States, Localities Imposing Big Layoffs

Published June 18, 2011

State and local government jobs were long thought to be more secure than private sector ones during economic downturns. But that’s no longer the case.

The recession that hit in 2008 has opened up large budget shortfalls in nearly every state. To help balance their budgets, 44 states have reduced their personnel costs through layoffs, unpaid leaves, and hiring freezes.

This time even the public employee unions do not seem to have the bargaining power to stop the government job cuts.

Partly because of collective bargaining agreements, states and local governments do not have the option of reducing compensation packages substantially to make ends meet. Therefore, they are using layoffs to balance their budgets, said policy analyst Mary McCleary of the Ohio-based Buckeye Institute for Public Policy Solutions.

Local Governments Cut 446,000
The total number of persons employed by local governments has fallen by some 446,000 since September 2008, according to data released June 3 by the U.S. Bureau of Labor Statistics. Many remaining government workers have experienced other cost-cutting measures such as furloughs—required time off without pay.
Another 400,000 workers could lose their jobs in the next year as states, counties, and cities grapple with lower revenue and less federal funding, according to Mark Zandi, chief economist for Moody’s

“State and local governments were initially insulated from the effects of the great recession by relying on one-time money such as the federal stimulus dollars,” said Jason Mercier, director of the Center for Government Reform at the Washington Policy Center, a public policy think tank in Olympia, Washington. “The current reductions we are seeing in government employment are directly related to the absence of those one-time funds.”

Driven by Revenue, Not Need
Although reducing government spending is crucial to balance budgets, laying off large numbers of workers is not the best way to go about saving taxpayer dollars, says Buckeye’s McCleary.

“Along with the layoffs will undoubtedly come a reduction of services that could harm our most vulnerable populations,” she said. “Part of the financial mess can be attributed to the fact that government spending typically is driven by revenues collected instead of by actual need.”

John LaPlante of the Minnesota Free Market Institute agrees, saying this is why states and local governments must “establish what spending categories are the most important, fund those, and ditch the rest. Governments can make significant changes if they are backed into a corner and the right leadership emerges.”

‘A Needed Adjustment’
Steve Buckstein of the Oregon-based Cascade Policy Institute says the states and local governments are “top-heavy. Laying off workers is probably a needed adjustment.”

Policy experts worry that once the economy recovers and revenues rise, state and local officials will resume overpromising and overspending.

“Hopefully, when the economy picks up, they will resist the urge to go on another spending spree and [will instead] keep their costs and employment down, thus putting less pressure on their fragile local economies,” said Buckstein.

Sreya Sarkar ([email protected]) writes from Chicago.