How COVID-19 is Driving Big Job Losses in State and Local Government

Cuts to payrolls are mostly temporary for now, but decisions ahead will depend on the virus and budget stresses

How COVID-19 is Driving Big Job Losses in State and Local Government

Although the federal jobs report released June 5 provided some unexpectedly good news about the start of a recovery from steep private sector losses in recent months, cuts continued to mount for state and local governments, including public education.

In the public sector, officials responded to the COVID-19 pandemic by furloughing workers at shuttered facilities and trimming payrolls in the face of substantial projected budget shortfalls. Colleges, school districts, and other areas of state and local government have shed approximately 1.5 million jobs since March, but most have been furloughs or temporary layoffs, according to the U.S. Department of Labor. In all, employment for the sector has fallen to its lowest levels since 2001, eclipsing the declines that followed the Great Recession.

Private industries have generally incurred greater percentage losses than the public sector. The lifting of lockdowns across the country brings hope for the return of private sector jobs, but many governments face bleak financial outlooks that continue to leave workers vulnerable.

A few key themes have emerged from the federal data released since the pandemic froze much of the national economy in March:

  • Education jobs have accounted for nearly two-thirds of the decline in state and local government employment.
  • No region of the country has been spared from cuts to government payrolls, although they have been applied unevenly across states.
  • The vast majority of public sector reductions so far have been classified as temporary layoffs.
  • One area of the workforce that had largely avoided layoffs nationally so far has been state agency jobs, excluding education.

At the local level, governments issued hiring freezes, furloughed staff, or laid off seasonal employees. School districts made significant cuts to noninstructional hourly staff, such as bus drivers and maintenance workers. Most of the hits to school payrolls so far resulted from closures, but any future downsizing would be driven primarily by budget cuts in the wake of the recession, according to Noelle Ellerson Ng, an associate executive director of the American Association of School Administrators.

Nationally, local education employment has declined more than 9% since March. Ellerson Ng said she expects teachers and instructional staff to be among the last to face cuts. “The economy cannot run unless kids are going to school,” she said.

The state government education workforce, mostly public colleges and universities, similarly suffered a substantial blow, decreasing more than 9% in the weeks since the shutdowns began in response to the pandemic.

Outside of education, employment for cities, counties, and other local governments was down about 8% in May from pre-pandemic levels in March, according to the federal data.

Joshua Franzel, president of the Center for State and Local Government Excellence, attributes the cuts to two factors: pandemic-related closures and officials bracing for budget shortfalls, a scenario few anticipated when the year began. Already, Santa Monica, California, for example, has eliminated 337 positions and 144 temporary jobs as part of a broad restructuring in anticipation of a 23% budget reduction.

The vast majority of public sector layoffs so far are considered temporary. Nationally, approximately 93% of state and local government workers suffering a job loss reported their layoff was temporary in the federal government’s Current Population Survey for May. By comparison, only 39% of a smaller number of unemployed government workers considered their layoffs temporary in February before the coronavirus-related closures. (The Labor Department defines temporary layoffs as those in which workers receive a return date or expect to return within six months. Workers furloughed for less than a week are not counted as unemployed.)

“At this point, indications point to [job cuts] being temporary and not structural, longer-term layoffs,” Franzel said.

Differences across states

Initial public sector job cuts have been widespread. The Labor Department’s latest employment estimates for states show that every state sustained a loss between March and April.

One regional variation stood out: Local governments in the South had relatively fewer job losses compared with the rest of the country. Of the 10 states experiencing the smallest declines—less than 4% for localities and schools in April—all but two were in the South. Hawaii registered the smallest local decrease, but also recorded one of the largest percentage drops in state government jobs, likely because public school workers are employees of the state Department of Education rather than local school districts as in other states.

Connecticut and Alaska incurred the largest local government reductions, each falling about 13%. Drops in state government employment varied significantly across the country but didn’t follow any regional patterns.

The magnitude of public workforce cuts in April did not mirror the scale of declines in states’ private sector economies. For example, while Rhode Island and New York suffered among the largest percentage drops in private sector jobs, government jobs contracted less there than in most other states.

Differences from the Great Recession

The sudden drop-off in public employment represents a stark contrast from the Great Recession, when the public sector initially avoided cutbacks. Revenue didn’t plummet right away during the 2007-09 downturn. As a result, downsizing of state and local workforces lagged the rest of the economy, bottoming out in 2013, more than three years after the private sector.

The current downturn, triggered by a public health emergency, is also different in that most public sector layoffs so far are considered temporary, unlike the more permanent changes forced by the last recession.

A look ahead

Both state and local governments face potentially substantial revenue losses in the coming months and widespread furloughs already are being proposed to balance budgets.

In April, the University of Arizona announced plans to furlough all but the lowest paid employees for up to eight weeks. The city of Los Angeles plans to furlough approximately 15,000 civilian employees for 26 days under its budget proposal for the upcoming fiscal year.

Some temporary layoffs could become permanent if the pandemic hinders tax revenue for an extended period or if state and local budget gaps aren’t plugged by additional federal aid. A National League of Cities survey done in April found that the majority of municipalities with populations exceeding 50,000 expected furloughs, while more than a third anticipated permanent layoffs. Similarly, 57% of public university presidents in an Association of American Colleges and Universities survey published in April anticipate having to make permanent job cuts.

Barb Rosewicz is a project director and Mike Maciag is an officer with The Pew Charitable Trusts’ state fiscal health initiative.

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