The best way for California to secure its fiscal future is for policy-makers to embrace an economic stimulus plan that achieves economic growth – a strategy that has worked before and will work again.

This year’s budget shortfall has grown to an unprecedented $24 billion, more than one-fourth of the entire budget itself. To date, budget writers are considering a brew of spending cuts, tax increases and borrowing to at least get us through the year.

But seeking to “get through” these tough times is not enough. We cannot cut, beg, tax and borrow our way to prosperity. Only economic growth will restore California’s fiscal vitality.

This year, California has an opportunity to tackle the problem of future deficits and put millions of workers on a path to a better life. Will we seize it?

One economic strategy that has worked here and in other states is to reduce the tax burden on employers and job creators; specifically, reducing the sales tax on the purchase of new manufacturing equipment, a tax paid only in Wyoming, South Dakota, Alabama and California.

I am often asked to substantiate the economic benefit such a reform would bring.  Here it is.

The Santa Monica-based Milken Institute has performed a dynamic economic analysis that is the most comprehensive study of this issue to date. It confirms that reducing the tax burden on business would bring about new hiring, new growth, new productivity and, finally, new revenue to the state.

As the report puts it: “Exempting manufacturing equipment from the 5 cent sales tax results in an average of 50,000 new jobs per year over the next 10 years, of which 14,000 are created in the manufacturing sector.” The stimulus effect of a 5-cent sales tax reduction grows total state tax revenues by an average of nearly $50 million per year.

With all of the head-scratching going on in the State Capitol, this is a reform well within reach, and the kind of step that California could take to help insure against future shortfalls.

Here’s why:

Manufacturing represents 13 percent of California’s employment base and produces 14 percent of its gross state product. In addition, high-tech manufacturing (computers, communications equipment, electronic components, etc.) accounts for almost 40 percent of state manufacturing jobs. Every manufacturing job creates an additional 3.5 jobs in the economy, a higher multiple than any other business sector.

The manufacturing sector has not yet begun to recover from the recent economic downturn. While overall employment numbers are showing signs of recovery, manufacturing employment is still on the decline. Since January 2001 a total of 145,300 manufacturing jobs have been lost – 7.4 percent of our industrial workforce.

This loss is all the more compelling when you understand the nature of a manufacturing job.

Whether you are talking about the smokestack industry of yesterday or the high-tech manufacturing of today, it is time to realize that manufacturing is the gateway to the middle class for under-educated and low-skilled workers. California’s industrial workforce, now as in the past, reflects our diverse ethnic communities.

Manufacturing creates a high-skill, high-wage workforce, including upwardly mobile jobs that pay an average of $22,000 a year more than the average service-sector job. This can be the difference needed to qualify for a mortgage or pay for a child’s college education.

The Milken Institute has provided the proof, and now it’s up to policy-makers to prepare the pudding. The obvious recipe: Create effective incentives to modernize and stimulate the industries that will fire the engine of California’s growth.