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Illinois Tue Sep 08 2009

Is Laying Off State Workers a Fix?

Governor Quinn and the local leadership of AFSCME Council 31, which represents the largest proportion of state workers, have been unable to reach a deal that would avert over a thousand layoffs. The Governor was asking for concessions that the union said amounted to a 15% pay cut. This is a combination of cuts: deletion of promised raises, reduction of health care benefits and pension contributions, and unpaid furlough days. Quinn has announced that he will have to move forward with over a thousand layoffs as a result of the refusal of AFSCME locals to accept the cuts. Quinn sees the roaring budget deficits we all see. The assumption is that spending needs to be cut to reduce and eliminate this deficit; but it doesn't necessarily follow that cutting programs will have that effect. Cf., Adam Doster's "Civic Fed Rule."

And of course there is the fact that many state programs actually "save" the state, or the people, money from the services they provide. Either by addressing a problem that effects productivity (road congestion, child care for working class families, subsidies for health insurance that reduce sick days and unemployment), or by providing a service that indirectly raises revenue (subsidies for jobs programs; maintaining regulatory standards that protect consumer confidence). This isn't controversial; Illinois' conservatives would look at a list of state activities and approve of way more state activities than they disapproved of. Licensing, regulation of professions, capital projects that increase mobility, building institutions of higher learning, etc. We need correctional officers and child safety case workers; we need inspectors to check that our bridges aren't falling down, and to monitor water pollution levels. That's what a "state worker" is.

Knowing this, how about the fact that Illinois has the lowest state worker-to-resident ratio in the country? The problem is not the size of government, the problem is that politicians refuse to pay for the services Illinoisans demand. Cutting deeper into the bone won't make Illinois better; it'll make the quality of life worse. Even were our budget to be balanced, basic services will disappear. We know we're talking about basic services because Illinois has a tiny state government:

All states average, 2007 - 85
Illinois - 54

Ten Worst-Staffed Nationwide, 2007
Indiana - 53
Illinois - 54
Arizona - 58
Wisconsin - 60
Ohio - 62
Colorado - 63
California - 66
Nevada - 69
Florida - 71
Michigan - 71

If Illinois state budget is "bloated," as many charge, these numbers would seem to indicate that the state's employees are not the cause of that bloat.

When it comes to public employees, there are a lot of instant opinions that come out of bored, lazy narrative politics. One is that a state worker is by definition unnecessary; the second is that even one state worker is too many state workers.

If you start with the assumption that the ideal state is one that employs no people, you'll just assume that all lay-offs of state workers is justified. But that assumption is wrong, and I think we all know that. We want the state to do lots of things. But the proof is even more stark when you consider the fact that Illinois has made the largest cut in state staffing levels of any state--over the last six years of Democratic control, by the way--and yet are still mired in this deficit. Illinois has cut its state staff by over 23%. Why do we still have these deficits after cutting a quarter of the state's employees? Shouldn't we have expected to see an attendant decrease in the deficit? Or any decrease? Or at least not a rampant increase?

The strict Free Market Fundamentalist position would be that taxes above a certain level force a drop in revenues because people cease producing wealth*. But since most of the increases have been in fees and consumption taxes--which are not progressive--even this thoroughly unprovable argument doesn't work. You can't say Illinois' high state taxes are forcing revenues to drop by chasing out the entrepreneurs and capitalists, because the fundamental taxes they pay, on income and wealth, have not increased appreciably, even if you believe they are high. So why the deficit?

The deficit exists for lots of reasons, one of which is that revenue sources (taxes and fees) can't keep up with the services Illinoisans are demanding (roads, regulation, social services). The fix therefore needs to address revenue streams.

Meanwhile, the state is pushing more of its workforce into unemployment (where they will likely draw on unemployment and, for at least a portion of them, other social services such as health clinics or insurance, food stamps, etc.) This means less taxpayers and less demand, on top of poor delivery of services deemed, at one point, critical or at least socially useful. Their salaries are off the balance sheet, but the effect of losing their value to a community and the productivity lost--as well as the loss of consumption--isn't reflected. Since taxes aren't going to be reduced, that lost consumption doesn't return to the taxpayer.

So, in a general way, layoffs will not take care of the deficit: there aren't enough workers to lay off, and there's no recent historical evidence that layoffs have any positive effect on deficits--in fact, based on the last six years, you'd be better off guessing they exacerbated them.

But what about the straightforward arguments that such layoffs, while perhaps not helpful, are unavoidable because the state doesn't have the money?

The union counters this argument by pointing out that the state spends plenty of money on contracts for work that should be done by state workers being laid off; in other words, a contract for services goes out while state workers are being laid off. Redundant contracts for political cronies are not justifiable when unionized workers protected by a contract are being fired.

Anders Lindall, spokesman for AFSCME Council 31, explains via email:

[T]he state has a $270,000 contract out for data entry and verification of tax returns, even as it is laying off clerical workers in the Department of Revenue who do exactly this work. It has a half-million-dollar contract for screening, assessment and support services under the Department of Health Care and Family Services, even as HFS has targeted Human Services Caseworkers for layoff. There's an $8 million contract for quality assurance and utilization review under HFS, which is laying off Public Aid Quality Control Reviewers. Manpower Services has a $14.5 million contract for temp clericals in all agencies, even as half a dozen departments are laying off support staff."

Doesn't sound like a nefarious effort to protect bloat. In fact:

"They should also eliminate do-nothing political holdovers from the previous administration, and take up our other suggestions about running the state's group health insurance program more efficiently, just for starters...Pat Quinn shouldn't cut services or lay off frontline workers before he roots out wasteful contracts and gets rid of useless top managers first."

As with more local situations, particularly the CPS, a layer of bureaucracy that feeds the Masters Program Patronage sucks up lots of resources unnecessarily. Talk to front line workers in government, and complaints about redundant political appointees abound.

If Illinois' state workforce is not the cause of the deficit, and if layoffs will not address it, why is creating more unemployment--in potential violation of a contract--acceptable? Without a doubt, senseless and irresponsible demagoguing against state workers to score cheap political points is partly to blame.

*The so-called "Laffer Curve":

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Good Luck / September 8, 2009 3:17 PM

Its a shame you overlook the effect of pension obligations on public budgets.

A small example from the 2010 CPS budget:

"For FY2010, teacher pension costs are budgeted at $510.9 million, as compared to $392.5 million in projected expenditures for FY2009, for an increase of $118.4 million. This cost includes both CPS’ cost of the pension and a pension benefit that is paid on behalf of employees. Over the last five fiscal years, teacher pension costs have skyrocketed from $198.1 in FY2005, for an average increase of over 21% per year. This is a rapidly increasing burden on the CPS budget. "

Year over year increases of 21% is extreme exponential growth and clearly unsustainable.

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