The debate over the House Budget and subsequent reporting has put forth various numbers on the employment impact of cuts to state investments. Employment impact analyses can result in wide-ranging results depending on the assumptions used by the analyst. This suggests that a numbers game is at work, and a numbers game isn’t the real story in this budget debate.
The bottom-line is that many jobs will be cut. It’s also likely that, if all these jobs were cut within a month, it could push North Carolina’s unemployment rate back into the double-digits. At a time when the state is struggling to sustain a fragile economic recovery, relying on cuts alone weakens North Carolina’s ability to create, attract, and retain good, quality jobs that are necessary components of a robust future economy.
In the here and now, public workers who do not lose their jobs outright will see reductions in hours and offers of pay cuts in an effort to keep people employed. These concessions by workers may lessen the growth in unemployment but will represent increased economic hardship for many more thousands of North Carolinians.
So what creates such variability in estimates? There are three parts to any estimate on job losses from the State budget: state jobs, local government jobs, and indirect jobs. From an analytical standpoint, it is possible to reliably forecast the number of State jobs that will be cut as a result of the House budget. State jobs are jobs where the State of North Carolina is the employer, and cuts to state positions are clearly stated in the Governor’s budget as well as the “money report” that accompanies the legislative budget. While some of those positions may not be filled at the current time, many are filled, and those individuals would be sure to lose their jobs as a result of the House budget.
It is less possible to reliably forecast how many local government jobs will be cut. Local government jobs include both jobs that are partially state-funded – including public school teachers, teachers assistants, bus drivers, office assistants, and maintenance workers – as well as other county and municipal employees. In this state, public school employees are legally employees of the local educational authority (LEA) where they work. Although their salaries and benefits are partially state-funded, the State of North Carolina does not play a role in personnel management decisions within any given LEA. When critics of the House budget claim that the hardest decisions are being pushed to local governments, this is what they mean. When an LEA’s state funding is cut, they must make all the decisions about how to handle that reduction, including position eliminations, pay cuts, service reductions, and any number of other measures, few of which will be easy or popular. The job loss estimates stated in the Governor’s and House’s budget proposals are based on average salary levels for positions in those classifications.
Indirect jobs are the most difficult to assess even with a variety of sophisticated economic forecasting models. Indirect jobs are jobs that may disappear as a result of lower spending on a wide range of other programs and services. Child care providers may have to downsize their staffs if many of their clients rely on child care subsidies. Health care providers may hire fewer employees, or cut jobs, if they are reimbursed less for caring for patients on Medicaid. Though there’s no reliable hard number of indirect job losses to be had, mainstream economic theory suggests that job losses of some magnitude will definitely occur in the broader economy as a result of drastically reduced government spending. This is because the workers who will lose their jobs will cut back on spending in their local economies and government contracts will be lost by private providers in industries as diverse a health care, construction and legal services.
Given that all we can forecast reliably is the financial impact of State budget cuts to local governments and the state’s economy at large, there will be no “hard and fast” job loss number at the outset. Instead, we must all confront the fact that cuts at this level of magnitude will result in thousands of jobs lost and ripple through the economy undermining what little recovery we have achieved to date.