Budgeting is a bottom-line business, and the bottom line from an in-depth exploration of the pluses and minuses of laying off state employees in Sunday's N&O is that mass layoffs are an expensive, inefficient way to fill the $3.7 billion hole in North Carolina's budget.
Why? Because the cost to the state of laying off an employee - particularly the first-year cost - is so high. And though longer-term personnel-cost savings are, arguably at least, desirable, it's a "first-year" crisis that stares the General Assembly in the face.
That is, the budget for fiscal 2011-12, beginning July 1, must balance - either through spending cuts, revenue increases (from tax hikes, mostly) or some combination of the two.
A close look at the costs to the state of laying off a worker shows the difficulty of, as reporter Mandy Locke's article put it, balancing the budget on the backs of laid-off employees. It's worth noting that layoffs, in the traditional sense of the word - where someone is laid off for a spell, then called back to work - are not what's going on in the economy these days. These employees would, in effect, be fired.
Minimal savings
Take an average state employee, paid $42,000 (retirement contributions and benefits bring the compensation cost to $54,400). According to information from the General Assembly's Fiscal Research Division, the cost of providing required severance pay, health benefits for a year and unemployment benefits for this employee would run to $32,800. There's also a projected loss of $3,200 to the state in tax revenue. Bottom line: the net first-year saving is $18,400.
That's a painfully small sum, or saving, whether you compare it to the $3.7 billion budget gap, to the loss of public services that mass layoffs would likely produce or to the pain driven home to the fired employee and his or her family.
And here's another way to look at it: The state could cut an unthinkable 75,000 jobs (out of 255,000 total, most of which are in the public schools, since teachers in North Carolina are state employees) and still get only a slightly greater first-year benefit than by retaining the "temporary" tax hikes, including a 1-cent sales tax increase, adopted by the legislature two years ago.
So, keep paying those modestly higher taxes or lay off 75,000 more North Carolinians? The answer should be obvious to legislators properly concerned about the all-around ill effects of high unemployment.
Vacant? Lose it
Still, isn't there some way to make headway against the state's personnel costs?
There is, and it comes, as key legislators point out, from attrition. Eliminating a position that's vacant - most likely because the employee moved on and the job couldn't be filled because of a hiring freeze - is far less costly than a firing. And, as of Jan. 1, more than 9,000 state jobs were unfilled. And about 10 percent of employees leave their jobs each year.
Not filling any of these jobs - a tough order, since many are front-line positions such as teachers and prison guards - would save hundreds of millions of dollars. Good management would be required to deal with the consequences of losing many of those positions, but yes, it would be a step toward closing the gap.
The ultimate bottom line is that the problem looming before the legislature and Gov. Beverly Perdue demands a mix of solutions. North Carolina's budget gap can't reasonably be closed by giving its employees the boot.
