455.Paper.Peter Qu.UC Budget Cuts.AUT08

Nearlysixouttenjobscreatedincaliforniabetween2000and20

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Unformatted text preview: in
early
2005
and
began
to
decline
in
2006
(United
States
 housing
bubble,
2008).

Since
majority
of
the
mortgages
have
been
repackaged
and
sold
 worldwide
as
asset‐backed
securities,
the
subsequent
decline
in
house
price
and
rise
in
 mortgage
default
rate
have
caused
rapid
depreciation
in
the
value
of
securitized
mortgages
 (Financial
crisis
of
2007–2008,
2008).

What
started
as
a
loss
on
confidence
in
the
securitized
 mortgages,
involved
into
a
global
scale
credit
crunch
and
liquidity
crisis
(Financial
crisis
of
2007– 2008,
2008).

By
October
2008,
it
has
been
speculated
that
U.S.
and
European
financial
 institutions
have
lost
an
estimated
of
$2.8
trillion
(Coen,
2008).


 The
damage
was
not
limited
to
financial
institution
and
it
soon
spilled
over
to
the
Main
Street.

 California
was
hit
especially
hard.

The
State
of
California
has
benefited
from
the
housing
bubble
 in
the
early
2000s.

Nearly
six
out
ten
jobs
created
in
California
between
2000
and
2005
were
in
 housing‐related
industries
(The
California
Budget
Project,
2008).

After
the
bust
of
the
housing
 bubble,
unemployment
rate
in
California
soon
rose
to
7.7%
as
of
August,
2008
(Abowd,
2008).

 The
loss
in
revenue
and
rise
in
employment
have
caused
a
rapidly
widening
budget
deficit
in
the
 State
of
California.

When
Governor
Schwarzenegger
first
proposed
the
2008/2009
state
budget
 on
January
10,
2008,
the
budget
gap
was
projected
to
be
$14.5
billion
(Schwarzenegger,
 Governor’s
Budget
Summary
2008‐09,
2008).

By
the
time
Governor
Schwarzenegger
proposed
a
 revised
version
of
the
b...
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