With 2.3 million Californians out of work, the California legislature should take care to minimize harm to the State’s economy as it works to close an estimated $20 billion budget gap. When it comes to jobs and the economy, not all budget solutions are equal. Social service and health programs like In-Home Supportive Services (IHSS), Medi-Cal Healthy Families and CalWORKS bring in significant federal matching funds. Low-income residents spend a greater share of their earnings and spend more locally than higher income residents, so programs that provide income to lower-income families will have a greater multiplier effect than those that improve income of higher earning families.
The following chart from our recent policy brief provides a good picture of the differences in job outcomes from various budget solutions.
The state cannot afford to get this wrong.
The full report can be found here. Leighton Ku makes a related point about the stimulus effect of federal health care matches in Health Affairs blog here.