Between June 2011 and June 2012 the nation added more than 1.7 million jobs. At the same time, the number of government jobs fell by more 200,000. While the national economy has improved since the Great Recession, a number of state economies continue to struggle. In response to a stalled recovery and shifting political pressure, many states are doing the unthinkable: cutting government jobs.
Facing budget deficits, the most common state cuts were targeted cuts to particular programs, like K-12 education and Medicaid, according to a report published jointly by the National Governors’ Association and the National Association of State Budget Officers (NASBO). Reducing government jobs was less common, ahead of salary or benefit reductions and behind reducing funding to municipalities. Based on the recent state budget report, 24/7 Wall St. identified the 15 states that have included cutting government jobs as part of their fiscal year 2012 budget balancing strategy.
Historically, cutting government jobs has been a budget cut of last resort. “States go to great lengths to avoid layoffs” NASBO Executive Director Scott Pattinson told 24/7 Wall St. in an interview. Politically, it is often extremely unpopular, and financially, it is not always the best strategy. Firing state government workers often does not result in money saved in the short term, he explained. Once required benefits and severance are included, states may not see savings for at least a full fiscal year.
However, a number of these states are in serious trouble. According to Brookings senior fellow of economic studies, Gary Burtles, in many cases, the state has no other option. Declining tax revenues due to a foundering economy result in budget shortfalls. States are forced to either raise taxes, something that is politically unthinkable or procedurally challenging, or make cuts. According to Burtles, “California has other kinds of constraints, certainly constitutional constraints, to raise taxes, so a tough economic time is one in which they would be more inclined to cut public spending.”
And a review of analysis by the Center on Budget and Policy Priorities indicates that many states have no other choice. In several of these states, tax revenue declined substantially. Sales tax revenue fell by more than 30% in California between 2011 and 2012. During same period, corporate income tax revenue in Michigan fell by nearly 70%. Nevada, California, Oregon and Washington, each of which planned layoffs as part of their 2012 budgets, are in the top five for the largest deficits as a percentage of their total budget.
Balancing the budget, however, is just one reason behind state government layoffs. States appear to be using layoffs not only to close large deficits, but also because political winds encourage it. While many of the states cutting government jobs had significant budget shortfalls for fiscal year 2012, others were in much better shape.
States such as Missouri, Nebraska, Massachusetts and New Mexico all had among the smallest deficits as a proportion of their budget in the country in 2012. Burtless explained that politics may influence layoffs in some of these states. “A lot of states in 2010 got more conservative legislatures and governors, and those governors and legislatures have been acting on a political view that says that in order to make room for more private sector jobs, we have to scale back public sector jobs.”
The number of people employed in local government or state government positions fell in most of the 15 states on this list, according to unemployment data from June 2011 to June 2012. However, in some cases, the net number of government jobs actually increased. Pattinson explained that this is partially due to the fact that state governments are cutting positions that may have already been vacant. States can also hire new employees for some positions while cutting them in others. Despite the fact that several of the 15 states added jobs overall, all 15 cut jobs in at least one specific area, whether it be local education jobs or state government positions. While local jobs were not considered in the budget report, state cuts in local funding regularly prompt local job cuts.
Based on the Spring 2012 Fiscal Survey of States report, released jointly by the National Governors’ Association and the National Association of State Budget Officers, 24/7 Wall St. identified the 15 states that included layoffs as part of a strategy to balance FY 2012 budgets. We also looked at changes in unemployment at the state as well as state and local government job levels from June 2011 to June 2012. We relied on Center on Budget and Policy Priorities for additional budget data, including shortfalls.
These are the states that are cutting the most government jobs.