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Furloughs take toll on workers, businesses
(Sacramento Bee, The (CA) Via Acquire Media NewsEdge) Feb. 7--An unpaid holiday for its largest employer was the last thing Sacramento needed Friday.
Already suffering under 8.7 percent unemployment, the region endured its first day of state-worker furloughs. Most state offices stayed closed, while an appeals court denied a last-ditch union petition to block the furloughs.
The effect was immediate. Traffic was light through much of downtown and midtown Sacramento, where tens of thousands of employees normally congregate, and business was down at numerous restaurants and stores.
"It's tough to be a small business downtown, and for them to take out a Friday," said Ryan Rose, manager at Zocalo restaurant east of the Capitol. Friday is usually his busiest day for lunch, and though business was better than he feared, it was lighter than usual.
Friday showed that no sector of the economy is fail-safe, even one that usually buffers Sacramento against the turmoil of the private sector. The furloughs represent a 10 percent pay cut for 83,000 in the Sacramentan region, and more than 200,000 workers across the state.
Many have been tightening their belts since Gov. Arnold Schwarzenegger issued his order in December.
"We've cut down our cable TV package, canceled Netflix and our cleaning service," said Mike Whiteside, a Caltrans engineer who works at the agency's N Street office. "I want to buy a new computer, but that's out." He's also postponed a major landscaping project.
The unions are continuing to challenge the furloughs' legality in court, even though the 3rd District Court of Appeal rejected an attempt to block Friday's furloughs filed by the California Attorneys, Administrative Law Judges and Hearing Officers in State Employment. The court ruled the attempt came too late.
Schwarzenegger ordered the furloughs to help plug a projected $40 billion budget deficit. Unless blocked by the courts, the furloughs will occur the first and third Friday of every month, through June 2010.
With each idle Friday, the lost economic activity will become increasingly noticeable. Greater Sacramento will experience about $23 million a month in lost wages, according to a Bee analysis.
That's about 0.3 percent of the region's economic output -- not a catastrophic loss, but not meaningless, either. "Added on to everything else in the news we've seen around here, it has an impact," said Jeff Michael, director of business forecasting at the University of the Pacific.
The effect will grow somewhat if, as Schwarzenegger has demanded, the furloughs are extended to the 15,000 employees of the state treasurer, attorney general and other "constitutional officers," many of whom work in Sacramento. That issue is also in court; those employees worked Friday.
Beyond that, the hit to Sacramento's economy will get a lot worse once an additional round of cutbacks ordered by Schwarzenegger -- through layoffs and demotions -- kicks in. But that could be a ways off; the Department of Personnel Administration hasn't yet issued the necessary 120-day notice.
In the meantime, for many Sacramento businesses, the furloughs are bad enough.
"Most of our clients are state workers," said Tahlik, stylist at Mr. Don's Hair Designing, a salon near the Capitol where most of the styling chairs sat empty during lunch hour.
"It feels like a Saturday," said Tahlik, who goes by one name. Business was off a good 25 percent, he said.
Ironically, one of the few agencies that stayed open was the Employment Development Department to process claims for unemployment benefits and other matters. About half of the agency's employees were due to work Friday.
Throughout Sacramento, some restaurateurs tried to make the best of things. Rubicon Brewing Co., a brewpub a few blocks east of the Capitol, offered a 10 percent discount to furloughed workers. The place was about three-quarters full at lunch.
"Maybe we'll create a few new customers with this (promotion), and have some fun," said owner Glynn Phillips.
But the uncertainty surrounding the state budget crisis wasn't helping anyone's nerves. "If people don't have confidence in the future -- they don't spend money," said Lloyd Harvego, owner of the Firehouse Restaurant and chairman of the nonprofit Downtown Sacramento Partnership.
The state accounts for 9 percent of the region's work force. That doesn't include state college and university employees, who are exempt from the furloughs. Even without them, the state employs more Sacramentans than anyone else. About 30 percent of all state employees live in the four-county area, which means the region has a lot to lose as the budget impasse drags on.
"Sacramento will be the victim, the largest victim," said Rick Niello, president of the Niello Co. chain of high-end car dealerships in the region. "It's going to have a negative impact." Niello's brother, Roger, who is Niello Co.'s corporate secretary, is a Republican assemblyman.
Some businesses reported a good day. Zanzibar Trading Co., a midtown gift and jewelry shop, had a rush of furloughed workers stop by, said co-owner Scott Farrell. Many bought gifts for themselves.
"Some said they needed shopping therapy," he said.
Overall, the loss of income from the furloughs is small compared to the effect of the 22,400 jobs that have disappeared in greater Sacramento in the past year, said economist Suzanne O'Keefe of California State University, Sacramento.
And although fewer dollars were circulating in downtown and midtown, some of the workers surely spent money somewhere, she said. O'Keefe's husband, a furloughed employee of the Commission on Peace Officers Standards and Training, went out for coffee first thing Friday morning.
"Who knows how much money he'll spend by the end of the day?" she said with a laugh.
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Call The Bee's Dale Kasler at (916)321-1066. Read his blog on the economy, Home Front, at www.sacbee.com/blogs. Bee staff writers Jon Ortiz and Darrell Smith contributed to this report.
To see more of The Sacramento Bee, or to subscribe to the newspaper, go to http://www.sacbee.com/.
Copyright (c) 2009, The Sacramento Bee, Calif.
Distributed by McClatchy-Tribune Information Services.
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