Some states to use stimulus to forestall layoffs

Tom Curry National affairs writer • Profile • E-mail

Despite a dizzying decline in tax revenues, many states aren’t lopping their payrolls as fast as private sector employers. And some intend to use part of the federal stimulus windfall headed their way to keep employees on their payrolls — at least for now.

The recession and its ruinous impact on state finances will be the premier topic of discussion as the nations’ governors gather in Washington this weekend for their annual winter meeting.

Pressure to cut state workforces is growing in many statehouses as legislatures struggle with widening budget deficits. Some states began cutting workers in 2007 as the economy began slowing, but many continued to hire, adding about 1 percent to the cumulative state head count in the year ending in October 2008.

But even though state government employment has grown substantially in the last decade, trimming state payrolls is a politically risky move that can both alienate unions and citizens hurt by the resulting reduction in services. That explains why many governors and legislatures are doing everything in their power to avoid issuing pink slips.

In California, for example, Gov. Arnold Schwarzenegger sent layoff notices to 20,000 state workers earlier in the week as the state Legislature remained stymied over the budget package aiming to plug a $42 billion deficit.

Some California workers spared
But on Thursday, the governor signed a budget package that, along with incoming funds from the $787 billion stimulus bill that President Barack Obama signed into law on Tuesday, will keep many of those workers on the job. There will be some furloughs and layoffs, Schwarzenegger spokesman Aaron McLear told msnbc.com, but far fewer than there would have if no accord had been reached. Details are being worked out by departments and will become clear in the next several months, he added.

Other states also are struggling — not always successfully — to keep employees on their payrolls:

• In Tennessee, where the state is projecting a $1 billion budget shortfall, Gov. Phil Bredesen said layoffs of state employees are possible even though the state will receive more than $4 billion from the stimulus bill.
• Pennsylvania avoided laying off any state workers in the current fiscal year, despite a projected budget deficit of $2.3 billion, but Gov. Ed Rendell recently proposed a budget for fiscal 2010, which begins in July, that would eliminate between 300 and 900 jobs.
• Facing a $1.6 billion budget shortfall, Arizona has laid off 350 state employees.

In some states, government employees become political footballs as officials try to close yawning budget deficits.

In South Carolina, for example, where an unemployment rate of 9.5 percent — third-highest in the nation — and a plunge in tax revenue have triggered a budget crisis, Republican Gov. Mark Sanford has been an outspoken critic of what he sees as a boom-bust mentality in his GOP-controlled state Legislature’s spending.

“I have believed for a very long time that this day would come, and as a consequence I have fought with many in your leadership on spending,” Sanford said last month in his State of the State address. “Here in South Carolina every few years we overspend when times are good and then cut past muscle and right into bone when times aren’t so good.”

Growth of S.C. workforce defended
But Democratic state Sen. Brad Hutto said Sanford’s analysis does not reflect what really happened in South Carolina.

“We have a growing population, therefore we have a growing need for state employees,” Hutto said. “We’re building new subdivisions, new schools, new roads — all these have public-sector jobs related to them.”

The state has so far trimmed its payroll by a mere 400 jobs — from 64,811 to 64,411 — since June 30, 2008, shedding 247 employees through a reduction in force and the remainder through voluntary buyouts and attrition. Sanford’s proposed budget for fiscal 2010, which calls for a $1 billion reduction in outlays from last year’s levels, would achieve a small slice of those savings by cutting 90 administrative positions in the state Department of Education.

Sanford’s spokesman Joel Sawyer said the governor and his staff “don’t have the answer yet” on how many state jobs might be saved as a result of the $2.8 billion that is on the way to South Carolina as its share of the stimulus package.

No matter how many state jobs are lost, the bloodletting may only be beginning.

According to the National Conference of State Legislatures (NCSL), 43 states have budget shortfalls totaling $183 billion for the fiscal year that began last July. That figure is expected to grow to more than $200 billion for the fiscal year that begins on July 1.

The seven that are not facing projected budget gaps — Arkansas, Montana, North Dakota, Oklahoma, Texas, West Virginia and Wyoming — also may soon encounter red ink as the national economic slump deepens, though at least some likely have sufficient reserves to cover the shortfalls, the group said.

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