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July 2010, Volume 16, Number 3

California: Prisons, Air, Budget

The eight San Joaquin Valley counties from San Joaquin in the north to Kern in the south have unemployment rates that are four to eight points higher than the state's 12.4 percent in May 2010, when the US rate was 9.8 percent. The unemployment rates in Fresno and other SJV counties were almost 17 percent.

The structure of employment in the SJV is changing? there are more nonfarm jobs, reducing agriculture's share of jobs. In Fresno, fewer than 50,000 of the county's 330,000 jobs are in agriculture, less than 15 percent. However, there are four times more farm workers than construction workers in Fresno county, and twice as many farm workers as manufacturing workers.

Salinas, a 150,000-resident city in Monterey county, the US salad bowl, has a gang problem. There are at least 3,500 gang members in the county, divided into the Norte¤os, a coalition of Northern California gangs, and the Sure¤os, originally from Southern California; they are blamed for most of the 31 murders in the past 15 months. Police say that it is hard to convict gang members they arrest because unauthorized residents are afraid to testify.

Imperial county, which had 166,000 residents in 2009, is returning to its place atop the unemployment rate lists? almost 30 percent in summer 2010. Unemployment dropped during the economic boom as the federal government added Border Patrol agents and staffed a migrant detention center, the state government expanded prisons, and trade with Mexico created jobs? unemployment fell to 15 percent in 2000 as new housing developments spread. However, the boom was short lived? over 10,000 people applied for 200 jobs at a Wal-Mart supercenter in 2008.

Prisons. Mendota and other farm worker cities hope that prisons can revive their economies. The California Department of Corrections plans to spend $6 billion on 35 new prison facilities; many San Joaquin Valley cities have requested them. Mendota Mayor Robert Silva hopes that a new 1,100-bed federal prison will revive the economy of the city of 10,000 that regularly has an unemployment rate over 30 percent. The prison is expected to employ 350 workers, some of whom will earn over $80,000 a year.

Corrections Corporation of America, which operates 65 private prison facilities, says that 180 additional jobs are created for every 450 people employed by a prison. However, studies show that relatively well-paid prison guards often do not live in the cities in which they work, and many private employers shun cities with prisons, which may retard efforts to develop other nonfarm jobs. Iowa State University's Terry Besser found that opening a prison in a small city is often followed by higher unemployment, more poverty, and stagnant wages, the opposite of the desired spark for development.

Delano, California, a city of 50,000 with two state prisons holding 10,200 inmates, had an unemployment rate above 40 percent in 2010. Most prison employees do not live in Delano and some local residents complain that relatives of inmates who move to Delano raise the crime rate.

Air. The San Joaquin Valley has poor quality air that imposes costs on residents and may deter investors. A Cal State Fullerton study released in November 2008 estimated the cost of not meeting federal clean air standards in the San Joaquin air basin at $1,600 per person a year or $6 billion a year.

The main culprit are high levels of PM 2.5, microscopic particles that lead to premature deaths that the study estimated cost $6.7 million each. Fresno had 75 days in 2007, usually in the fall and winter, for which PM 2.5 levels exceeded federal standards, followed by 68 days in Bakersfield. During the summer months, a brown-gray haze of ozone hangs over the San Joaquin Valley.

Emissions from two million dairy cows have been blamed for poor air quality in the San Joaquin Valley, but a study released in April 2010 found that fermenting cattle feed generated more ozone than animal waste. Silage, usually a mix of corn, alfalfa, almond shells and corn stalks, ferments under black plastic in the sun, and the gases formed during fermentation react in the atmosphere to turn oxygen into ozone. To combat ozone from animal waste, many dairies invest in $2 million methane digesters, but few put their silage under cover. The silage study may lead to regulations requiring farmers to bag their silage.

Population. California added four million residents between 2000 and 2008, an average of 500,000 a year, raising the state's population to 38.1 million (www.dof.ca.gov/research/demographic).

The share of non-Hispanic whites among California residents fell from 47 percent in 2000 to 40 percent in 2008, while the share of Hispanics rose from 32 percent to 37 percent. Hispanics are projected to be the largest group of Californians in 2016, and the majority of California residents in 2042.

Fresno county's population rose from 804,000 to 936,000 between 2000 and 2008. The white share of the county's population fell from 40 to 35 percent, and the Hispanic share rose from 44 to 48 percent. Tulare county's population rose from 369,000 to 43,000 between 2000 and 2008. The white share of the county's population fell from 42 to 35 percent, and the Hispanic share rose from 51 to 58 percent.

Budget. State revenues did not rise as much as expected in spring 2010, increasing the anticipated deficit for 2010-11 to $19 billion. Governor Arnold Schwarzenegger proposed $12 billion in state budget cuts, mostly from welfare and social services, to bring general fund spending down to $83 billion.

Schwarzenegger proposed to reduce spending on the In-Home Supportive Services (IHSS) program that provides aides for the elderly and disabled in their homes by $637 million? the program currently spends $2 billion to serve 440,000 Californians. Previous efforts to reduce the pay of care givers prompted unions to sue and win injunctions that blocked proposed wage cuts; the SEIU represents 250,000 IHSS aides. If California eliminated the IHSS program, the state would lose federal Medicaid money that helps cover the cost; the injunction cited Medicaid rules to block proposed wage cuts.

IHSS is funded with a mix of federal, state and local funds. Counties must pay 35 percent of the cost of home health-care aides up to a cap, set at $12.10 an hour on September 30, 2008, and 100 percent of the cost above $12.10. In 2009, the legislature voted to reduce this cap to $10.10 an hour ($9.50 an hour in wages and 60 cents per hour in benefits), prompting the SEIU suit.

Schwarzenegger also proposed elimination of CalWorks to save $1.6 billion on cash payments to about 1.4 million poor residents, including a million children. Typical among the 580,000 welfare cases is a mother with two children who now receives $694 a month. The governor also proposed saving $1.2 billion by eliminating child care for 142,000 poor children, and eliminating the Healthy Families program, which combines federal and state funds to provide health insurance for about 900,000 low-income children.

The Legislature is controlled by Democrats. Senate Democrats want to raise taxes to eliminate the deficit, while Assembly Democrats want to borrow to close the deficit until economic recovery increases tax revenues; Republicans oppose higher taxes. The UCLA economic forecast expects the state's unemployment rate, 12.4 percent in May 2010, to average 12 percent in 2010.

California's state and local governments have an estimated $325 billion in unfunded pension liabilities, $22,000 for every working adult in the state. To close the gap between tax-supported funds and retirement benefits promised to current public employees, legislation that would reduce pension benefits for new hires is being considered. Under current pension law, state and local employees linked to public security? police officers, firefighters and prison guards? can retire as young as age 50 with a pension nearly equal to their highest salary.

Unions oppose reductions in benefits for current workers and new hires. They argue that public employees have become the villains for problems on Wall Street, and that an economic recovery that lifts investment returns will replenish pension coffers.

California's housing market continues to struggle; construction employment in 2010 is only 60 percent of its level in 2007. A third of the seven million California households with a mortgage have negative equity, a condition known as being underwater.

Scott Kraft, "Aggressive crackdown targets long-entrenched Salinas gangs," Los Angeles Times, June 16, 2010. Garth Stapley, "San Joaquin Valley growth woes intrigue scholars elsewhere," Modesto Bee, May 16, 2010. Alana Semuels, "Can a new prison save a town," Los Angeles Times, May 3, 2010.


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