Local Government Budgets Still Call for Workforce Cuts

May 10, 2012

USA Today by Tim Mullaney


After April’s employment report brought word of 15,000 more cuts of government workers, are states and local governments closer to the bottom?

Sort of.  States are stabilizing as tax receipts tick up. They’re helped by the upward march of private-sector jobs, which climbed by 130,000 as the national unemployment rate dipped to 8.1 percent in April, the government said Friday.

But local governments that rely on property taxes still have deep problems and won’t hire much until housing values rebound, says Greg Daco, and economist at HIS Global Insight.

“The state and local governments are still dealing with challenges,” says Lucy Dadayan, an analyst at the Nelson A. Rockerfeller Institute of Government. “The long term trends don’t look good.”

States actually added 1,000 workers last month, the U.S. Bureau of Labor Statistics reported while local governments cut 12,000 and the federal government cut 4,000.  Since the job market bottomed out in 2010, governments have cut more than 1 million jobs as companies added 4.25 million.

State tax receipts rose 3.6 percent in the last quarter of 2011, and are now above their pre-recession peak, according to the Rockerfeller Institute.  Preliminary data suggest state tax receipts rose 4 percent in the first two months of 2012, the Institute says.

Adjusted for inflation, local taxes fell 1 percent in the fourth quarter, it says.

This means poor prospects for workers such as teachers and police officers who work for local governments, Dadayan says.  More than 10,000 jobs were lost in education last month.

Even states still have problems, Dadayan says.

Most state-level revenue gains came in two states, Illinois and Connecticut, that raised income tax rates last year, Dadayan says.

Illinois’ experience shows states are under such pressure that boosting taxes won’t automatically save public jobs, says Moody’s Analytics economist Daniel White.  White also feels Illinois will have more layoffs because of fast-rising Medicaid costs.