Economic Snapshot | Budget, Taxes, and Public Investment

Public-Sector Cuts Drag Down State and Local Economies

Some states and cities struggling to dig themselves out of post-recession job losses are suffering from additional self-inflicted wounds. State lawmakers can affect state labor markets through the budgetary choices they make about the state and local public-sector workforce. As the recession took hold and revenues dropped, lawmakers in states and localities were faced with difficult decisions on how to achieve budget balance. While some state lawmakers attempted to preserve public-sector jobs—such as by raising taxes on the wealthy—too many chose to slash vital investments in the public sector, weakening the critical services provided by police, firefighters, teachers, and social workers. As the chart below shows, since the start of the Great Recession in December 2007, 28 states plus the District of Columbia have added state and local government jobs, while 21 states have cut public sector workers.

Economic Snapshot

Change in state and local government employment, Dec. 2007–June 2014

State Change in state and local government
Michigan -8.0%
Louisiana -7.6%
Rhode Island -7.6%
Nevada -6.5%
Connecticut -5.8%
Florida -5.7%
Maine -5.5%
Ohio -5.5%
California -5.4%
New Hampshire -5.4%
Georgia -5.0%
New Jersey -4.8%
Arizona -4.5%
Pennsylvania -4.5%
New York -4.2%
New Mexico -3.7%
Indiana -3.0%
Tennessee -2.1%
Alabama -1.8%
North Carolina -1.5%
Illinois -1.2%
Kansas -1.1%
Wisconsin 0.1%
Maryland 0.2%
Oregon 0.3%
Mississippi 0.5%
Hawaii 0.8%
Minnesota 1.1%
Vermont 1.3%
Washington 1.5%
Virginia 2.0%
Massachusetts 2.3%
South Carolina 2.3%
Arkansas 2.3%
Nebraska 2.7%
Idaho 2.8%
Alaska 2.9%
Missouri 3.2%
South Dakota 3.7%
Iowa 3.8%
Montana 4.1%
Oklahoma 4.3%
Kentucky 4.4%
Delaware 4.6%
West Virginia 5.2%
Wyoming 5.6%
Texas 6.2%
North Dakota 9.2%
Colorado 9.9%
District of Columbia 10.9%
Utah 15.3%
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Source: Authors' analysis of Local Area Unemployment Statistics data from the Bureau of Labor Statistics

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Nationally, the state and local public sector had roughly 412,000 fewer jobs in July 2014 than it did in December 2007, and nearly 600,000 jobs fewer than at its peak in July 2008. Importantly, this workforce should have expanded to keep up with population growth over this time. Had the state and local public sector grown with population growth since its peak in July 2008, we would have 1.8 more million state and local public-sector workers today. Instead, state and local government is one of the few sectors still below its prerecession levels, and remains a significant drag on the overall recovery.

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