Local Governments Can't Avoid Cuts Forever
This is reprinted with permission from The News & Observer of Raleigh.
Businesses are laying off employees by the thousands. Macy's is cutting 7,000 jobs. Microsoft is letting go of 5,000 employees. GlaxoSmithKline may eliminate as many as 6,000 jobs, including some in the Triangle.
But across North Carolina, the hundreds of thousands of people who work in government jobs have been spared the sort of job cuts that are becoming commonplace in the private sector.
That may be about to change.
Government budgets are feeling the same sort of squeeze that private businesses are experiencing. But local and state officials say they have resisted layoffs because they are in the business of providing services -- teaching school, policing the streets or handling claims for unemployment benefits. And as the economy struggles, more and more residents turn to the government for help, through additional community college classes or more demand for Medicaid, the government-funded health plan for the poor.
"When you get into taking people off a street-patching crew or off a garbage collection crew, then you are hurting the services going to the front door of a home," said Brian Hiatt, the city manager of Concord. "That's going to be noticed."
Meanwhile, Congress is working on an economic stimulus bill that would funnel billions of dollars through governments at all levels in an effort to create jobs and increase consumer spending. In the version of the bill originally passed by the House, the state Department of Transportation, for example, would be expected to manage millions of dollars for road-building projects that would be farmed out to private contractors.
"This is a time when we're contemplating economic stimulus to create jobs, and to consider laying off government employees at this time seems contradictory to me in terms of what the national strategy is," said Julie Robison, the mayor pro-tem of Cary.
But the reluctance to consider public sector layoffs may be thawing in the face of ever-worsening economic news. Gov. Beverly Perdue surprised some in state government recently when she told state agency heads to begin preparing, procedurally speaking, for layoffs in case conditions worsen. Durham Mayor Bill Bell hinted in his state of the city address last week that layoffs may become necessary.
And public universities have prepared plans for the next fiscal year that would eliminate up to 1,600 jobs. In all three cases, the officials doing the warning said they hoped to avoid job cuts.
"The public sector in general is more reluctant to shed jobs," said Mike Walden, an economics professor at N.C. State University. "For them to shed jobs is a signal that times are very dire."
A global recession has forced North Carolina businesses to cut 120,000 jobs since December 2007, according to the state Employment Security Commission. The U.S. Labor Department announced Friday that U.S. employers eliminated nearly 600,000 jobs in January.
The public sector provides hundreds of thousands of jobs in North Carolina. In 2007, state and local governments, schools, public hospitals, universities and public utilities employed the equivalent of 542,180 full-time workers in North Carolina, according to the U.S. Census.
Statewide, government employees account for about 17 percent of jobs, according to the U.S. Bureau of Labor Statistics. In Wake County, three of the top five employers are public entities.
The state government is facing a revenue shortfall next year that could reach more than $2 billion of a $21.5 billion budget.
Lawmakers from both parties and from across the state agree that large tax increases are unwise and unlikely, which means that deep spending cuts will be needed to balance government budgets. That means layoffs may be unavoidable, said state Rep. Thom Tillis, a Mecklenburg County Republican. Tillis is a consultant who helps businesses cut costs and become more profitable.
"If there's a reduction in service, there's got to be a reduction in force," Tillis said.
Cary has found about $3.5 million in cuts to its current $165 million budget without resorting to layoffs, Robison said. The town saved $60,000 by delaying a consulting contract. It delayed replacing its vehicle fleet, which saved $2.4 million. Officials cut back on services such as mowing medians and cleaning community centers.
And the town saved more than $300,000 by not hiring for several unfilled positions that were funded in the budget.
"One of the overriding principals of these cuts is we did not make any cuts that would negatively impact the quality of the services that the citizens of Cary expect to see," Robison said. "We're not letting our medians run wild."
Municipalities and agencies across the state have saved money by keeping jobs unfilled. At least 32 cities or towns have frozen hiring or placed restraints on filling jobs, according to data collected by the League of Municipalities. The hiring freezes are in effect in large cities such as Charlotte and in towns such as Spring Lake, which has also reduced its travel budget. At the state level, the Department of Health and Human Services has reported that not filling 32 vacant jobs would save $1.4 million.
Searching for Work
"They just aren't hiring," said Evangeline Walls, 47.
Walls, a Raleigh resident, would know. She has been looking for work for nine months. She has experience in social work and has put in applications at the cities of Raleigh and Durham and with Wake County. The answer has been the same.
"Everybody's working at a deficit," said Walls, who spent hours Thursday at the Employment Security Commission office near WakeMed in Raleigh to talk about unemployment benefits. The office has added chairs to its waiting room to accommodate all the people looking for work.
On Wednesday, a handful of Employment Security Commission employees stayed at work through the night to ensure that the agency's computers could handle a federal extension of unemployment benefits.
"That's the kind of dedication you'll find not only in the Employment Security Commission but in a lot of places in state government," said Andy James, a spokesman for the commission.
There Will Be Pain
Some see the current downturn as an opportunity to reverse a decade of steady growth in government.
"If there is a silver lining in this, we now have an opportunity and in fact an obligation to the people of North Carolina to reduce the size of government," said state Rep. Ric Killian, a Charlotte Republican. "We cannot continue to expand the scope of government because in down times we hurt those that we are trying to help the most."
Cities and towns may soon lose the luxury of finding cuts that don't affect services, said Ellis Hankins, executive director of the N.C. League of Municipalities.
"I won't be surprised at all if we don't see some layoffs, some furloughs," Hankins said. "There is going to be pain."
Durham's mayor, Bell, recently sent a signal to the city's employees in his State of the City address.
"I don't want to scare anyone with my remarks," Bell said, "but all city employees should be aware that we are entering a period of economic uncertainty that many of us have not experienced."
The city's anticipated revenue shortfall could reach $40 million in the coming fiscal year; the city's budget is $216 million.
Bell said in an interview that he was trying to get the attention of employees, who can help the city, and themselves, by cutting off lights, reconsidering travel or finding other ways to save.
"Hopefully, it encourages our employees to do more in an efficient way to try to avoid potential layoffs," Bell said. "If we all chip in, we can try to keep the family together."
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