Statement from Alexandra Sirota, Director of the N.C. Budget and Tax Center
Raleigh (Nov. 18, 2011) — Four months into the implementation of the FY 2011-2012 budget, the Office of State Budget and Management (OSBM) reported that the equivalent of 1629 state workers were receiving severance payments resulting from reductions in force (i.e. layoffs). Those laid-off workers have increased the number of North Carolinians without a job in the state. Their loss of income will ripple through the economy, and the loss of their service to our communities will impact families across the state.
But the numbers released on Wednesday only tell part of the story. Because the numbers presented reflect only those who are receiving a severance package, they do not capture the positions that have been lost when normal turnover provides state agencies with the opportunity to cut a job without having to lay off an individual. These numbers also don’t capture the jobs that have been cut when local governments are forced to balance their own budgets with fewer dollars from the state when faced with the same, if not greater, demands in their communities. And then there are the jobs supported by federal recovery dollars that didn’t get funding from the state when those dollars ran out.
All of these very real numbers need to be monitored because of the different things they tell us (and measure) about the way budget and policy decisions are playing out in communities.
And that brings us back to the ripple effect of job loss. The most significant omission in the discussion of public-sector job numbers is the impact these will have on the private sector. Budget cuts affect private businesses in two ways. First, businesses suffer because their customers—those laid-off public-sector workers—no longer have money to spend, and the high unemployment rate means many of these workers will struggle to find new jobs. Secondly, much of the money that state government pays for public services goes to private businesses; for example, money spent on Medicaid goes to doctors, hospitals, therapists and others.
The N.C. Budget & Tax Center conducted a whole-budget analysis of the net effect of spending cuts and tax cuts in the final budget using industry-standard economic modeling. The findings estimate that over the next two years the state is likely to lose nearly 30,000 jobs, on net. Nearly half of these jobs will be lost in the private sector, the vast majority in the health care industry.
The OSBM numbers released on Wednesday give us one measure of the impact of state budget decisions. These impacts will be varied and long-lasting. What is clear, however, is that continuing down this path will lead us further from a strong economic recovery.
The N.C. Budget and Tax Center—a project of the N.C. Justice Center—seeks to create economic opportunity and shared prosperity for all North Carolinians through non-partisan research, education and advocacy on budget, tax and economic issues.