Max Whittaker / Reuters file
Lawmakers inside California's capitol have had to make hard decisions because of the state's massive budget deficit. And they'll continue to have to.
By Michael Sauter and Alexander E.M. Hess, 24/7 Wall St.
?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.?
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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 percent in California between 2011 and 2012. During same period, corporate income tax revenue in Michigan fell by nearly 70 percent. 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 changing political winds may now 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.
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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.
1. Alabama
- ?One-year?change?in state?government?jobs:?-9.33 percent
- ?One-year?change?in local?government?jobs:?-1.19 percent
- ?Budget shortfall FY 2012:?$1.2 billion
- ?FY 2012 shortfall as a percent of budget:?15.9 percent
Between June 2011 and June 2012, Alabama netted a loss of 9,900 state government jobs, or 9.3 percent of the state?s government workforce -- the highest percentage of any state. The state also planned to reduce job benefits for many of those still employed. These labor?expenses?reductions were part of Alabama?s broader strategy to address its budget shortfall. The plan also included across-the-board cuts to numerous state programs for a total of $1.2 billion for the fiscal year 2012. Meanwhile, corporate income tax receipts were estimated to have reached some $417 million, a 43.23 percent increase from the 2011 fiscal year.
2. California
- ?One-year?change?in state?government?jobs:?-0.14 percent
- ?One-year?change?in local?government?jobs:?-1.71 percent
- ?Budget shortfall FY 2012:?$23.9 billion
- ?FY 2012 shortfall as a percent of budget:?27.8 percent
Between June 2011 and 2012, California added roughly 275,600 jobs, a 2 percent increase in general workers, as the state unemployment rate fell from 11.9 percent to 10.7 percent. Excluded from this job recovery was local government, which saw a net decline of about 29,200 jobs. In fiscal year 2012, California faced the nation?s largest total budget shortfall of $23.9 billion. This deficit was more than twice as large as that of any other single state. Though the state used a large number of methods to reduce this deficit, including salary reductions and cuts to local aid, California is projected to face a budget gap of $15 billion in fiscal 2013. There may still be some room to make job cuts: despite planning for layoffs and salary cuts in fiscal 2012, there were only 700 fewer state government employees compared to a year prior.
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3. Connecticut
- ?One-year?change?in state?government?jobs:?-0.95 percent
- ?One-year?change?in local?government?jobs:?-1.68 percent
- ?Budget shortfall FY 2012:?$3.2 billion
- ?FY 2012 shortfall as a percent of budget:?17.1 percent
Connecticut only added some 9,200 jobs overall between June 2011 and 2012, raising the number of jobs in the state by just 0.6 percent, less than 40 other states. However, the?state?s?government had to tackle a budget shortfall of $3.2 billion for fiscal 2012, or 17.1 percent of the budget -- the nation?s 12th-largest percentage shortfall. Given?poor job growth, from June 2011 to June 2012, Connecticut?s state government eliminated?approximately 600 jobs, while localities cut 2,600 positions. Connecticut also opted to reorganize state agencies and reduce employee benefits to meet budget requirements.
4. Florida
- ?One-year?change?in state?government?jobs:?-3.16 percent
- ?One-year?change?in local?government?jobs:?0.06 percent
- ?Budget shortfall FY 2012:?$3.7 billion
- ?FY 2012 shortfall as a percent of budget:?15.8 percent
Florida?s unemployment rate fell by 2.1 percentage points, from 10.7 percent in June 2011 to 8.6 percent the next year -- one of the largest improvements nationwide. As with other states on this list, however, the labor market did not improve for Florida?s government employees. To help eliminate a $3.7 billion shortfall when drafting its fiscal 2012 budget, Florida planned to lay off state workers, cut state employee benefits, reorganize agencies and privatize certain operations. From June 2011 to June 2012, the state eliminated roughly 6,600 state jobs, a 3.16 percent drop -- the third-largest percentage decrease in state government employees nationwide.
5. Maryland
- ?One-year?change?in state?government?jobs:?-2.72 percent
- ?One-year?change?in local?government?jobs:?1.51 percent
- ?Budget shortfall FY 2012:?$1.4 billion
- ?FY 2012 shortfall as a percent of budget:?9.5 percent
The total number of workers in Maryland?rose?in June just 1 percent compared to the preceding year. However, there was no such increase in state government employees, as the state cut about 2,900 jobs, or 2.72 percent of state workers. Those who kept their jobs potentially faced planned salary reductions and benefit cuts. The state did this even though its budget shortfall was only 9.5 percent of its fiscal year 2012 budget, smaller than more than half of the states that faced shortfalls. While Maryland?s sales tax receipts rose by nearly 10 percent in 2012 from fiscal year 2011 -- a larger increase than more than all but two other states -- the state again faces an expected total budget shortfall of 7 percent its 2013 fiscal year budget. Despite these cuts at the state level, Maryland has added 3,800 local government employees over the year ending in June 2012.
Read the rest of the list at 24/7 Wall St.'s web site
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