LEGISLATIVE BULLETIN: To Save Jobs, Reject a Cuts-Only Approach

To Save Jobs, Reject a Cuts-Only Approach

SUMMARY

  • At the governor’s request, most state agencies have put together proposals for budget cuts of 5, 10 and 15 percent. With a 10-percent cut for education and a 15-percent cut for all other departments, more than 21,000 state employees would lose their jobs. This is an underestimate of the actual job loss, given that not all state agencies produced job-loss figures.
  • The budget cut proposals will also produce direct private-sector job losses. For example, the Department of Health and Human Services has many contracts with private service providers, and budget cuts will force the department to slash payments to providers or cancel some contracts all together. The impacts of the resulting job losses will circulate and multiply through communities.
  • Cuts of this level would still leave the state $1.1 billion short of closing the $3.7 billion gap.
 
By Alexandra Forter Sirota
Director, NC Budget & Tax Center
Feb. 7, 2011
 
The biggest concern for communities throughout North Carolina is increasing the number of good jobs available. During last November’s elections, many residents voted for the person they believed would do the most to put people back to work.
But now that the legislative session is underway, state lawmakers old and new face a considerable obstacle when it comes to job creation—a $3.7 billion budget shortfall. And some of them have decided that instead of creating jobs, the state should put tens of thousands of people—in both the public and private sectors—out of work.
 
The legislative leadership and Governor Perdue have said they plan to deal with the budget shortfall by slashing programs and services and cutting thousands of teachers and other state employees. That will of course have a ripple effect, as the affected families have less money to spend and businesses throughout North Carolina see fewer customers. In addition, private businesses that provide services or have contracts with the state will lose millions of dollars in business, resulting in additional job losses. The combined impact will sink North Carolina’s nascent economic recovery.
 
21,000 Workers… and that’s just the beginning
At the governor’s request, most state agencies have put together proposals for budget cuts of 5, 10 and 15 percent. Under the worst-case budget cut scenario (at least the worst that’s been suggested so far), with a 10-percent cut for education and a 15-percent cut for all departments, more than 21,000 state employees would lose their jobs. This is an underestimate given that not all agencies produced job-loss figures. And that would still leave the state $1.1 billion short of closing the $3.7 billion gap.
 
Such extensive public-sector job losses would also result in private-sector workers joining the ranks of the unemployed. Certainly, with thousands of families forced to significantly cut back on spending and possibly facing foreclosure and other financial hardships, the drop in consumer demand will hurt a wide range of industries.
 
The budget cut proposals will also produce direct private-sector job losses. For example, the Department of Health and Human Services has many contracts with private service providers, and budget cuts will force the department to slash payments to providers or cancel some contracts all together. The impacts of the resulting job losses will circulate and multiply through communities.
 
The Long-term Impact on NC’s Public Investments
While the immediate impact of job losses and budget cuts will certainly bring North Carolina’s economy to a grinding halt in the short term, they threaten to put an end to everything that makes North Carolina a great place to live and work. The investments generations of North Carolinians have made in the state’s education, infrastructure and health-care system are the reasons the Fortune 500 companies have their headquarters here.
 
It’s why students, scientists, physicians and scholars from around the world come here. It’s why North Carolina’s population has boomed in the past decade. North Carolina’s investments in its public structures have paved the way for the past century of economic progress and growth and delivered a quality of life recognized nationally. But another year of drastic budget cuts would put all of that at risk.
 
In the current economic context, North Carolina’s policymakers’ priority must be job creation. Even as they face a significant budget shortfall, the measures to address that shortfall must be considered in light of their impact on employment. A cuts-only approach will not only result in job losses but would undermine investments in public structures that are vital to ensure the long-term growth of the economy.
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