California’s Employment Dysfunction

The Associated Press reports:

California’s unemployment dipped slightly in December to 11.1 percent, down two-tenths of a percent from the previous month.

Nonfarm payroll jobs increased by 10,700 last month, for a total gain of 240,300 jobs in 2011…

California remains above the national jobless rate of 8.5 percent.

California’s unemployment rate was near 12 percent for months and has been above 11 percent since 2009.

The state’s rate fell to 11.3 percent in November, the lowest since May 2009.

Given California’s sustained period of high unemployment, and its reputation for unusually poor governance, marginal improvements like this offer little consolation to its residents. However, the Bay Area Council Economic Institute recently published a report that offers substantive solutions for the Golden State that show another economy is possible if policymakers are willing to partner with the private sector.

The full report, entitled Accelerating Job Creation in California Through Infrastructure Investment: Opportunities for Infrastructure Asset Formation and Job Creation Using Public-Private Partnership Procurement Methods, is available online here.

The report is a continuation of the Bay Area Council Economic Institute’s five-year focus on identifying global infrastructure best practices and applying them to California with respect to the unique environment, challenges, and opportunities there. The report specifically seeks to focus on leveraging infrastructure asset formation to stimulate near- and long-term job growth and maximize productivity in infrastructure assets.

This post does not constitute a wholesale endorsement of the report, however there are several vitally important takeaways:

  • “As California confronts a sustained budget crisis and high unemployment, the quality and state of repair of its infrastructure does not correspond to its population density or the size of its economy.” (p. 5)
  • “In 2006, the Bay Area Council Economic Institute calculated that California has an unfunded infrastructure shortfall of between $527 billion and $737 billion. Consistent with that finding, the Nicholas Berggruen Institute puts the state’s infrastructure deficit at $765 billion.” (p. 5-6)
  • “Calculations by the Bay Area Council Economic Institute for construction of new non-residential structures in California indicate that $1 billion in infrastructure investment creates approximately 13,468 jobs. This suggests the strong potential of infrastructure investment as a vehicle for job creation in the state. Infrastructure investment of between $250 and $750 billion could create an estimated 3.4 million to 10.1 million jobs.” (p. 6)
  • “California does not need to invent a new concept for infrastructure investment to attain the results described above. There are two recent projects in California that illustrate the benefits of the (public-private partnership) approach: the Long Beach Courthouse sponsored by the Judicial Council of California Administrative Office of the Courts, and the Presidio Parkway sponsored by the California Department of Transportation.” (p. 10)
  • “… California’s infrastructure procurement methods and processes have not been reviewed or modernized in decades. SB 4 (2009) opened the door for the expanded use of private capital and (public-private partnership) methods for state transportation projects, but it did not create institutional mechanisms that would firmly embed alternative procurement in the state’s decision-making processes, nor did it promote investment in other important infrastructure. While California was once a world leader in infrastructure asset formation, the absence of modernization and innovation in recent times leaves it far behind the global best practice standard of performance.” (p. 12)

The authors go on to list nine actionable prescriptions for state policymakers:

  1. The administration should recognize that the state must be open to alternative methods for infrastructure delivery, and the Governor should endorse P3 as an important tool in California’s strategy to rebuild infrastructure and create jobs… (p. 17);
  2. Create a comprehensive infrastructure plan for California… (p.17);
  3. Create an Infrastructure Procurement Center of Expertise… (p. 18);
  4. Leverage Existing Programs and Capacity… (p. 19);
  5. Establish a public-private sector comparator process… (p. 19);
  6. Develop an Availability Payment Standard for California… (p.19)
  7. Develop a Labor Protection Standard… (p. 20);
  8. Adopt an Infrastructure Life-cycle Planning and Budgeting Process… (p. 20); and
  9. Reform the California Environmental Quality Act… (p. 20).

These sorts of common sense reform initiatives are increasingly common in the U.S. and around the world, and it’s time for California policymakers join the party. For more on this topic, explore Reason Foundation’s Highways Toll Roads and Public-Private Partnerships Research Archive and California Research Archive.