Impact on State’s Economy May Be Less Than Feared : Effects: Shutdowns will take place gradually. Retraining programs and efforts to convert facilities to civilian functions could soften the blow.

The impending round of proposed military base closings looms as the latest dagger threatening California’s beleaguered economy, costing billions of dollars and tens of thousands of jobs when the state is in distress.

The news could further erode public confidence about the future and, in particular, hammer communities that have relied on the military for their economic lifeblood.

But for all that, some economists said Friday that the fear over military cutbacks may exaggerate the economic perils. Shutting the bases could take years, and, as a result, would have only a limited effect on the state’s recession.

“I don’t know why there’s this impression that the bases are going to be closed overnight and thousands of people are going to be out of jobs,” said Robert K. Arnold, an economist at the Center for Continuing Study of the California Economy in Palo Alto. “This is a long process.”

Key unresolved issues will greatly affect how much the impending closures harm the state’s weakened economy now--and later this decade when they are implemented.

These include timing: when the shutdowns begin and how fast they are accomplished. Retraining programs, if effective, could help cushion the blow. Moreover, the speed and success of efforts to convert military facilities to new, civilian functions will have a big effect on how communities experience the transition.

“People shouldn’t be overly frightened by it,” said David Hensley, director of the UCLA Business Forecasting Project, adding that the California economy is likely to be stronger by the time the cuts fully kick in, “and we’ll be better positioned to absorb them.”

Clearly, the planned cutbacks are another minus for California, which has a 9.8% unemployment rate, the largest among major states.

But much remains unclear.

Gov. Pete Wilson’s office of planning and research projected that the cutbacks, including closure of eight major facilities, would cost the state up to 156,000 jobs, directly and indirectly. The recession has cost the state 800,000 jobs by some estimates.

However, a military expansion in San Diego and elsewhere could offset the loss, perhaps by several thousand jobs, gains that the governor’s office did not include in its arithmetic.

Some economists assume that each job lost on a base is matched by one job lost outside the base; Wilson’s office calculated that each on-base loss could prompt between 1.2 and two jobs lost off the base.

Yet if there is dispute on the numbers, most analysts agree that the announcements can affect the economy instantly, discouraging investment that might otherwise take place.

Entrepreneurs may choose to hold off plans near the bases. Some residents could decide to relocate in search of better opportunities.

“If you were thinking about building a new pizza restaurant near one of these bases, you’d probably think again now,” said Ted Gibson, an economist with the California Department of Finance.

“If people have opportunities elsewhere, they’ll tend to drift off. They may even leave the state. Who knows?”

When the closures occur, a whole range of enterprises that relied on the bases will be hurt, ranging from suppliers of boots to taverns to makers of munitions.

It is far less clear how much the localized distress will radiate throughout the state economy. California has about 12 million non-farm jobs.

Most forecasters expect the state’s lengthy recession to end by next year, leading to a new period of job growth and expansion by business. But if California is still struggling in recession in the mid-1990s, or has lapsed into a new downturn, the economy will have far less resilience and the cuts could be more punishing.

“If California is back on track by 1995 and most of its industries have recovered, then this could be sort of a blip,” said Adrian R. Sanchez, a specialist on the California economy at First Interstate Bancorp. “But if the economy continues to be slow, then it could aggravate things.”

Now, Sanchez foresees the state economy “moving sideways” in 1993 despite continued job losses in Southern California, especially in manufacturing, construction, and wholesale and retail trade.

The transition of the military bases to peacetime functions is likely to be less turbulent than some may realize because it will be done gradually, Arnold said. “The individuals aren’t going to be given a week or two weeks’ notice, and the communities aren’t going to be impacted by massive cutbacks in a short period of time,” he said.

UCLA’s Hensley noted that different military installations may have greatly different prospects for new uses, so it is difficult to generalize about the overall economic fallout.

“There probably are groups out there licking their chops to get their hands on some of this property,” Hensley said. On the other hand, he added, communities that have less-obvious alternative uses for the property could be in for rocky times.

Economists also pointed out that defense spending accounts for 5% to 8% of the California economy, perhaps half of its peak.

But when reminded that many analysts underestimated the fallout from recent defense cutbacks in California, one economist acknowledged that all projections have their risks.

“I think many economists missed the boat” on the disruptions brought by the defense build-down in California, Sanchez said. “And it’s possible that these cuts may have a greater impact than what we’re saying. But that’s not my feeling today.”