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Recession’s lesson: Pay now, or pay much more later

Post by Kim Bradford on July 3, 2010 at 4:14 pm with 5 Comments »
July 2, 2010 4:13 pm

This editorial will appear in Sunday’s print edition.

Call them what you will – furloughs, temporary layoffs, reality catching up to state government, the Legislature balancing the budget on the backs of state workers.

By whatever name, the state’s plan to save $73 million by idling a third of its workforce on 10 separate days over the next year is better than the alternatives.

Union leaders may be fighting furloughs in court, but many of their members no doubt realize that staying home Tuesday is a small price to pay for having a job come Wednesday.

Furloughs preserve jobs, and the U.S. economy needs them. Signs that the nation’s economic rebound is stalling – among them a rise in jobless claims – underscore the importance of keeping people employed.

Twenty-two states used furloughs in the last fiscal year. But Reuters reports that the practice is going out of fashion and the more drastic step of laying off workers is becoming a more widespread cost-cutting tool.

The reason: States underestimated the staying power of the recession. Many governments were slow to take decisive and aggressive action to trim expenses. The reckoning is bound to be doubly dramatic – and require twice the sacrifice.

Take Puyallup. City officials there crowed for much of the recession that their financial prudence had allowed them to avoid layoffs.
Now the slow erosion of tax receipts has caught up with the city, and it faces losing nearly one-third of its staff. The longer it waits to act, the more pink slips it could have to hand out.

Pierce Transit has also tried to put off the inevitable. After sales tax revenues took a dive, the agency made only nips and tucks in spending, thus bleeding its reserves into such a hole that now only a 50 percent increase in the transit sales tax – or a 43 percent cut in service – will save it.

Perhaps what state and local government need is more pessimists in charge of the purse strings.

State lawmakers also have been slow to acknowledge the growing financial crisis, hoping against the odds that economic recovery would deliver them from having to make tough calls.

If it hadn’t been in denial, the Democratic majority might have resorted to furloughs sooner. The plan saves $38 million in the general fund and $35 million elsewhere. Legislators went there only after it became clear that they’d be asking for far greater concessions from taxpayers and vulnerable populations.

Making up for lost time will hurt. Unions might rail – and yank endorsements from all but the most loyal Democrats – but don’t look for the next state budget to be any kinder to anyone, state employees included. Furloughs are the least of their worries.

Leave a comment Comments → 5
  1. There is also a flip side to the furloughs. It can serve as a crutch to keep positions that are no longer sustainable. We used them in Gig Harbor at the start of the recession in concert with layoffs. The idea was to cut expenses while not slashing services too steeply and keeping a close eye on revenue. If the economy turns around then there’s not as much ground to make up. Obviously it didn’t so at that point you just need to get to a sustainable budget without balancing a structural deficit on the backs of the employees you will need to keep.

    The state, on the other hand, is out of time. We’re out of the recession but starting to understand that our consumer based economy is not returning. We’ve answered the age-old economic question of whether or not “general gluts” were possible. It’s here. Prices are still plummeting (and with it, sales tax). We’re also seeing the impact of a decade of tax cuts. Voters have been sold “something for nothing” on both sides of the aisle for too long. Discussing furloughs at this point is a bit like putting the stopper in the drain after the water is all gone. Time to grow some political courage and make massive and painful cuts or raise taxes. Messing around with small numbers like furloughs or pay freezes is irresponsible. We need to make big number moves and do it quickly. If it doesn’t start with a “B” as in “billions” then it’s time to move on to another solution. We can tinker later.

    It’s true most of you legislators who make those hard decisions will lose your office. There are worse things in life. Do the right thing and take satisfaction in the fact that you sacrificed your political career for the good of the state and republic.

  2. PumainTacoma says:

    “We’re out of the recession but starting to understand that our consumer based economy is not returning.”

    WHO Says we’re out of the recession? Hello?

    Reports are that we are deepening and that we must raise taxes AND cut spending drastically or face what now Spain is facing and soon to be the U.K. too. Krugman and Ferguson well known economist, Harvard professor sees things differently. I am not inclined to go on a spending spree with the remaining bail out monies to save government jobs, nor increase taxes on the 50% who only pay taxes while the other 50% sit back and don’t pay their mortgages (“strategic mortgage default strategy” which 25% of the population is doing) while buying gadgets and new cars only to leave us and the banks holding their mortgages. Politicians will have a rude awakening soon as those that have been paying their mortgages and taxes for years will no longer foot the bill for any pay as you go program for people who essentially finger the tax payers and say… I give up, not paying my mortgage but will buy a new car and walk away from my loan. These people deserve nothing!!!!! Seven year moratorium on the ability to get new loans is not long enough for these bums. Bad seeds will always be that “bad seeds.” Do the right thing and cut waste today with no added income for the bums who will remain bums indefinitely. Happy FOURTH!!!

  3. Recession is defined by negative GDP growth. We’ve had positive GDP growth for 3 quarters now. Certainly unemployment, which is a lagging indicator, is still high and making life miserable for a lot of people, and we could dip back into recession. But we’re out of it, for now.

  4. PumainTacoma says:

    I suppose this guy is now the Harvard professor or Noble Prize winner. Some of us do have advanced degrees, read, and have jobs (other than the government). We don’t need to be lectured by arrogant politicians who depend on the government for a pay check.

  5. larsman says:

    Human nature 101- Potentially negative consequences are ignored or at least downplayed in order to a) make a sale, b) get a permit, c) attain consensus or d) get a vote or an election. Correction, they don’t depend on the govt. for a paycheck…they depend on taxpayers (me and you)…

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