NCPA - National Center for Policy Analysis


September 8, 2009

Across the country, cash-strapped state governments are shutting down business for a day at a time to save money.  So far the effect of furloughs appears to have been muted, with most people able to take care of state business in advance of closures or by filing forms online, says the Wall Street Journal.

The furloughs, which basically act as salary cuts for state workers, are the latest response to plunges in tax revenue because of the recession.  State legislatures have struggled to cover shortfalls that have ballooned to $168 billion, or 24 percent of their general-fund budgets.

But furloughs do little to address fiscal problems such as ballooning pension costs, and some policy watchdogs fret they are a short-term solution to what is likely to be a long-term problem, says the Journal:

  • Furloughs may provide a political benefit to politicians who must placate powerful unions while dealing with taxpayers who fume that government employees haven't shared the pain of a recession that has cost more than six million private-sector jobs.
  • Since August 2008, states have shed about 33,000 jobs and more layoffs are inevitable; furloughs have already affected hundreds of thousands of workers -- more than 200,000 in California alone.
  • In some states, labor unions have turned to the courts to try to stop shutdowns; in Rhode Island, where a union lawsuit alleges the governor violated collective-bargaining agreements by ordering 13,000 workers to take 12 unpaid furlough days over the next nine months to help close a $68 million budget gap.

But in many states, unions have accepted the furloughs as preferable to layoffs.  States choosing shutdowns rather than rolling furloughs say that they think residents will be better able to deal with the occasional closed office, announced in advance, than with long lines and overloaded clerks every day, says the Journal.

Source: Leslie Eaton, Ryan Knutson and Philip Shishkin, "States Shut Down to Save Cash," Wall Street Journal, September 4, 2009.


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