States Consider Jobs Programs to Accelerate Lagging Productivity

IN the 1930s, the United States used public works jobs to help pull the country out of the Great Depression. In the 1990s, the idea has become voguish to bootstrap the country out of the "Great Recession."

Iowa Sen. Tom Harkin (D) has already made rebuilding the nation's roads, bridges, and sewers a centerpiece of his would-be presidential portfolio. Now a number of cities and states are proposing smaller versions to spur development and take people off unemployment rolls.

In California, leaders on both sides of the aisle are pushing $6 billion bond packages that would put people to work constructing schools, prisons, libraries, and park facilities - though with slightly different ideas and purposes in mind.

In New York, Gov. Mario Cuomo proposes an $800 million bond act to resuscitate the economy. New Jersey Gov. James Florio is making public works a part of his job-creation plan. Boston Mayor Raymond Flynn wants to spend $100 million renovating roads, parks, and schools.

"These initiatives are not going to pull states out of recession by themselves," says Stephen Gold, a fiscal expert at the Rockefeller Institute in Albany, N.Y. "But when a governor wants to do something and can't raise taxes, borrowing money is the best option."

How much impact can public works initiatives have? Analysts say it depends on the amount of money being spent and the nature of the projects. But most agree the number of jobs that can be created is modest and not immediate. Even so, such programs can help rebuild public infrastructure, and, in tough economic times, proponents say putting even limited numbers of people to work is worth the investment.

"The money has to be spent now - if there is any lag at all it is irrelevant as far as the recession goes," says Robert Arnold, a senior economist with the Center for the Continuing Study of the California Economy in Palo Alto, Calif. "But it is positive in the long term" because investment in infrastructure will help improve productivity.

California's proposed plans highlight some of the limits and potential of such programs. As befits a state like California, the public construction programs being talked about here are among the largest.

Gov. Pete Wilson (R) proposes $6 billion in new bonds for construction of such things as prisons, schools, environmental projects, and acquisition of park lands. A proposal by Democrats in the state Senate, which sponsors say is more job-oriented than the governor's, would spend the same amount but on different projects - the biggest difference being a hefty allotment for housing construction.

Both bond packages would have to be approved by the voters, which is where the problems begin. In November 1990, when a record $5.4 billion in general obligation bonds were on the ballot, all were rejected except one: an $800 million issue for school construction. Earlier that year, though, voters did approve $4 billion in new bonds.

Proponents think the measures would pass this time around, given the projects they would fund and the need to stir the economy. Democrats want to put $5 billion in bonds on the June ballot to get a quick stimulus.

Senate aides say these notes, coupled with a $1 billion transportation measure already on the November ballot, would create 100,000 jobs over 18 months.

The governor's office believes the Democrats are up to their old political tricks and promising too much. It doesn't see the package as a recession cure-all but a long-term investment in schools, highways, and other infrastructure.

"It is not a quick fix for unemployment," says Wilson spokesman Bill Livingstone. "It is an important investment in California's health."

Bonds don't become bricks and paychecks overnight. State Treasurer Kathleen Brown cautions that public-works investments "take time to work their way through the political process and into the economy."

The state can't go to the market with bonds until projects are under way. Some require environmental impact statements. Bidding processes are complex. California currently has a $9 billion backlog of bonds that have been approved by voters but not yet sold. Nor are they free: The state is paying $637 million a year in interest on one floated bond.

Senate leader David Roberti says projects could be accelerated by paying for start-up costs with the state's cash reserves before bonds are sold.

Aides say there are $3 billion in school- and $150 million in library-construction projects ready to go.

There is also a push to keep jobs at home. Senate Democrats want to give California companies an advantage in bidding for state construction contracts and ensure that at least half the jobs go to state residents.

In Los Angeles, a testy dispute has broken out over the recent awarding of a rail contract for the city's mass transit system to a Japanese company instead of an Idaho firm, which came in with a lower bid. Some city and county officials are fighting both the technology chosen for the segment - an automated and driverless system - and awarding of the contract for the train cars to Sumitomo Corporation of America.