A Long View for State’s Economy : Planning one year at a time just isn’t enough

Gov. Pete Wilson and the Legislature appear to be on the verge of completing the state budget--on time for a change. But it is a nightmarish budget, full of Draconian cuts, especially for local governments. Few people are happy with the plan, which is designed primarily to enable the state to squeeze through the 1993-94 fiscal year.

But at least the budget process will not drag on through the summer; that’s good. On the other hand, the budget is a stopgap measure only; that’s not good.

It would have been better if Sacramento had adopted a multiyear budget, but even with that out of the picture the state still must have a multiyear perspective on solving its problems. Two new economic reports paint a dismal economic situation: no rebound, continued job losses, declining property values and a manufacturing slump until at least mid-1994. That’s why the state must develop a well-conceived long-haul strategy for dealing with its economic challenges.

The Governor’s Council of Economic Advisers: In February Gov. Wilson created this panel, chaired by George P. Shultz, former U.S. secretary of state and secretary of the Treasury who now is a senior fellow at the Hoover Institution at Stanford University. The 16-member council’s assigned task is to come up with recommendations on how to make California more competitive. The governor, who met with panel members Thursday, should instruct the council to expedite its work and formulate proactive measures to get the economy moving and to restore confidence among Californians.

Devising strategy for a changing state: In the Federal Reserve Board’s latest report on economic activity in 12 regions, California lags behind most other areas of the country, which are growing at a slow-to-moderate pace. Sales in California remain flat, manufacturing is in a serious slump and activity in high-tech electronics is down.

As if that were not bad enough, the UCLA Business Forecasting Group notes that the state economy’s seeming inability to rebound leaves it in a precarious position just as a new cause of job loss is emerging--21,000 jobs cut in state and local government. The loss of these jobs is compounded by a lack of indications of recovery in housing and manufacturing. Undercutting demand for housing and contributing to a decline in property values is a drop-off in migration into California. In the late 1980s, 350,000 to 400,000 more people came to California annually than left it. UCLA estimates that the net increase is now down to about 100,000 annually--mostly immigrants from abroad.

Coming up with a long-range plan: Even after the recession is over, California’s changing demographics and changing industries will put new demands on state services and revenues. Sacramento needs a long-term economic strategy.