The Anti-Stimulus

Loren Kaye
President of the California Foundation for Commerce and Education

The state budget abyss draws closer, and the first victims – surprisingly – are not public employees or school children or poor people, but instead are working men and women, many with union cards.

State construction projects are grinding to a halt, triggered by a decision last month by a crucial state finance agency to halt working capital for state-financed projects. This has led to a cascading effect on state construction projects, placing at risk more than 5,700 projects valued at $22.5 billion.


·        Some 203 transportation projects valued at $1.8 billion are in danger of being suspended. "That has never been done in the history of the state, certainly not in the transportation program," Will Kempton, director of the California Department of Transportation, said Monday.

·        The nation’s largest higher education system – California State University – has shut down  all state-funded design and construction projects on all campuses, affecting libraries, classrooms, laboratories, and seismic upgrades.

·        Schools, flood control and water projects have also been halted.

According to the Department of Finance, stopping these projects "will result in closure costs and penalties that could be hundreds of millions of dollars."

Hundreds of large and small businesses – and thousands of workers – are collateral damage, even as politicians from Washington, DC, to Sacramento are touting the value of new public works construction to prime the pump of economic recovery.

But it gets even worse.

Not only are current projects shuttered because of the budget debacle, magnified by the international credit crunch, but California may well lose its opportunity to land our fair share of federal infrastructure funds from President Obama’s economic recovery package.

The new package being considered by Congress would provide states with billions of dollars in new transportation and public infrastructure funding, but may condition that financing on having those projects "shovel-ready" within a relatively short period of time. Unfortunately for California, the construction projects with the most jobs and economic benefits are potentially those most at risk for environmental challenge, which is why the Governor is asking for limited relief  from state and federal environmental regulation.

According to the Governor, the relief he is seeking would require all relevant permits to be obtained to protect natural resources and human health and implement all mitigation measures required by state and federal regulatory agencies. They must also conform with air quality planning as well as Americans with Disabilities Act and storm water runoff design requirements.

In response, Legislative Democrats have proposed a "green economic stimulus" package  that amounts to a statement of infrastructure priorities, but assumes the existing environmental review and project delivery mechanisms are adequate. On the other hand, since their priorities do not include any short-term infrastructure investments, project delivery schedules would be the least of their concerns.  Key Democratic infrastructure priorities include:

·        $200 million for "expenditures in integrated regional water management plans."

·        $800 million for mass transit projects.

·        $700 million for local road maintenance (consistent with the Governor’s proposal).

·        $50 million for "multi-benefit projects that reduce conflicts between flood conveyance facilities and transportation infrastructure."

·        $200 million for state and local park maintenance and rehabilitation.

·        $65 million for "habitat restoration and enhancement."

·        $10 million for "community tree planting projects."

None of the money in the Democrats’ economic stimulus package is geared toward highway, water development, higher education or public safety projects.

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