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Stimulus Money A Focal Point In California Senate Race

WASHINGTON (AP) -- Republican Senate challenger Carly Fiorina points to California's 12.4 percent unemployment rate to make the case that the federal $814 billion economic stimulus package was a failure.

Democratic Sen. Barbara Boxer is asking voters to take their examination one step further and judge the stimulus based on what the economy would look like without it.

"We would have been in a depression," Boxer said.

The difference of opinion is an important one as voters weigh which candidate is best suited to help the state's economy over the next six years as a U.S. senator.

Interviews with a wide range of stimulus participants in California suggest the program has fallen short of expectations to create long-term jobs. Still, thousands of teachers, construction workers, police officers and firefighters throughout the state have been able to keep working as a result of the billions of dollars that flowed to school districts and local governments over the past two years.

As in other states, most of the 57,000 jobs created or saved in California during the second quarter of 2010 have come in education. Schools in California have received more than $6.5 billion in stimulus funding over the past two years, which has allowed people such as high school English teacher Jennifer Thomas to avoid a pink slip.

"I can't imagine the nightmare that would have happened without that money," said Thomas, a former teacher of the year at a previous employer. "I don't know what miracle the stimulus was supposed to allow, but I couldn't be more grateful."

Gillig Corp., a manufacturer of buses in Hayward, provides one example in which the stimulus program helped generate new business and allowed the company to hire 70 more workers. Even so, long-term prospects are still gloomy for the company, which manufacturers buses for mass transit systems around the country.

"The stimulus improved things at our company. Now that the stimulus is over, things are going to fall apart. And we're already seeing that in our industry," company president Dennis Howard said. "People don't understand how broke the states and cities are."

Economist Stephen Levy said the economy has not recovered as quickly as many had expected because businesses and consumers are reluctant to spend after such a dramatic collapse in the housing and financial markets. He said he doesn't blame the stimulus for that scenario.

"I have the simple explanation that the hole was deeper and the trauma larger," said Levy, director of the Center for Continuing Study of the California Economy in Palo Alto. "It takes time to repair balance sheets and to rebuild confidence. It's a slow process."

When the stimulus was up for debate, the projections from the Obama administration were that unemployment nationally would peak at around 8 percent in 2009. Without the stimulus, the rate would increase to 9.5 percent.

It turns out those projections were too optimistic. The unemployment rate peaked nationally at 10.1 percent in October 2009, and California's has been at 12 percent or above since August 2009.

The Congressional Budget Office, an independent adviser to federal lawmakers, concluded the nation's economic health would have been even worse without the stimulus. The office estimates the stimulus created or saved between 1.3 million and 3.3 million jobs this year. The vast range points to the difficulty of documenting the program's effect on the job market.

The latest state estimates show California was awarded more than $42 billion in stimulus money as of June 30.

The largest chunk of that -- $18.5 billion—went to maintaining safety net programs such as health insurance for the poor, food stamps and checks for the unemployed. Another $13.5 billion is going to education, worker training, and to repair roads and bridges.

Research programs at universities, public transit systems and community health centers also received a sizable share.

Overall, California is expected to receive about $55 billion in federal funding through the stimulus bill. An additional $30 billion is expected to flow to residents and businesses through tax cuts.

Ronald Loveridge, mayor of Riverside and president of the National League of Cities, said California's municipal governments are dealing with the most precipitous drop in revenue since the 1930s. An infusion of federal funding reduced the need for layoffs and even allowed for hiring in certain departments.

As an example, he cited the hiring of 15 police officers in Riverside. The stimulus also allowed the community to undertake some projects that otherwise would have been shelved or delayed, such as construction of a new hotel and office building in downtown Riverside.

"Without it, we would have been worse off," Loveridge said of the legislation.

Still, as he talks to other mayors, there is a sense the stimulus program could have been more effective.

"I think for cities there's some disappointment there wasn't more money for shovel-ready infrastructure projects," Loveridge said.

The stimulus is being used to help fund some huge construction projects in California, such as the new Transbay Terminal in San Francisco, which will serve bus and rail passengers, and the widening of Interstate 405 in Los Angeles.

Still, stimulus dollars have done little to stem the tide of layoffs in the construction industry, said Tom Holsman, chief executive officer for the Associated General Contractors of California. He believes the bill could have been more effective by investing more in infrastructure and in getting the money out sooner.

"Those companies that did benefit from it indicated it wasn't a stimulus. It was really more of a maintenance," Holsman said.

Another example of stimulus funding is found in the city of Long Beach, which received about $14.3 million to pay for improvements to 10 streets, $1.5 million to reduce flooding in a neighborhood, and $4 million to provide part-time jobs to 1,200 local teenagers. It shared another $5 million with other cities that will be used to catch trash before it can drain into the Los Angeles River.

"For us, it was absolutely money we put to good use, and it was money that we would not have otherwise had," said Tom Modica, the city's manager of government affairs. "In that vein, we believe in Long Beach that the stimulus was very helpful."

Other reports lead to skepticism about the effectiveness of the stimulus program. In Los Angeles, the city comptroller reported last month that the city had created or retained 55 jobs after receiving $111 million. The comptroller said bureaucracy prevented money from getting out more quickly to get road projects under way.

The debate over the stimulus bill could go on for years because many construction and energy-related projects will take years to finish—providing fodder for both campaigns. Boxer can claim the program will have a long-term positive effect, while Fiorina can continue to claim it did too little to improve job growth.

"It's too early to judge whether the program was a failure or a great success," said Rick Rice, director of the California Recovery Task Force, which tracks stimulus money spent in California. "Obviously, it was successful as a safety net in providing people with more unemployment checks and food stamps— the kind of basic essentials that people were needing during the depths of this recession."

(© 2010 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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