States Cutting the Most Government Jobs

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.

Read: States Cutting the Most 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.

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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-yr. change in state govt. jobs: -9.33%
> One-yr. change in local govt. jobs: -1.19%
> Budget shortfall FY 2012: $1.2 billion
> FY 2012 shortfall as a pct. of budget: 15.9%

Between June 2011 and June 2012, Alabama netted a loss of 9,900 state government jobs, or 9.3% 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% increase from the 2011 fiscal year.

2. California
> One-yr. change in state govt. jobs: -0.14%
> One-yr. change in local govt. jobs: -1.71%
> Budget shortfall FY 2012: $23.9 billion
> FY 2012 shortfall as a pct. of budget: 27.8%

Between June 2011 and 2012, California added roughly 275,600 jobs, a 2% increase in general workers, as the state unemployment rate fell from 11.9% to 10.7%. 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.

3. Connecticut
> One-yr. change in state govt. jobs: -0.95%
> One-yr. change in local govt. jobs: -1.68%
> Budget shortfall FY 2012: $3.2 billion
> FY 2012 shortfall as a pct. of budget: 17.1%

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%, 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% 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-yr. change in state govt. jobs: -3.16%
> One-yr. change in local govt. jobs: 0.06%
> Budget shortfall FY 2012: $3.7 billion
> FY 2012 shortfall as a pct. of budget: 15.8%

Florida’s unemployment rate fell by 2.1 percentage points, from 10.7% in June 2011 to 8.6% 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% drop — the third-largest percentage decrease in state government employees nationwide.

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5. Maryland
> One-yr. change in state govt. jobs: -2.72%
> One-yr. change in local govt. jobs: 1.51%
> Budget shortfall FY 2012: $1.4 billion
> FY 2012 shortfall as a pct. of budget: 9.5%

The total number of workers in Maryland rose in June just 1% 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% 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% 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% 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% 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.
6. Massachusetts
> One-yr. change in state govt. jobs: 0.96%
> One-yr. change in local govt. jobs: -1.50%
> Budget shortfall FY 2012: $1.8 billion
> FY 2012 shortfall as a pct. of budget: 5.5%

From June 2011 to June 2012, the total number of jobs in Massachusetts rose by 1.4%. Moderate job growth also extended to the state government workforce, which grew 0.96%, or 1,100 jobs. This increase in state workers was at odds with the Massachusetts’ stated plans to cut workers to reduce a fiscal 2012 total budget shortfall of $1.8 billion. Though job cuts did occur at the local level as local governments eliminated roughly 4,100 positions. As of June 2012, slightly less than 12% of Massachusetts workers held state or local government jobs, less than all but three other states.

7. Michigan
> One-yr. change in state govt. jobs: -0.18%
> One-yr. change in local govt. jobs: -3.03%
> Budget shortfall FY 2012: $767 million
> FY 2012 shortfall as a pct. of budget: 3.5%

Only five states added more jobs than the roughly 62,000 Michigan added between June 2011 to June 2012. Despite overall growth, the number of state employees barely changed year-over-year, while local governments cut a net of 12,000 active positions, or 3.03% of all local government workers — more than all but three other states. The state planned to use layoffs, cuts to employee benefits, and privatization to trim its deficit despite Michigan’s $767 million budget shortfall for fiscal 2012 representing just 3.5% of the state’s budget. Though the state is not expected to have any budget shortfall to close in fiscal 2013, an expected decrease of nearly 46.6.% in corporate income tax revenue and slow sales tax revenue growth could put a dent in its efforts to eliminate its budget deficit.

8. Missouri
> One-yr. change in state govt. jobs: -1.71%
> One-yr. change in local govt. jobs: -0.32%
> Budget shortfall FY 2012: $704 million
> FY 2012 shortfall as a pct. of budget: 8.8%

With a net decrease of 9,700 jobs, Missouri is just one of seven states in which the total number of workers declined between Junes 2011 and 2012. Despite a $704 million budget shortfall, Missouri eliminated fewer government jobs than many other job-cutting states–perhaps because of the state’s weak labor market. Over the year ending in June 2012, 1,600 state government jobs and roughly 900 local government jobs. Balancing its budget has required Missouri to make across-the-board cuts, and the state has been especially tough on its public university system. According to the Columbia Missourian, the state will have cut the University of Missouri system’s budget by $75 million between fiscal years 2010 and 2013.

9. Nebraska
> One-yr. change in state govt. jobs: 2.83%
> One-yr. change in local govt. jobs: -0.44%
> Budget shortfall FY 2012: $166 million
> FY 2012 shortfall as a pct. of budget: 4.8%

As of June, Nebraska had strong year-over-year job growth. The state’s number of total employees increased 1.6%, from about 953,400 to 968,700. State government job growth was actually similarly strong as Nebraska added about 1,100 jobs, a 2.83% increase. Interestingly, the state did not cut government jobs even though layoffs were part of its strategy to eliminate its budget shortfall of $166 million for fiscal 2012. Unlike the state’s government,  local governments did have to make job cuts. Amid reductions in financial aid from Nebraska localities’ governments cut a net of some 500 jobs between June 2011 and 2012.

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10. Nevada
> One-yr. change in state govt. jobs: -2.62%
> One-yr. change in local govt. jobs: -1.99%
> Budget shortfall FY 2012: $1.2 billion
> FY 2012 shortfall as a pct. of budget: 37.0%

At both the state and local government levels, job losses in Nevada were quite high between June 2011 and June 2012. The state government cut roughly 900 net jobs, or 2.62% of all workers, and the local governments lost roughly 1,900 jobs, almost 2% of all their workers. Nevada’s estimated $1.2 billion budget shortfall for fiscal 2012 stands at 37% of the state’s budget. Proportionally, this was the second-largest deficit nationwide. As the state sought to eliminate the deficit, the layoffs were supplemented by furloughs, early retirements, salary reductions, benefit cuts and agency reorganizations. As of June, only slightly more than 11% of Nevadans were either state or local government workers, a smaller percentage than all but two other states.
11. New Mexico
> One-yr. change in state govt. jobs: -2.91%
> One-yr. change in local govt. jobs: -1.69%
> Budget shortfall FY 2012: $450 million
> FY 2012 shortfall as a pct. of budget: 8.3%

From June 2011 to June 2012, only a few states lost more jobs than New Mexico, where the total number of workers declined by 1,700. This is at least partially due to cuts in public sector workers, as some 1,600 state government jobs, almost 3% of such positions, and 1,800 local government jobs were lost over the same year-over-year time period. Many of these jobs were cut as part of New Mexico’s strategy to eliminate a $450 million fiscal 2012 budget deficit, a strategy that also included benefit cuts, agency reorganizations, and reductions in local aid. For the fiscal year 2013, the CBPP projected that New Mexico would not face any budget shortfall.

12. Ohio
> One-yr. change in state govt. jobs: 6.54%
> One-yr. change in local govt. jobs: -0.98%
> Budget shortfall FY 2012: $3 billion
> FY 2012 shortfall as a pct. of budget: 10.8%

Although the National Governor’s Association reported that Ohio’s strategy to trim its budget deficit included planned layoffs, the number of state workers has actually risen considerably. As of June, Ohio added about 9,700 state government jobs in the past year — more than any other state. This has occurred even though the state has committed to privatizing certain operations, and reorganizing state agencies in the 2011-2013 two-year budget. However, many sacrifices were made at the local level. As of June, local governments, which employ over half of a million Ohioans according to the BLS, had cut over 5,000 positions in the previous year.

13. Oregon
> One-yr. change in state govt. jobs: -1.56%
> One-yr. change in local govt. jobs: -2.06%
> Budget shortfall FY 2012: $1.7 billion
> FY 2012 shortfall as a pct. of budget: 24%

As of June, Oregon had reduced its state government workforce by about 1,300 employees over the past year. The layoffs were part of the state’s strategy to eliminate a combined budget shortfall of $3.4 billion for the 2011-2013 period. Oregon also has planned to reduce state employee salaries, cut benefits and institute furloughs to reduce its budget deficit. Localities have also had to sacrifice, as local governments cut their workforces by around 4,000 from June 2011 to June 2012. Tough times aren’t limited to state workers; the total number of workers in the state increased by a mere 0.9% from June 2011 to June 2012.

14. South Dakota
> One-yr. change in state govt. jobs: 0.57%
> One-yr. change in local govt. jobs: -1.58%
> Budget shortfall FY 2012: $127 million
> FY 2012 shortfall as a pct. of budget: 11.0%

At $127 million, South Dakota had the second-smallest budget shortfall among all 41 states to run a budget deficit in fiscal 2012. Nonetheless, the state planned to address this shortfall through a combination of layoffs, reductions in aid to localities and restructuring state agencies. Despite these plans, South Dakota actually increased the number of state government workers by about 100 employees from June 2011 to June 2012. Far more job losses happened at the local level, however, as local governments shed roughly 800 employees, or more than 1.5% of the state’s local government workforce.In his 2012 State of the State address, Gov. Dennis Daugaard suggested that South Dakota could further cut costs by eliminating future opportunities for teacher tenure.

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15. Washington
> One-yr. change in state govt. jobs: -1.11%
> One-yr. change in local govt. jobs: -1.37%
> Budget shortfall FY 2012: $2.7 billion
> FY 2012 shortfall as a pct. of budget: 16.9%

Between June 2011 and 2012, Washington added roughly 54,100 jobs, growing the state’s total workforce 1.9%. Yet the government sector did not experience similar growth, as roughly 1,600 state government jobs and 4,500 local government positions were eliminated in the same time period. Facing a total budget shortfall of about $5.8 billion for the 2011-2013 two-year budget period, Washington not only chose to lay off workers, but also to reduce state employee benefits, as well as cut aid to localities. State employees in Washington have gotten used to sacrifice: in announcing her budget proposal for 2011-2013, Governor Chris Gregoire’s office noted that state employees have had no general wage increase since 2008.

Michael B. Sauter and Alexander E. M. Hess