More harm than good in state cuts

California Gov. Arnold Schwarzenegger shows how the state receives much of its revenues from capital gains tax as he called state legislators to a special session to address budget concerns in November.

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Tess Vigeland: Today's headline here in Southern California is not one we often see: roads close due to heavy snow. Well it's not the only freeze afflicting the state; today California put billions of dollars of financing on ice for thousands of road, levy and school construction projects. It's a story that's playing out across the country as a majority of states are facing massive budget deficits. Unlike the federal government, states have to balance their budgets -- but the cuts needed to make that happen may only make things worse. Marketplace's Sam Eaton has that story.


Sam Eaton: It's the exact opposite of an economic stimulus plan: California Alliance for Jobs director Jim Earp says the billions of dollars California is cutting from public works projects boils down to one thing. Job cuts. More than two hundred thousand of them.

Earp: It will have a devastating impact on California's economy.

California may not have a choice. The credit market has made bonds hard to come by, leaving a $15 billion hole in the state budget. The casualties are everything forms emergency repairs on schools to new carpool lanes on freeways. But that doesn't mean these projects are dead on arrival. Many states hope Obama's economic stimulus package will come to the rescue. The problem with that, says Earp, is that it diverts funds from economic stimulus to maintaining the status quo.

Earp: What your really doing is you're not creating new jobs your just changing the bank that's paying for the jobs.

And changing the intended nature of those jobs. Obama has promised to use the economic stimulus to launch a green job revolution. But Colin Peppard with Friends of the Earth says if those funds are diverted to so-called "shovel ready" projects, there may be nothing green about it.

Colin Peppard: Just because a project is ready to be built doesn't mean it should be built. Maybe some of these projects are actually lying on the cutting room floor for a reason.

At least 37 states are grappling with budget gaps totaling about $66 billion. And Peppard says states have identified a wish list of projects they hope the federal government will fund. But most of those, he says, have to do with expanding highways to make room for more cars.

In Los Angeles, I'm Sam Eaton for Marketplace.

About the author

Sam Eaton is an independent radio and television journalist. His reporting on complex environmental issues from climate change to population growth has taken him all over the United States and the world.

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