Would massive state layoffs make recession worse?

  • If Gov. Pat Quinn signs the budget, he'll have to decide whether he treats it as a six-month budget and calls lawmakers back to Springfield around Christmas for compromises and negotiations. Or, Quinn could treat it as a full-year budget and start layoffs after July 1.

    If Gov. Pat Quinn signs the budget, he'll have to decide whether he treats it as a six-month budget and calls lawmakers back to Springfield around Christmas for compromises and negotiations. Or, Quinn could treat it as a full-year budget and start layoffs after July 1.

Published: 6/16/2009 12:28 PM | Updated: 6/16/2009 8:41 PM

SPRINGFIELD - If Illinois state workers are laid off under the bare-bones budget lawmakers approved last month, the effects will go beyond the possibility of criminals being released from prison early, the sick losing their caregivers and road construction projects grinding to a halt, some experts say.

Hundreds of thousands of private-sector layoffs and furloughs will follow and Illinois' economy could get dragged deeper into recession, one expert predicts.

On the other hand, a tax watchdog says all this talk of the sky falling is essentially a fear tactic that allows state lawmakers to continue funding greedy programs, such as a pension system that pays several thousand retirees more than $100,000 each year in pension income, at the expense of people who really need it on the other end of the income spectrum.

Yet those who believe the answer is not in budget cuts say the numbers speak for themselves.

"This is really a complex question, but the wrong answer could be disastrous, and the wrong answer is really major cuts," said Ralph Martire, executive director of the Center for Tax and Budget Accountability, a Chicago-based bipartisan think tank that studies the Illinois state budget. "If Illinois were to primarily balance its budget by cutting spending, i.e. cutting jobs, our recession would be significantly worse."

"For regular public expenditures - things like education, health care, human services - for every dollar the state spends, you get a multiplier of $1.36 rippling through the local economy," Martire said. "Even better are infrastructure projects, which get a $1.59 multiplier. And maintaining state spending is a significantly higher multiplier than any kind of tax relief."

At the end of May, faced with an estimated $12 billion budget shortfall and unable to agree on a tax hike to increase state revenue, state lawmakers approved a budget that spends only the money Illinois has coming in over the next year. That means Gov. Pat Quinn will get only about half the money he's requested for state agencies.

If the governor signs the budget, he'll have to decide whether he treats it as a six-month budget, keeps most services intact and calls lawmakers back to Springfield around Christmas to figure out where to get the money for the second half. Or, since there's no guarantee lawmakers will be more likely to compromise in December, Quinn could treat it as a full-year budget and start layoffs soon after the budget year begins July 1.

"If the budget stands, thousands of layoffs are inevitable," said Anders Lindall, spokesman for AFSCME Council 31, a union representing many state employees.

Quinn is required by the state's union contract with the American Federation of State, County and Municipal Employees to give the union 30 days' notice before beginning layoffs. Quinn hasn't sent a layoff notice to the union, Lindall said.

Quinn also can't furlough state workers, force pay cuts or change work hours without going back to the union to negotiate those concessions, Lindall said.

Representatives of the governor's office and AFSCME met Tuesday in Springfield to discuss the possibility of "voluntary" furloughs for state workers. Under the proposal, state workers would be encouraged but not required to take four unpaid days off in the next year. If every state worker participated, the state could save up to $35 million.

"It doesn't seem like a serious effort to deal with the deficit," Lindall said.

That leaves layoffs. But since the entire state payroll is approximately $4 billion a year, layoffs alone won't fix the state's budget mess.

"You could shut down state government tomorrow and release 45,000 inmates, and say we're not going to provide any protection for abused kids, and we're going to turn our backs on the mentally ill and the developmentally disabled, we're going to close all the state parks, we're going to shut down all state services, and you would still have an $8 billion deficit," Lindall said. "Those who say that you should cut, it just doesn't square with the facts. There's no way to cut yourself out of this hole."

But there are plenty of cuts that should be made, counters Jim Tobin, the president of National Taxpayers United of Illinois, an anti-tax group based in Chicago.

"I think they should lay off all the state troopers. I think they're a total waste of taxpayer money," Tobin said. "We have too many cops and state police have proven time and time again they're glorified Keystone Kops. We won't miss them one bit."

Tobin said lawmakers should also make state employees pay more into their pensions and pay more for retiree health care.

"They're basically cutting back services, they claim, for the needy. And they're doing that to subsidize the greedy," Tobin said.

For example, he says, 3,194 retired state employees took in more than $100,000 each in pension benefits in 2008. "They want to raise taxes on the middle class to subsidize the wealthy retired government employees."

Should Quinn resort to cuts to solve the budget problem, making those cuts will be more difficult because there are simply fewer people to lay off.

Since 2001, Illinois has eliminated 14,237 state employees - a 22 percent cut, leaving the state with the fewest state employees per resident in the country. Prison guards, mental health workers, and other state employees in 24-hour locations already work mandatory overtime to cover shifts. Layoffs there could make an already difficult situation for these workers even worse.

"Rather than using overtime to cover unforeseen operational needs, the state has relied on overtime, and forced overtime, as standard operating procedure," Lindall said. He calls mandatory overtime a "triple loser of a proposition" because employees get burned out and exhausted, the quality of care in treatment facilities and safety in prisons is diminished, and the state ends up paying more money for all of it.

Lindall predicts up to five mental health centers, four centers for the developmentally disabled and veterans homes could all face forced closures with little recourse for their clients. Forced state prison closures could put criminals back on the streets before finishing their prison terms.

"State services are so desperately understaffed that layoffs of the kind of magnitude that are inevitable if the current budget stands - 9,000 or more layoffs - are going to force closures. There's no question about that," Lindall said.

And then there's the ripple effect. Many services that used to be provided by state employees are now provided by private organizations paid by state grants. Those groups would see a cut in their grant money, leading to more than 100,000 additional layoffs in the private sector.

"Illinois is very much not a public employment state. It is a grant-making state," said Martire, the think tank executive director. "That is our model. We already are primarily an outsourcing public entity, especially for human services."

Not everyone thinks these groups should continue to receive state funding for the services they provide.

"These people should be raising their money in the private sector like I do. We don't accept money stolen from the taxpayers and they shouldn't be, either," said the anti-tax group's Tobin. "If they're really doing a great service for the people of Illinois or the people of their community, then the folks will voluntarily donate."

Jerry Stermer, the governor's chief of staff, contended Tuesday that those private-sector job cuts would disappear "almost instantly" if lawmakers don't pass a new budget by July 1.

"It's not something the governor wants to do. It's not something the governor has proposed to do. It's not something the governor is looking forward to doing," Stermer said. He said Quinn will call lawmakers back to the Capitol next week to push for a new budget.

"We have now two weeks to work as a community to change that reality and turn that around," Stermer said.

The cuts would also cost the state access to some federal funds. When Illinois spends money on certain health programs and other budget items, the federal government reimburses or matches what Illinois spends. If Illinois isn't spending, it can't get that money from Washington.

Since the General Assembly adjourned June 1, Quinn and legislative leaders have been meeting occasionally in Chicago to try to hammer out a budget compromise that would avert layoffs. But lawmakers and the governor still don't agree on what should be done.

In May the state Senate approved raising the state's income tax rate from 3 percent to 5 percent and to apply the state's sales tax to services like oil changes and hair cuts that aren't currently taxed. The House didn't vote on that tax hike and instead voted down a Quinn proposal to temporarily raise the income tax rate to 4.5 percent.

If an agreement is eventually reached lawmakers could return to Springfield before the end of the month in special session to approve the deal.