4-day week for state workers likely to slow area's recovery

Published: Friday, May. 25, 2012 - 12:00 am | Page 1A
Last Modified: Tuesday, Feb. 26, 2013 - 8:13 pm

Elias Silhi, owner of Tony's Deli in downtown Sacramento, has unpleasant memories of "furlough Fridays," and gets nervous imagining what an encore would look like.

"It's a lot like Dodge City," said Silhi, whose eatery sits two blocks north of the Capitol. "The street is empty. The parking lot is empty. Business goes down 50 percent."

A little more than a year after furloughs ended for state workers, a mini revival is being planned: a four-day workweek, proposed by Gov. Jerry Brown as a means of nibbling away at the deficit.

Just like before, Sacramento would lose more than any other California community. Brown's plan would cut pay by 5 percent at the region's single largest employer. About $230 million a year in wages would disappear, just as Sacramento's economy is finally starting to come back.

"I don't think it's going to completely derail the recovery that's been emerging in the region," said economist Jeff Michael of the University of the Pacific. "But there's not any doubt it's a significant decline in income."

In terms of lost wages, Brown's plan isn't as dramatic as the three-times-a-month furloughs imposed by former Gov. Arnold Schwarzenegger starting in 2009. Most workers would put in 9.5 hours a day, four days a week. They'd lose two hours a week, or 5 percent of their pay.

Schwarzenegger's furloughs reduced state worker pay by around 14 percent. Furloughs began in February 2009 and ended for many workers in November 2010; they lasted until April 2011 for some employees.

Brown has said he wants to negotiate terms of the reduced workweek with public employee unions. The largest union, Local 1000 of the Service Employees International Union, said Thursday it will bargain with the Democratic governor.

Predicting the impact of the plan on the economy is hard. Workers still would get pay increases that already have been negotiated, just as they did during furloughs. That would blunt some of the impact.

Still, there would be a loss. Excluding the Legislature and public university systems, which are not affected under the proposal, state workers in the Sacramento region earned $4.6 billion last year. Cutting their pay by 5 percent would lower wages in the region by almost $1 million per business day, according to a Bee analysis of data from the state controller's office.

That would represent two-tenths of 1 percent of the region's annual economic output – not a huge slice, but enough to take some of the edge off the emerging recovery.

"Things are improving, but at a snail's pace," said Mike Heller, a real estate developer with projects in the central city. "I could see the (reduced workweek) being a setback to any little momentum we have here."

Bonnie Hinrichsen, who works at the Department of Corrections complex at 16th and S streets, said the governor's proposal would cost her $300 a month. She'd get by, but would feel the difference.

"I can still pay my bills," said Hinrichsen, a state worker for 22 years. "I just won't have the spending capacity.

"This whole community suffers greatly," she added, gesturing toward a small cluster of nearby restaurants on 16th. "All the restaurants, Safeway down the street … gas stations – everything within a 10-block radius of this place."

Given the slow pace of economic recovery, even a relatively small reduction in wages would be felt. Although the Sacramento unemployment rate fell sharply in April to 10.5 percent, job creation has been anemic. There were 100 fewer Sacramentans holding payroll jobs in April than a year ago.

Beyond the impact on paychecks, the four-day workweek could damage consumer confidence. That could hurt purchases of big-ticket items, such as houses.

"We're so state-employment heavy," said Doug Covill of Coldwell Banker real estate. Some type of state cutback "is something I felt was always hanging over our head."

The housing market is improving but is still "kind of fragile," he said. Brown's plan "definitely doesn't help it any."

His anxiety provides a reminder that Sacramento, despite efforts to diversify, remains at heart a government town.

While the ranks have thinned slightly the past four years, the state still employs 81,500 workers in the four-county area, according to the Employment Development Department. That's 10 percent of all workers, more than any other industry.

The figures don't include employees of UC Davis or CSU Sacramento, which aren't affected by Brown's plan.

When the state of Utah went to a four-day workweek in 2008, businesses "definitely felt the impact," said Jason Mathis of Salt Lake City's Downtown Alliance. "People definitely noticed it."

Utah reverted to a five-day workweek last year.

Some California state agencies might reduce hours without switching to a four-day workweek. The California Public Employees' Retirement System, for instance, said it is willing to "achieve the necessary cost savings" but can't close its doors for a day.

"The markets do not close on Fridays," CalPERS Chief Executive Anne Stausboll said through a spokesman.

But most agencies would likely close on Mondays or Fridays. That would leave scores of central city shops and restaurants hungry for customers.

"It will definitely affect midtown businesses like ours," said Scott Farrell, co-owner of Zanzibar Trading Co.

The gift shop, three blocks east of Capitol Park, depends heavily on state workers. Furloughs led to "an insane drop-off" in business, Farrell said, and Zanzibar has never really recovered.

"Now we see our state clients, but we see them every three or four months where we used to see them every week," he said.

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