State Budget Crisis Slows Sacramento's Economic Recovery

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(Sacramento, CA)
Thursday, July 9, 2009

For better or worse, Sacramento is a government town.  A full third of the region’s million jobs are in the public sector.  So when budget crises force government layoffs,furloughs and other cuts, the local economy feels the heat.  As we get set for the return of “Furlough Fridays” this Friday, we asked Sanjay Varshney, the dean of the business school at Sacramento State, what the state budget crisis will do to the Sacramento area’s economy.

Click the LISTEN button to hear the interview.
Varshney says Sacramento normally benefits from having a third of its workforce in the public sector – but not now.
Varshney: “Usually if the government can hold stable, that ends up being a cushion – and that becomes a huge positive for the region.  But when the government starts laying off in big numbers and starts doing furloughs in big numbers, the very advantage we thought we had by having a government presence in Sacramento is now becoming a huge negative for us.” 
Sacramento was among the earliest cities to enter the recession – and some economists, including Varshney, figured it would also be quicker to bounce back.  But Varshney says the state’s fiscal crisis has changed that equation.  He now expects Sacramento to recover from the recession more slowly than the rest of California.
Varshney also projects the region’s unemployment rate will rise from the current 11 percent to 13-and-a-half percent by early next year.