Those were the main conclusions of the 16th annual Silicon Valley Index released Feb. 14 by the nonprofit Joint Venture Silicon Valley Network and the Silicon Valley Community Foundation.
The Index reports the latest data and trends in economic development, workforce, housing, education, public health, land use, environment, governance and culture throughout Santa Clara and San Mateo counties, as well as in portions of Alameda and Santa Cruz counties.
Data in the report was gathered and analyzed by Collaborative Economics of San Mateo.
"Silicon Valley's economy is making slow but noticeable progress recovering from the major blow delivered by the recession," Joint Venture CEO Russell Hancock said Monday, noting upticks in new business establishments, patent registrations and venture-capital activity emanating from the region.
But with the loss of 4,200 public jobs — mostly in education and city government — and people such as the police chief of Half Moon Bay cutting back to part-time schedules, the public sector faces a looming crisis.
"You're going to see huge layoffs of staff and massive reductions in public services," Silicon Valley Community Foundation CEO Emmett Carson predicted at Monday's press conference.
"The question isn't how to avoid that. The question is, 'Are we having the broader adult discussion about what kind of community we'd like?'"
Federal economic-stimulus funds, which cushioned the blow of public layoffs last year, have run out, Mr. Carson said.
And supposed silver bullets such as reforming public-employee pension costs — comprising 10.6 percent of city-government expenditures and 7 percent at the county level — won't begin to solve the problem, he said.
Mr. Hancock and Mr. Carson said their groups later this week will offer up a "third path" to new governmental efficiencies through agency consolidation, shared services and cross-jurisdictional collaboration.
"We'll propose this as a path Silicon Valley really needs to consider," Mr. Hancock said.
Currently, the largest single category of county spending is in public safety at 33 percent, followed by public assistance at 27 percent, Mr. Carson said.
"We'll have to look at a multiplicity of approaches for the new normal, have the tough discussions about, 'Is it the youngest people we want to protect, or the oldest folks? Where do we really want to protect the environment — is it the water or the air?'
"We're going to have to make hard choices because we no longer have the revenue streams for the world we used to have."
In the private sector, Silicon Valley added 12,300 new jobs over the past year, Mr. Hancock said.
Unemployment in the valley, at 9.8 percent, is out of the double digits and compares to a similar national unemployment rate and a 12.3 percent California rate.
The region had a net gain of 20,200 new business establishments in the past year, he said. "Entrepreneurship is alive and well. In a difficult economy, people are still coming to Silicon Valley to start new companies."
After two years of falling, the region's household income has stabilized at an average of $79,999, with a median of $86,000 a year, he said.
Venture-capital investment in the region is up 5 percent and in certain sectors, such as information technology and telecommunications, by much more.
Patents emanating from the region grew by 9 percent, outstripping the national growth of 6 percent, he said.
And IPOs in Silicon Valley rebounded to 11 last year — 6 percent of the nation's total in a region with just 1 percent of its population, Mr. Hancock said.
But some social indicators, such as health-insurance and food-stamp participation, were troubling, he said.
The percentage of Silicon Valley residents with no health insurance rose from 14 percent to 18 percent, and those receiving food stamps grew from 2.6 percent to 4 percent.
Mr. Carson noted the stark dichotomy between the local haves and the have-nots.
"On one hand we have Google giving 10 percent across-the-board raises ... and at the same time our unemployment continues to hover around 10 percent ... and one in 10 people gets (public assistance)," he said.
"Everything's wonderful here and there's a hiring war going on if you're in tech and you can write app code. The sky's the limit. Yet there's this other half ... that lives in a very different world.
"Where do these people come together to even have a discussion?"
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