Why Cutting Jobs Won't Solve States' Budget Crisis

In Ohio, Governor Mike DeWine froze hiring. New York’s Andrew Cuomo halted raises for 85,000 union workers, including police and corrections officers. In Pennsylvania, 9,000 state employees stopped getting paychecks.

And it’s just the beginning. While over 40 million jobs have vanished during the pandemic, states have held off on firing workers en masse. Yet as they reopen, huge deficits caused by Covid-19 mean layoffs are all but certain. Deciding who — and how many — will lose jobs will require tough choices and have devastating consequences for those affected. On Thursday, New Jersey Governor Phil Murphy said the state may have to fire 200,000 public workers.

 

But using job cuts to make the budget math work won’t be so simple.

That’s because what might seem like a straightforward cost-savings strategy is anything but, according to former state budget officers. Not only is there severance pay for accrued vacation and sick days, but also provisions that let some former employees, like those in Virginia, keep their health-care plans for up to a year. Crucially, every laid off worker adds to the burgeoning rolls of the unemployed, putting states’ nearly depleted unemployment trust funds under even more strain. People who lose their jobs also spend less, depressing tax revenue. And fewer public workers means fewer public services.

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