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ESA: Tough Economic Times Continue for State and Local Governments

State and Local Government Expenditures and Employment

Cross post by Commerce Chief Economist Mark Doms

Last week’s gross domestic product (GDP) report confirmed that our economy continues to grow (2.5 percent in the third quarter), although not as quickly as we would like. The fears of a “double dip” recession didn’t come to pass (if anyone in the DC area is interested in a triple dip, head to Ben and Jerry’s from 4 to 7 for their 3-dips-for-3-bucks special.).  One reason why the economy isn’t growing faster is that budget constraints are forcing continued and historically deep contractions in state and local government spending.  Measures within the American Jobs Act can help bridge the gap.

These cuts in state and local government spending are evident in the GDP data and also in the employment data (the October payroll data will be released this Friday).  State and local spending and investment decreased 5.3 percent in real terms since spending peaked in the fourth quarter of 2007, by far the deepest 15-quarter decline in spending in the post-WWII era.  Job losses that have followed from these budget cuts total 646,000, or 3.3 percent, since state and local employment peaked in August 2008. 

So far this year state and local governments have been cutting jobs at the same pace that private sector firms are adding them.  Over the first 9 months of the year, private payroll employment has grown 1.2 percent (1.3 million jobs) while employment in state and local governments declined by 1.2 percent (234,000 jobs). 

With cuts so deep, few services are spared, including for local schools.  Nationally, employment in local education has shrunk by nearly 270,000 jobs since August 2008 even as enrollment continues to rise.  According to the American Community Survey, K-12 enrollment climbed 1.7 percent to 54.3 million between 2008 and 2010.  

The 5.4 million K-12 teachers represented about one in four state and local government jobs, according to the Census Bureau’s Annual Survey of Public Employment and Payroll.  Unlike other federal surveys that capture public sector employment, this survey examines jobs by function and reviewing the data is a great reminder of how workers in our state and local governments touch our lives in many critical ways.  Several million other state and local government workers support our public safety and health, including 1.4 million paid workers providing police and fire protection.  As states and localities tighten their belts, some of these essential positions are at risk of being cut.

Does it make sense to decrease teachers at a time when enrollment is rising and education is more critical than ever to prepare our children  for future global challenges? Does it make sense to reduce the number of first responders during these times?  One way to help state and local government bridge these pressures is the American Jobs Act, which provides $5 billion to help create and preserve police and other first responder jobs and $30 billion to create or preserve educator and support positions.  In addition, the bill provides $30 billion to help overstretched communities repair and upgrade more than 35,000 schools and community colleges.  This work benefits our schools and also immediately benefits the private sector.  Cutbacks in state and local spending have hurt the private sector businesses that provide them with products and services, such as fixing our schools, bridges, and other public infrastructure.  The infrastructure spending in the American Jobs Act will directly support American businesses and workers whose sweat and dedication will yield long-term benefits for our economy. 

A sustained, strong economic recovery will bring the best relief to strained state and local budgets.  The American Jobs Act will bolster the recovery while supporting jobs in areas that strengthen our communities and will ensure our future competitiveness.

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Obama employment plan

Keep the first responders and teachers and get rid of middle management and loafers. The
government always protects the pluto crats and hanger os and threaten to fire the people the public wants. Fire the elected officials!

My Opinion

The idea that the government can create jobs is a misnomer. In 2010, federal spending increased to $3.69 trillion, with a $1.54 trillion dollar deficit. Any “jobs bill” created by Washington to maintain “first responders” in inherently funded by the taxpayer is reminiscent of the same failed stimulus option pushed by the administration two years ago, where the cost to the taxpayer was over $312,500 per job. Historically, the private sector has been the jobs engine (and where I got mine at Kareo ). Removing the many obstacles from the path of such a vehicle will automatically allow a real recovery. A sustained, long-term recovery will bring back funding for first responders (through increased tax revenue), but the long-term recovery must be created and encouraged not by a “jobs bill”, but by the 70% of small businesses who should be encouraged to grow our economy. This is basic economics. It is impossible to spend ones way out of a recession.