Tens of billions of dollars are cascading into California from the federal stimulus package, but the economic oomph is being weakened by massive cutbacks in state spending.
The financial crosscurrents show up in places like downtown Sacramento's old railyard, now undergoing a huge facelift. Stimulus money from Washington, D.C., will help move the train tracks, a key element of the plan. Separately, though, the slashing of redevelopment funding by the Legislature might derail a housing project at the site.
This push-pull effect will play out in education, transportation and other sectors. Economists say the likely result will be prolonged pain and a weaker recovery despite the $85 billion coming to California from the stimulus program over the next two years or so. Unemployment stands at 11.6 percent in Sacramento and statewide, and is forecast to exceed 13 percent next year.
The state budget "absolutely … will blunt the impact of the stimulus," said Chris Thornberg, head of Beacon Economics consulting in Los Angeles.
Thornberg and others say the budget agreement that passed Friday, which will cut billions in spending on transportation, social services and other programs, is only part of the equation. A proper accounting of the drag on California also must include the February budget agreement, which carved nearly $30 billion out of the economy, and fresh spending cuts sure to come when tax revenue continues to lag next year....MORE
HT: the Columbia Journalism Review
