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Press Release · January 6, 2009

Economic Recovery Task Force Calls on State’s Leaders To Act with Unity, Urgency on a Plan For Federal Dollars

Bipartisan Group of Experts Offers Guidance on Response to Historic Crisis

SAN FRANCISCO, California, January 6, 2009 — California has an unprecedented opportunity to take bold steps toward economic recovery but only if its elected leaders can unite to present a clear plan for using federal dollars, according to a group of state leaders assembled by the Public Policy Institute of California.

The California Economic Recovery Task Force, established at the request of the bipartisan leadership of the state legislature, was diverse in its membership but united in its message: California faces a crisis of historic proportions that requires its elected leaders to make a cogent case for the state’s needs in Washington, develop projects that support long-term growth, and balance the state budget.

“This distinguished group was made up of Republicans and Democrats, business and labor, and represented the major regions of the state,” said Mark Baldassare, PPIC president and CEO, who presided at the group’s one-day meeting. “Despite their differences, they reached consensus quickly and cordially. In these extraordinary times, we need our state’s leaders to do the same.”

PPIC began assembling the 12-member task force in November, consulted with its members in early December, and convened the meeting on December 17 with the goal of providing recommendations to legislative leaders by the end of the year. The task force reached consensus on three central principles for undertaking economic recovery:

Plan for federal dollars. Task force members warned that failure to develop a comprehensive plan for using federal funds on state infrastructure projects and budget needs would severely limit the state’s economic recovery. The need is particularly pressing, they said, because other states will have their own competing plans. Members emphasized the need to stem housing foreclosures and specifically mentioned the need for federal intervention to reset mortgages for homeowners who will face unaffordable interest rate increases in coming years. Members said federal action was needed to unlock credit markets for state and local governments—and for the small businesses and start-up companies that fuel growth in California’s economy.

Set the stage for long-term growth. California can be a national leader in developing infrastructure projects that support environmental goals if leaders focus on long-term growth rather than stop-gap measures, task force members said. They were unified in opposing action that would hurt the state’s environmental leadership role or harm the health and safety of its residents. They would not delay the regulation of diesel truck emissions, for example, despite its short-term negative economic impact. Specifically, the group felt the state should:

  • Prioritize infrastructure and “green” projects. The task force recommended that the state consider infrastructure investment in two phases. The first would consist of projects, such as road repair, that are ready to begin as soon as possible, use existing funds, and would create jobs today. The second would encompass projects that take more time to plan but could raise California’s long-term productivity and help the state achieve environmental goals—for example, building a smart electricity grid.
  • Consider ways to streamline state regulations. The group said leaders need to find ways to spend faster on infrastructure projects and develop more flexibility in the system. For instance, the state could benefit from exploring best practices for “design-build” construction contracts. Most states allow these contracts, which allow a single company to both design and build a project.
  • Invest in education. Task force members emphasized the need for investing in education facilities and programs at all levels in light of the growing gap between the need for college-educated workers and the likely supply of these workers.

Balance the budget. The primary mandate of the task force was to focus on economic recovery, but members were united in the view that steps to end the budget crisis should be considered part of an economic recovery program. They said the state’s elected leaders must balance the budget even though measures to do so run counter to economic recovery. Specifically, they recommended that leaders:

  • Choose budget-balancing actions that do the least harm. Members agreed that such actions would need to take the form of tax increases and spending cuts but, given the depth of the current downturn, specific fiscal actions should be considered in light of the overall goal of economic recovery. Tax increases should be broad and temporary, with the smallest possible negative effect on new consumer and business spending. Spending cuts should have the smallest possible negative effect on overall employment.
  • Pursue permanent, fundamental budget reform. The group agreed that annual state budget crises pose a serious threat to the state’s long-term economic stability and emphasized the critical importance of the Commission for the 21st Century Economy, appointed by Governor Arnold Schwarzenegger and Assembly Speaker Karen Bass to consider ways to restructure the tax system.
  • Make a stronger case to use federal funds to help close the current budget gap. A grant from the federal government would reduce the tax increases or spending cuts that the state will otherwise have to make.

PPIC set up the California Economic Recovery Task Force at the request of Senate President pro Tem Darrell Steinberg with the active support of Senate Republican Leader Dave Cogdill, Assembly Speaker Karen Bass, and Assembly Republican Leader Mike Villines.

PPIC selected bipartisan leaders with experience in both the private and public sectors to co-chair the task force: Kathleen Brown, senior advisor and head of public finance for the west region at Goldman, Sachs & Co. and former California state treasurer, and Daniel Young, president of the Irvine Community Development Company and a former mayor of Santa Ana. The other members were:

  • Alan Auerbach, director of the Robert D. Burch Center for Tax Policy and Public Finance at the University of California, Berkeley
  • Ruben Barrales, president and CEO of the San Diego Regional Chamber of Commerce and former deputy assistant to President George W. Bush
  • John Bryson, senior advisor for infrastructure initiative at Kohlberg Kravis Roberts & Co. (KKR), former chairman and CEO of Edison International, and former president of the California Public Utilities Commission
  • Maria Contreras-Sweet, chair of Promerica Bank and former California secretary of business, transportation, and housing
  • Ed Grier, president of Disneyland Resort
  • John Harris, president and CEO of Harris Ranch
  • James W. Head, director of programs at The San Francisco Foundation and commissioner for the Port of Oakland
  • Noel Perry, founder of the nonprofit Next 10 and founder of the venture capital firm Baccharis Capital Inc.
  • Courtni Pugh, executive director of the Service Employees International Union (SEIU) California State Council
  • Fred Ruiz, chairman of Ruiz Foods and a regent of the University of California

ABOUT PPIC

The Public Policy Institute of California is a private, nonprofit organization dedicated to informing and improving public policy in California through independent, objective, nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett. PPIC does not take or support positions on any ballot measure or on any local, state, or federal legislation, nor does it endorse, support, or oppose any political parties or candidates for public office.