State & Local Government Jobs — The Next Shoe to Drop?by Tim Manni
Just as many experts were claiming that the residential housing market had hit bottom, others warned that the crisis was only beginning to develop in the commercial real estate market.
Now it seems that the same can be said for the public and private job markets. As the private job market trends toward improvement, the public job market is slated to be the next shoe to drop in the unemployment crisis.
While up until now the fallout in the public job market has been rather muted, there are several looming factors that suggest state and local government payrolls are destined for far more cuts.
1. Stimulus Money Running Out: Albert Bozzo of CNBC.com writes that “The main trigger [of private sector job loss] will be the winding down of the massive America Recovery and Reinvestment Act, better know as the federal stimulus plan“:
“A lot of states didn’t go through with the layoffs that were expected because of the stimulus,” says Christian Weller, who specializes in economics and public policy for the University of Massachusetts and the Center for American Progress.
The federal government is spending more, not less, so its workers won’t be affected by the end of the stimulus program. Still, federal employees represent a relatively small percertage of all government workers, with state and local workers making up the biggest portion.
2. Tax Revenue Hasn’t Improved: The economic downturn has caused state and local tax revenues to take a significant hit, and they haven’t improved. The housing crisis has crimped both residential and commercial property taxes and massive unemployment has limited both consumer and corporate taxes. “States just aren’t getting the tax revenue they used to,” said HSH VP Keith Gumbinger.
3. Slow Economic Recovery: As we alluded to above, until economic conditions improve — employment, housing, etc. — states will continue to be without substantial sources of revenue. At the present time, the recovery just isn’t happening fast enough for states.
How are states dealing with the problem? Budget cuts always result in “painful choices” for state and local officials. They almost automatically mean less services and less jobs for residents.
Education Cuts: Illinois Governor Patrick Quinn has proposed over $2 billion in budget cuts for 2011, “including a deep reduction in education funding,” according to the state’s website.
Privatizing Jobs: New Jersey Governor Chris Christie has begun to examine the possibility of privatizing thousands of state jobs:
[Christie] said privatization could narrow the scope of public services provided by the state’s nearly 75,000 workers and increase efficiency.
Privatizing jobs would inevitably mean layoffs for state workers, but Christie said he hadn’t asked the task force to come back with a specific level of savings.
Longer Wait for Tax Refunds: Due to state budget deficits, taxpayers may be forced to wait even longer for their state tax refunds:
States from New York to Hawaii that have been hard-hit by the economic downturn say they have either delayed refunds or are considering doing so because of budget shortfalls.
“It’s an indicator of how bad it is,” says Scott Pattison, executive director of the National Association of State Budget Officers. “You know things are bad when you have to do that.”
For the most part, the public sector has not had to adjust all that much to the new economic landscape. However, it will have to do so quickly if the private landscape doesn’t improve soon.