If you read well beyond the headlines today about the government’s employment report, you may notice that 99,000 jobs were shed in the economy’s public sector in November. That recalls to mind the huge public sector job losses in the Great Recession. By July 2013, nearly 800,000 local and state government employees had been cut from the payroll. Even now, a decade after that economic downturn officially ended, not all those workers have been replaced. This time around, 1.3 million public sector jobs have been lost. The pain associated with that doesn’t just apply to those who lost their jobs or those still working who have had to pick up their departed colleagues’ tasks, it also affects private businesses that depend on the public sector for all kinds of services.
Faced with even more job and service cuts, state and local authorities have implored federal officials to provide financial assistance by year’s end. Obstructionist Republicans in Congress have brushed them off. Senate Majority Leader Mitch McConnell scoffs at what he labels a “blue-state bailout.” Like so much that McConnell says, that’s bogus.
Patricia Cohen at The New York Times reports:
[I]t turns out this budget crisis is colorblind. Six of the seven states that are expected to suffer the biggest revenue declines over the next two years are red — states led by Republican governors and won by President Trump this year, according to a report from Moody’s Analytics.
Those on the front lines agree. “I don’t think it’s a red-state, blue-state issue,” said Brian Sigritz, director of state fiscal studies at the National Association of State Budget Officers. The National Governors Association’s top officials — Andrew M. Cuomo of New York, a Democrat, and Asa Hutchinson of Arkansas, a Republican — issued a statement this fall saying, “This is a national problem, and it demands a bipartisan and national solution.”
While there is talk, talk, talk about another stimulus, and there is now a smidgen of hope that something (though far too small) may be approved before 2021, Republicans have remained adamant about not providing financial assistance to state and local governments as part of any relief package.
The impacts vary from state to state based on their sources of revenue. Wyoming, North Dakota, and Alaska, heavily dependent on oil revenues to fill government coffers, have taken a big hit from the pandemic with vastly lowered demand in the transportation sector and oil prices now below many producers’ break-even point. States like Nevada, Florida, and Louisiana have seen their tourism sectors get creamed as fewer people risk infection by traveling. Whether run by Republicans or Democrats, states dependent on sales and income taxes, which have fallen sharply in the past nine months, are seriously considering layoffs of first responders, librarians, park workers, and teachers.
In fact, nationwide, taking the biggest hit in the public sector have been teachers, just as in the Great Recession. Georgia, for instance, has cut K-12 funding by nearly $1 billion. California cut its spending for higher education by about the same.
Dan White, director of fiscal policy research at Moody’s Analytics, told Cohen that the best outcome to be expected without more federal aid would make the situation “the worst since the Great Depression.” And take years to dig ourselves out of.
The impacts are being felt everywhere. The Kansas City, Missouri, city manager has asked each department to prepare budget cuts of 11%. That could mean laying off 180 firefighters and emergency medical technicians and 200 cops, closing one or two police stations, and making fewer garbage collections. It also would likely mean a slowdown in approving permits and meeting other needs of private business.
As we’ve seen throughout the pandemic, the negative impacts have afflicted people of color more than white people. This is also true for the public sector, which in many states has for decades provided some of the best available employment opportunities to people of color. The pandemic layoffs affect them disproportionately.
Michael Leachman and Elizabeth McNichol at The Center on Budget Policy and Priorities report:
States’ adjusted estimates suggest that, in the absence of further federal support, shortfalls will total about 11 percent of their budgets in fiscal year 2021 and 10 percent in 2022, which begins next July in most states. Plus, states face increased costs due to higher enrollment in Medicaid and other programs. Including these higher costs, states’ own estimates suggest shortfalls through fiscal year 2022 that total about $305 billion.
Those estimates could easily prove too optimistic. While the economic harm from this recession so far has been more concentrated among lower-income families than in past recessions, that may not remain as true in coming months.
In June, Josh Bivens and David Cooper at the liberal-leaning Economic Policy Institute wrote that without more federal aid, we’re facing a result like this:
- If policymakers do nothing at the federal level to address these shortfalls, the United States could end 2021 with 5.3 million fewer jobs, with losses in every state.
- Further, if Congress passes some level of aid that is insufficient—less than $1 trillion—they will needlessly guarantee a significant job gap by the end of 2021.
- If they pass $500 billion of aid over that time, the jobs gap will likely be roughly 2.6 million. If they pass $300 billion of aid, the jobs gap will likely be roughly 3.7 million.
- While empirical estimates of the shortfall should guide policymakers’ thinking, they can (and actually should) avoid putting a firm sticker price on state and local aid by tying this aid to economic conditions. If the economy recovers faster than the forecasts driving the $1 trillion estimated shortfall indicate will happen, then less aid would be needed. If instead recovery lagged, more would be needed.
- Finally, filling in the estimated shortfalls would merely return state and local governments to their pre-crisis fiscal status quo. But the unique features of the current economic shock will put greater demands on public services than existed before the crisis. To go beyond macroeconomic stabilization and promote the general welfare, even more federal aid to these governments is likely needed.
One big lesson to take from the Great Recession is that without adequate aid to states and local governments, the economic pain will be immense and last a long time. Another is that in states that preserved all or most of their public sector workforces, the private sector recovery was quicker and about 2% more robust than in those places that laid off large portions of their employees.
Senate Republicans are apparently determined to keep kicking these state and local governments, the people they hire, and the people they serve in the teeth. They argue, as they never do when tax cuts for their rich buddies are the topic, that financial relief is too expensive without ever taking notice of how expensive the outcome of not providing that relief will be both monetarily and socially.