‘The last thing we need right now’: States, cities hemorrhage jobs

Megan Cassella and Eleanor Mueller

Governors and local officials are struggling to meet payrolls amid a pandemic that has dramatically hiked government costs and sapped tax revenues. The U.S. shed 585,000 government jobs in May almost entirely at the state and local level, even as the rest of the economy began to show signs of recovery.

Now state and local governments are looking to Congress for help as lawmakers begin to consider another round of economic aid. The job losses in government — which totaled more than 1.5 million in two months, according to Labor Department data — could get worse without a federal backstop, state officials and some members of Congress say.

“The last thing we need right now is for unemployment to go any higher,” New Jersey Gov. Phil Murphy said during a POLITICO Playbook event on Tuesday. Absent cash assistance from the federal government, which the state will need as early as next month, educators, firefighters and EMS workers might be laid off, he said.

“These layoffs are happening as we speak,” Murphy said. “It’s not theoretical.”

Many of these municipal and state layoffs are disproportionately affecting black Americans, adding pressure on Congress to act as protests over racism and police brutality roil the country. The public sector employs a higher proportion of black workers than other U.S. industries do, and its decline explains in part Friday’s jobs report, which showed that while the unemployment rate declined overall, it continued to tick upward for black workers.

“African Americans tend to have those kinds of jobs that are the service jobs where they’re going into work and risking their lives every single day, and then going back home and risking their families’ lives,” said Lee Saunders, president of the American Federation of State, County and Municipal Employees union. The government “has historically been one of the most dependable employers of African Americans.”

“So those who are getting laid off disproportionately are African American, and they’re going to be hurt the most.”

Congress allocated $150 billion to state and local governments under the CARES Act in March, but officials were restricted in how they could spend it, permitted to use it only for coronavirus-related costs rather than to cover budget shortfalls due to a loss of tax and fee revenue. The National Governors Association, composed of both Democrats and Republicans, has for two months now been calling for an additional $500 billion in flexible aid and for a loosening of restrictions on the CARES Act funding, but lawmakers have yet to act.

House Democrats set aside at least $915 billion in state and local aid in the HEROES Act they passed in mid-May, only for Senate Majority Leader Mitch McConnell to dismiss it as a “laundry list of pet priorities.” More recently, McConnell told Fox News his chamber “may later do more” to help states by allocating aid but that he wants to wait and see how things are looking after more of them begin to open up. Some conservative lawmakers have made clear they have no interest in providing further aid, arguing that would simply reward primarily Democratic-led states that have, in their minds, mismanaged their budgets.

“We’re just seeing so much incompetence in blue state management, it’s going to be hard to make the case to any Republican that for some reason people in Utah should pay for Bill de Blasio’s incompetence,” said Stephen Moore, a conservative economist and outside adviser to the White House, referring to the mayor of New York City. He advocated instead for states to quickly reopen their doors so they can start collecting tax revenue.

In the meantime, negotiations on the Hill are essentially at a standstill.

“There’s no serious conversation happening,” Sen. Chris Van Hollen (D-Md.), who serves on the Appropriations Committee, said of state and local aid. “There should be, but Senate Republicans are slow-walking this process.”

“Maybe they’re trying to figure out what they want,” he added. “There doesn’t seem to be any consensus.”

Governors and mayors are urging Congress not to delay sending aid that is sorely needed. “The timeline is now,” said Teryn Zmuda, chief economist at the National Association of Counties.

Should layoffs continue on their current trajectory, they could lead to a dramatic cutback of essential services at a time when they are in greater demand than ever.

“You will see disaster occur if in fact there are continued layoffs in the public sector,” Saunders said, listing health, education and sanitation services as some that will see major cutbacks without additional aid.

And in many cases, the populations benefiting from those services are communities of color that the pandemic has already hit hardest.

“The reduction in services that comes from cutting those jobs disproportionately affect communities that are black and brown,” Democratic Treasurers Association Executive Director Dave Wallack said. “There’s a ripple effect.”

One of the services already taking a hit is public education. Of the government job losses recorded in April and May, nearly half were in state and local education, a sign of school districts moving classes online and in some cases ending the school year early.

Many of those jobs are likely furloughed service employees — bus drivers and cafeteria workers, for example — who are unable to do their jobs while schools are shut down. Others may be teachers and teachers’ aides who expect to go back to work in the fall. But the concern, school district leaders and education policy analysts say, is that temporary furloughs could quickly become permanent layoffs without additional aid.

Here, too, the cutback in services is likely to disproportionately hit low-income and minority students: School districts that rely the most on state funding, rather than just local property taxes, tend to be low-income and low-wealth areas, said Michael Griffith, a senior researcher and analyst with the Learning Policy Institute.

“You’re helping all kids if the federal government were to be able to provide additional funding,” he added, “but you’re really helping those kids who traditionally struggle.”

As states search for ways to trim their budgets, layoffs will be their primary tool, said Kim Rueben, director of the state and local finance initiative at the Urban Institute. “By and large, if states are making cuts, what that translates to are employment cuts,” she said.

In California, which employs more people in state and local government than any other state, thousands of local government workers across the state already have seen their hours slashed or positions eliminated.

Some of the deepest cuts have been made in small to mid-sized cities that rely on taxes generated from the tourism and hospitality industries to fund operations. In Santa Monica, for example, more than 20 percent of city employees were either laid off or given buyouts last month.

With so many potential job losses on the table, economists and officials warn that a lack of aid to state and local governments would affect the broader economy. Beyond prolonged unemployment — which would limit how much consumers are spending — it would also cause a drop in essential services and a pause on public sector projects, both of which could worsen an already bleak situation, they say.

“Infrastructure projects have been put on hold,” said Iowa State Treasurer Michael Fitzgerald, the longest-serving state treasurer in the U.S. “That will slow down the economy, slow down the workforce.”

“Everyone,” he added, “is treading very carefully.”

Sam Sutton, Alexander Nieves and Aaron Leathley contributed to this report.