Government paychecks, pensions now a dead weight to Sacramento economy

SACRAMENTO, Calif. -- Through the decades, as flashier private sector jobs came and went, solid government paychecks and pensions formed the steady foundation of Sacramento's economy.

Now that foundation has become a dead weight.

Layoffs, furloughs and other public sector cutbacks are stalling Sacramento's economic recovery. To a degree not seen in decades, a crisis in government is elevating the region's unemployment rate, prolonging the real estate slump and carving cash out of the economy to the tune of around $2 million a day.

"From 2007 to 2009, it was all about construction and real estate," said economist Jeff Michael of the University of the Pacific. "Now, without a doubt, government cuts have been at the center of the downturn the thing that's preventing the recovery from taking hold."

So far, practically all of the pink slips have gone to schoolteachers, probation officers and other local government workers.

The state has avoided major layoffs. That could change. The budget passed by the Legislature last week contemplates 5,600 layoffs, according to the Department of Finance. If certain tax revenue projections aren't met, additional spending cuts will ensue.

It's not clear how many layoffs would take place in Sacramento, which is home to one-third of the state workforce.

But Sacramento obviously has a lot to lose; state government is the region's largest employer and accounts for 10 percent of its jobs. The work, on average, pays $10,000 a year more than the private sector, according to data from the state controller and the Employment Development Department.

"You can't lay off a bunch of moderately high-wage workers and not expect to have an economic spillover effect," said Michael Shires, a budget and public policy expert at Pepperdine University.

Make no mistake, Sacramento's woes started with a real estate crash that enveloped much of California. The construction industry, despite an uptick in hiring in May, remains deeply troubled.

But the downturn has persisted longer in Sacramento than in most places, in part because of government cutbacks. While the region's unemployment rate matches the state's – 11.7 percent – Sacramento's job performance has been far weaker. California is adding jobs, albeit slowly, while Sacramento is still going backward. Fewer Sacramentans held jobs in May than a year ago.

And, of the 37,000 jobs that have disappeared in greater Sacramento over the past two years, one-third are from government.

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