As state and local officials cope with budget-related COVID challenges, Benjamin Franklin’s attorney should be aware that “adversity creates opportunity.” In this case, the option is to use taxpayer money more efficiently and then to provide permanent state and local tax breaks.
The amount that states and local corporations tax is determined solely by the amount each selects to provide services. The vast majority of both groups found ways to cut costs and make up for some lost revenue during the pandemic, and much of the savings came from staff.
The job report from December showed a decrease of 350,000 jobs in the state government compared to the previous year. The local administrative units together had 863,000 fewer workers.
With more than 1.2 million government agencies gone, state and local lawmakers should ask the authorities some open questions, such as:
- Which essential functions were not fulfilled in 2020?
- What is the total annual cost of jobs that have been cut (pay, benefits, pension, etc.)?
- By how much does the uncovered pension obligation decrease if these positions are not filled?
When the average total cost per job is just $ 60,000, there is nearly $ 73 billion on the table for potential tax breaks. However, the actual number could be much higher. Some states have bizarre created government offices while the private sector has been decimated. These governors may blame COVID for the need to hire more staff, but that doesn’t wash away as most states have made significant reductions.
Five states – Alaska, Iowa, Montana, New Mexico, and Oregon – reported more state government employees in December than the previous year. The average job loss in 50 states was 6.4 percent, although some states made only minor cuts.
New York’s private sector jobs fell a worrying 11.6 percent. But Governor Andrew Cuomo only reduced the state workforce by one percent. Other states with disproportionately low government job losses compared to private sector losses are Oklahoma and Louisiana (government jobs -1.9 percent), North Dakota (-2.2 percent), Nevada (-2.9 percent), Vermont ( -3 percent) and North Carolina (-3.4 percent), Missouri (-3.7 percent), and Illinois (-4 percent).
Utah and Idaho, both fast growing states, showed strong fiduciary responsibility to taxpayers. They were the only states with more private jobs than a year ago, but they still managed to shed some government jobs. Utah cut government jobs by 3.3 percent and Idaho by 8.9 percent. This builds on prudent decision-making by this state duo, which ranked first and third for economic prospects in the latest edition of the annual index of economic competitiveness of rich and poor states (ALEC-Laffer State).
Hawaii was the only state with more local government agencies (100) in December than the previous year; The 50-state average was a decrease of 5.9 percent.
State and local lawmakers will be working hard to replace any government job, and some may need to be replaced. However, policymakers can use logic and facts to defend themselves against the case for more government jobs.
Those who say government employees contribute to the economy should be reminded that every dollar used to pay government employees is taken first from the economy and hardworking taxpayers. This is not intended to diminish the value of the necessary government employees. It’s just a reality that is too often overlooked.
“We’re already on the point” and “We’re very efficient” are two other justifications that state and local lawmakers are accused of. Here the legislature can answer questions such as “How do you measure this?” And “Have you analyzed whether these functions can be provided more efficiently through outsourcing or through cooperation with another government unit?”.
Comparing the number of government employees per capita across states is a good place to start to measure efficiency. According to the July 2020 population estimates and December 2020 Employment Report, New York has 59 percent more state and municipal employees than Florida (682 per 10,000 residents versus 429). Both states have similar populations and basic services, but Florida works much more efficiently – and its residents benefit from a much lower tax burden.
State and local lawmakers should take this opportunity to insist on prioritizing spending and leveraging savings to ensure lasting tax breaks. Everyone deserves a lower tax burden, especially the 7.5 million Americans who have lost their jobs and continue to pay property taxes. In addition, a real tax break that improves the economic competitiveness of states and municipalities will create a way for the currently unemployed to get back into work.