Mandatory furloughs may not save as much as advertised

The chairwoman of the Senate budget committee says mandatory furloughs at the state’s top tax collection agencies may be hampering the state’s ability to collect revenues, and undermining the very cost savings sought by the furloughs.

That was the subject of a budget subcommittee hearing held by Sen. Denise Ducheny, D-San Diego, in the Capitol this week.

“I don’t believe the third furlough day is creating the savings Finance has said,” said Ducheny Their projections are not credible.”
Officials from the Franchise Tax Board and Board of Equalization said the three furlough days per month ordered by Gov.

Scwharzenegger could cost the state hundreds of millions of dollars in uncollected revenues. Officials say the furloughs hamper the agencies ability to collect taxes and perform tax audits that would end in more revenues for the state.

The suggestion that furloughs were hampering the ability of the agencies to collect taxes was dismissed by the governor’s Department of Finance.

The Department of Finance’s Chris Hill, who appeared at this week’s hearing of the Senate Budget Subcommittee on Revenues and the Economy, defended the administration’s numbers, and reiterated the $1.3 billion figure in budget savings because of the furloughs.
But finance officials later conceded that the scored savings did not take into account the possibility of diminished state revenues because of the forced work stoppages.

Furloughs were imposed by the governor this year to help the state out of its budget morass. The governor has the authority to unilaterally order the furloughs.

As part of this summer’s budget agreement, the governor called for a third furlough day per month for most state employees. The three furlough days save the state an estimated $1.3 billion per year, according to projections from the department of finance.

Under earlier proposals, workers were allowed to take “floating” furlough days. Many workers used accrued furlough days instead of vacation time, which diminished the ultimate cost savings to the state. But as part of this summer’s decree, the governor reinstituted “Furlough Fridays,” forcing state workers off the job three Fridays of every month.

Among the officials who testified at this week’s Senate hearing were Hill, Lisa Garrison, the chief financial officer of the Franchise Tax Board; Ramon Hirsig, executive director of the Board of Equalization; Laura Anderson of the Employment Development Department;  and Pamela Schneider from the Department of Personnel Administration.

EDD has also claimed furloughs have hampered their ability to deal with the flood of calls from out-of-work Californians trying to claim their unemployment benefits. Last week, figures showed the state’s unemployment rate at a record 11.9 percent – 2.5 points higher than the national rate of 9.4 percent.

Last week, the state’s largest state employee bargaining union, SEIU Local 1000, launched a radio ad campaign against the governor saying the furloughs were a violation of the deal reached between the union and the administration last year.

SEIU’s contract remains mired in the Legislature, still seeking the Republican votes necessary to ratify the accord.

Schwarzenegger’s communications director Matt David reacted angrily to the ad saying, “This is nothing more than a media campaign by union bosses to intimidate the governor. This is no different than the tactics used by the prison guards. When he ran for office, the governor was very clear that special interests will push, but he will push back. The Governor has made the difficult but necessary decisions to cut spending, order furloughs and will continue to stand firm to protect taxpayers.”

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