Local Governments May Slash Nearly 500,000 Jobs, Ruin Unemployment Forecasts

The Administration said last week in its mid-year report to Congress that unemployment would remain above 9% until the beginning of 2012. That goal may be a struggle, as there is growing evidence that companies large and small will squeeze productivity out of current employees rather than take the financial risk of increased personnel expenses.

It is unlikely the Budget Office has counted on mass firings at the local government level, but that is exactly what local governments are expecting– a cavalcade of layoffs. A new piece of research from the National League of Cities, The United Conference of Mayors, and the National Association of Counties forecasts that close to 500,000 municipal workers will lose their jobs.

Those worker terminations will take place some time between this fiscal year and next. Local governments plan to reduce work forces by 8.6% from fiscal 2009 to fiscal 2011. Municipalities and states operate on mid-year fiscal periods.

A deeper look at the survey numbers shows that most of the cuts will be made in the public safety and public works areas. That raises the threat of a significant attrition in law enforcement work forces and employees who manage and repair infrastructure, particularly roads.

A great deal of the nation’s road and bridge infrastructure is already aged, and by some estimates the cost of making comprehensive repairs to the system would be several hundred billion–the lion’s share of the entire $787 billion Obama stimulus program. The amount of   stimulus dollars devoted to infrastructure work is small part of that

The cities and countries will require capital from state and federal treasuries to augment their own receipts if the 500,000 jobs are to be preserved. The state and federal governments do not have that money, so the hope of a rebound in the financial affairs at the local level is slim.

The effect of the layoffs will be profound. The federal government will probably have to carry the burden of supporting 500,000 more jobless people with unemployment benefits. That will be money that might have gone directly to local government aid.

Douglas A. McIntyre