Layoff savings would be modest in first year

For one thing, state would pay more for unemployment, other public benefits.

Staff WriterJanuary 30, 2011 

If lawmakers tried to balance the state budget on the backs of employees, it would require a lot of backs.

The first-year net savings from shedding a state employee earning an average salary is less than $19,000, according to data from the Fiscal Research Division at the General Assembly.

That modest savings comes after the state pays legally required unemployment benefits, severance payouts and health insurance for a year and absorbs estimated losses from taxes that its former workers wouldn't pay.

Lawmakers face tough choices as they grapple with a budget with a $3.7 billion gap between revenues and expected expenses. Legislators and the governor have talked of cutting the state work force. Some lawmakers say they will focus on eliminating vacant positions; others say they will coax workers to leave by offering buyout packages. All say the state work force will shrink.

"When you look at the size of the problem, I don't think you can say honestly there would be no layoffs," Senate leader Phil Berger has said, noting that it's too soon to know the size of those cuts.

Legislators could make deep cuts in the state's work force and account for less than half of the gap they need to fill. In fact, legislators could eliminate 75,000 employees working for core state agencies and save about $1.5 billion in the first year.

The savings in the second and later years would exceed $3 billion. But the estimated first-year savings - legislators' immediate focus - would add up to just a bit more than the revenue from extending the 1-cent sales tax increase and income tax hike for higher-income residents and some corporations that were passed in 2009. Those tax extensions, billed as temporary two years ago, would bring in about $1.3 billion a year.

Gov. Bev Perdue now says she's willing to consider extending those tax increases. Republican legislative leaders say they will not.

No one thinks the budget can be balanced just by reducing the number of employees. Republican legislators have been stressing the need to get what they can primarily through attrition, annual turnover as employees leave.

"Most of it can be done through attrition," said Rep. Paul Stam, an Apex Republican.

Already, more than 9,000 positions in state agencies in central government are empty. The problem is that many of the employees who leave state-funded positions each year filled posts that many would consider essential: prison guards and schoolteachers.

These hard questions arise amid toughening rhetoric by lawmakers determined to balance the budget without more taxing.

Slimming the state's work force brings challenges that extend far beyond this fiscal year, labor experts and economists say. The displacement of state workers would be absorbed for decades to come in their households and their local communities.

"This will put whole families on a downward slide," said John Quinterno, a work-force specialist in Chapel Hill.

Economists predict that mass layoffs in the public sector would further increase the state's growing foreclosure rates. They could also increase demand for public benefits such as food stamps or child-care subsidies.

Alexandra Forter Sirota, director of the N.C. Budget and Tax Center, predicts cuts to state employees will displace another segment of the state's middle class, perhaps permanently.

"Those jobs aren't likely to come back," Sirota said. "When we have quality jobs that provide a living wage and benefits ... the idea of losing those and replacing them with jobs that drive up the low-wage sector, it's hard to imagine that as a cost savings for the state."

Staff writer J. Andrew Curliss contributed to this report.

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