result in a loss of $503 million in future years, which brings the actual General Fund savings down to $236 million, which is a little more than 10% of the projected savings of $2.01 billion.
The furloughs impact workers paid both from the General Fund and federal funds. If a worker is paid using federal funds, the state cannot collect the federal money for the furloughed time, resulting in a loss of revenue. Additionally, workers paid using federal funds include staff who help qualify California residents for federal programs. Cutting qualification workers cuts federal payments to Californians, which leads to a further economic loss.
The report, The High Cost of Furloughs, discusses other points such as CalPERS payments, losses to businesses, losses to revenue generating departments, rise in foreclosures, and the price for disruptions in state services.
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