Nearly one in 12 state jobs disappear under new budget

SACRAMENTO -- California will trim one in every 12 state jobs, the single most important step so far to eventually return state government to long-term fiscal balance, officials say.

The administration must eliminate 16,000 jobs -- 7.7 percent of the state's 207,000 non-university positions, said Finance Director Steve Peace.

The laid-off state employees could simply have gone to 20,000 unfilled state jobs, but for two executive orders signed by Gov. Gray Davis the day California entered the new fiscal year facing a record-setting $38 billion deficit.

With that option gone, the number of layoffs may climb because of delays in renegotiating union contracts and terminating employees.

The longer the delays, the more people have to lose their jobs to bring the necessary savings, Marty Morgenstern, director of the Department of Personnel Administration, said Friday.

The state already has put 12,000 employees on notice they could be laid off this fall. But the notices must be in place for 120 days, and only in the final 30-60 days are formal layoffs issued.

The administration plans to ultimately issue at least 15,000 preliminary notices, then reassess how close they are to targeted savings based on the layoffs and union contract re-negotiations.

"I wouldn't be surprised if the number of surplus notices doubled," to 30,000, said Morgenstern.

Davis had proposed permanently cutting 13,000 jobs, and blamed Republicans for refusing to raise taxes to forestall additional layoffs.

"There's a price involved, and the price is drastically reduced services," Davis said in a telephone interview with The Associated Press. "Clearly there is pain people shouldn't have to experience."

Unlike last year, when lawmakers insisted on employee cuts that both the administration and legislative analyst said were unrealistic, this year there's no alternative but to actually fire employees, Peace said.

"It'll be everywhere," said Peace. While the state will have to meet its legal obligations, administrators across state government now are forced to ask themselves, "What things do we say we're not going to be able to do anymore?"

Officials said they now are beginning to figure where the ax will fall, and will do their best to keep public health and safety their priorities as they decide where to cut.

Many targeted employees won't wait that long. Of more than 300 employees issued layoff notices at the close of the last fiscal year, only about 100 were actually fired, said Morgenstern. "Many of them just quit and get jobs somewhere else."

Departments that don't lay off enough employees and make deep enough cuts will exhaust their budgets in the second half of the fiscal year, Peace predicted, and this year those agencies won't get midyear spending increases to bail them out.

Lawmakers gave the governor new power to shift up to 5 percent of the state's budget, which Peace suggested Davis will use to strip money from agencies that haven't done enough of their own streamlining.

Of course, Davis could be gone if voters recall him in October. And in his fight for political survival, the governor is counting on money and votes from the very public employees' unions his administration is now asking to accept layoffs and contract revisions that would cut wage increases.

As it stands, the state budget is predicated on saving $1.1 billion either through layoffs or deferred salary increases. Unlike layoffs, the union negotiations would merely shift currently contracted salary increases into future years, with no net long-term savings and potential long-term higher costs.

Davis wanted the unions to approve $855 million in reduced salary increases to help see the state through the next year. But just two unions have cut new deals so far, and even if the remaining 19 follow suit it will save the state about $470 million -- little more than half the target, said Morgenstern, the administration's chief negotiator.

That could mean more layoffs to make up the difference, Morgenstern and Peace said. It is theoretically possible for unions to give up so much that no layoffs would be needed, Peace said, but contract cuts that steep haven't even been discussed.

Peace said such cuts will be tough to make, but pressure from Wall Street bond rating agencies will force them to happen.

Standard & Poor's lowered the state's rating to near junk bond levels last month, while Moody's Investors Service last week downgraded the rating and kept the state on a credit watch for fear elected officials won't be able to trim the state's long-term spending imbalance.

The state's new budget still contains a projected $8 billion shortfall next year.

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On the Net:

Legislative Analyst's Office's nonpartisan budget review, http://www.lao.ca.gov/default.asp

Read the budget bill, AB1765, and the budget trailer bill, SB1044, at www.sen.ca.gov