State starts layoff sequence for up to 10,000 workers

Layoff warnings began being sent out Tuesday from some 54 state departments to thousands of state workers, the first step in a lengthy process that ultimately could result in layoffs of up to 10,000 people.

The announcements, called “surplus notices,” were being sent to 20,000 state employees. The notices, required by law when layoffs loom, tell workers that they face potential layoffs after 120 days, although the precise number of layoffs was uncertain, said Lynelle Jolley, a spokeswoman for the state Department of Personnel Administration. The DPA represents the Schwarzenegger administration in labor negotiations with the state’s unionized workforce. The state employs about 238,000 workers.

The total magnitude of the potential layoffs is still unknown.

Although 20,000 notices are being sent out, “the number of employees who will ultimately be laid off as a result of this process is estimated to be as high as 10,000. We don’t really know yet because we don’t really know what kind of budget the legislators will adopt,” she added. The uncertainty stems from the number of vacant positions, the number of workers who have downward demotion, or “bumping rights,” as opposed to outright layoffs; natural attrition and other factors. “We can’t lay off anybody faster than 120 days,” she noted.

State employees weren’t the only ones caught in the fiscal vice as the governor and Legislature try to cover a $41.6 billion budget shortage.

Some 276 transportation construction projects totaling $3.8 billion were also put on hold, payments to state vendors were frozen and income  tax refunds were delayed. Shutting down the construction projects is in itself expensive, costing some $199 million to shut them down and some $192 million to resume them once money begins to flow, said Caltrans Director Will Kempton. Some of that money, perhaps 25 percent, can be recouped, but in the end there is “over $300 million that will be flushed down the toilet,” Kempton said.

“Without a budget, the implications can be catastrophic, absolutely catastrophic,” Kempton reported to lawmakers. “It is the first time in the history of the transportation program that we have had to shut down ongoing work.” The federal economic stimulus package signed Tuesday by President Obama means that California could begin $2.2 billion worth of projects by the end of the year, but the interrupted, ongoing work would not be eligible for the money, Kempton said.

Estimates of the number of private-sector construction jobs that would be lost by a prolonged shutdown varied widely, but could be as high as 18,000, Kempton said.

The administration hopes to cut its state payroll costs by 10 percent through a combination of four factors – forced furloughs, layoffs, elimination of some holidays, and tightening up on overtime. The exact dollar savings was still being computed, but the administration estimated that the forced furloughs – two days a month – would result in a $1.3 billion savings through the middle of 2010. Union officials said the furloughs amounted to a 9.5 percent pay cut.

“We are in a pretty deep hole and it is going to get pretty hard to get through the next fiscal year,” Jolley said. “We have to take these steps.”

Complicating the picture is the nature of the funding that fuels the state workforce. Jobs that are dependent on the state’s main treasury, the General Fund, are at the most risk because they are directly tied to the negotiations between the governor and Legislature. But many California workers – such as the Highway Patrol and Caltrans – are funded by fees levied specifically for that purpose, and those jobs are relatively insulated. As the layoff threat deepens, many workers attempt to move to fee-supported jobs.
The state’s budget crisis is the result of two basic factors. One is the decline in revenue, most income tax money, that has flowed to state coffers as the result of the deepening recession. The second is the requirement that state budgets be approved with a two-thirds vote of each house.

The Assembly and Senate each have Democratic majorities, but they fall short of the two-thirds majorities needed for the budget. That means Democrats need Republican votes in order to approve a spending plan. In the Assembly, leaders have reportedly been able to muster the necessary votes, but in the Senate, the Republicans have balked. Going into Tuesday evening, the house was still one Republican vote shy of reaching the required two-thirds majority.

Estimates of the total impact of the federal stimulus package upon California vary widely. A top fiscal adviser to the governor, David Crane, said the package could result in $80 billion in the form of direct funding, tax relief, expenditures and investments,” while other estimates were far lower, ranging from $22.5 billion to $60 billion. Whatever the exact figure, it is clear that the federal money is desperately needed in the state.

Of the $80 billion, we estimate that about $45 billion will come to California in the form of expenditures for education, health care, infrastructure, and unemployment benefits. A third of that will be awarded on a competitive basis. For now we assume we will receive a share of that funding proportionate to our share of U.S. population, but because so much of that money is for programs that are directly in California’s wheelhouse – such as energy efficiency programs, infrastructure projects and high-speed rail – it is possible we will fare better and earn a greater share of those awards,” Crane wrote Tuesday in a “Memo to Interested Parties.”

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