$30b budget hole leaves CA firms anxious

SACRAMENTO: California's multibillion-dollar budget woes are creating uncertainty for PR and public affairs firms in the state capital.

SACRAMENTO: California's multibillion-dollar budget woes are creating uncertainty for PR and public affairs firms in the state capital.

Facing a $30 billion budget gap, Governor Gray Davis has called on all state agencies and departments to cut back on non-essential spending, including PR. How much damage this will do to local PR firms remains to be seen, as state departments begin to look at their own budgets.

"That's the million-dollar question," said Robert Deen, managing director of Ogilvy Public Relations Worldwide's Sacramento office. "We're checking in with existing clients. Everybody is waiting. There's a lot of concern.

We've already had one contract frozen, but not cancelled. It's about $75,000 with the California Medical Board. But it could just as easily have been one of the big ones."

John Segale, SVP and GM of Fleishman-Hillard's Sacramento office, said PR is typically sacrificed whenever there is a budget downturn.

"The communications contracts are the first to be thrown overboard as the state tries to right its ship," said Segale. "If you have a state contract, and you're not awake at night worrying about it, then you're not in tune with what's going on in Sacramento."

But Jami Warner, EVP and GM for Edelman in Sacramento, said it's just too early to tell how the budget constraints will impact PR firms, as state agencies and departments have yet to see how much their budgets will be cut.

However, some agencies are finding a silver lining in the budget doldrums.

Many special-interest groups will need PR work when they lobby politicians to make sure funding for their departments is not cut heavily, said Jose Hermocillo, SVP and MD of APCO Worldwide in Sacramento.

"The reality is that interest groups will be threatened, by either having services cut or new fees or taxes imposed on them," said Hermocillo. "The alcohol industry in particular could find itself facing new taxes.

"Local governments and healthcare interests, everyone, will have something at stake," Hermocillo added. "And they are going to want their concerns heard."

Deen said it's ironic that state PR contracts are so unstable right now, because typically, state contracts are a very reliable and stable source of work.

"They get their money budgeted in advance," said Deen. "It's extremely rare to have a contract cancelled."

"For many, (PR) is an easy target for the budget axe, especially when compared to funding schools or keeping inmates in jail," added Segale.

"The PR is far better in Sacramento than it used to be. The state has become much more savvy in terms of what it wants. It's a shame that the progress that has been made will be lost."

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