Water-related job losses could total 40,000+, UC estimates

Issue Date: January 28, 2009
Kate Campbell

As prospects for growing many of the state's traditional food crops dry up, the State Board of Food and Agriculture heard sobering reports from farmers, officials, researchers and community leaders on the current water outlook.

"We had a 35 percent water allocation to State Water Project contractors last year, but there's a high degree of uncertainty for this year," Lester Snow, state Department of Water Resources director, told the board during a meeting last week in Sacramento. He warned that the project is having a hard time holding on to a 15 percent allocation for 2009.

"We're going to fight like hell to get through this drought," he said. "But, if we don't fix the system, we're just going to be back here (in a crisis) every time there's a vagary in the weather pattern or a new species is listed (under the Endangered Species Act)."

DWR is working with economists and watershed experts at the University of California, Davis, to develop a statistical model to predict and quantify the economic impacts of drought and other water supply constraints on California agriculture.

UC Davis agricultural economist Richard Howitt told the board that, based on an 85 percent cut in water deliveries for the State Water Project and the federal Central Valley Project, "We're estimating a 50 percent increase in groundwater pumping, compared to 2005. We're also factoring in the removal of older permanent crops and the use of stress irrigation, as well as the likelihood of water trades."

Based on those assumptions, he said, "The take-home message is that we'll lose $1.15 billion in income to those who live in the Central Valley, a serious loss. The other striking thing is the loss of jobs. We're going to lose 40,000 jobs, and these are job losses for those who can least afford them in the valley's small, rural towns."

He said the model, which is still being constructed and does not include livestock operations, indicates lost revenue for farming of at least $800 million.

"If there are further reductions in water supplies to the east side of the San Joaquin Valley, these losses can go up," Howitt warned. "We cannot predict prices for cross-valley water transfers because they are complicated by the role of second- and third-party water districts."

From the financial perspective, Cornelius Gallagher from Bank of America said there is no ag credit crunch currently but, as farmers in the San Joaquin Valley and throughout the state have shifted to more permanent crops, water plans have become as important to bankers as financial plans.

"With a zero allocation, you'd be looking at a significant increase in the amount of income lost, the amount of jobs lost," Gallagher said. "The bottom line is that there are farmers who've already done their water plans and their budgets and the simple answer about financing is this: no water, no crops, no revenue, no loan.

"It's a simple equation," he said.

(Kate Campbell is an assistant editor of Ag Alert. She may be contacted at kcampbell@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.