“You’re Fired!” – Local Budget Wars Turn Tough
Policy + Politics

“You’re Fired!” – Local Budget Wars Turn Tough

Karl Dolenc, dem10/ iStockphoto.com

As times get tougher, responses gets more radical – but one move is making drastic action in Wisconsin and Ohio look tame. In an effort to close a budget gap of at least $41 million in Providence, Rhode Island, the school board there is sending all 1,926 of its public school teachers a termination notice.

The draconian measure is the latest salvo in the white-hot budget wars being waged at the state and local level across the country. It reflects an increasing acknowledgement by many government leaders that in this period of lower revenue streams and economic fragility, the pay and benefits of public employees – including health care benefits and generous pensions for teachers, police officers, and other municipal workers – must be checked

“How do we feel? Disrespected. Broken,” Julie Latessa, a special-needs teacher, told The Providence Journal on Thursday. The city’s mayor, newly elected Democrat Angel Taveras, said that government leaders and the school board wanted “maximum flexibility” in making tough budget decisions and that the “overwhelming majority” of teachers would probably not lose their jobs in the end. By Rhode Island law, teachers must be informed by March 1 if they no longer have a job to return to in the coming academic year. What’s really roiling the teachers is that terminations – as opposed to layoffs – could erase seniority status.

Rep. David Cicilline (D-R.I.), who served as mayor of Providence for eight years before successfully running for Congress, told The Fiscal Times, “When you’re mayor of a city, you have to get stuff done. Obviously we have huge challenges in dealing with deficits and figuring out how we make sure government is responsive and effective, but at the same time [affordable].” 

Exactly how state and local government “get stuff done” is now, of course, top of mind across the country as the precarious fiscal environment forces local officials to consider previously unthinkable steps to stabilize budgets. This is something that Governor Scott Walker of Wisconsin – “the man in the middle of all of this,” as he was dubbed on yesterday’s “Meet the Press” – knows perhaps better than anyone.

Here’s a quick wrap-up of the current fiscal situation in five troubled states,  as governors coast to coast continue to search for budget and public-policy solutions at a time of spiraling costs.

Two weeks ago, Governor Walker, a Republican, issued a budget-balancing bill that would prevent most public workers from collectively bargaining for benefits and work conditions. The bill would also make them pay 12.6 percent of the total cost of their health care premiums and put nearly 6 percent of their salary toward pension benefits. Walker is trying to close the $137 million deficit in his state’s budget this year, which is projected to balloon to $3.6 billion in the next two years.

This weekend, in a show of solidarity, protestors flocked to cities all over the country, chanting pro-union comments, sounding bullhorns, and carrying signs declaring, “We are all Wisconsin.” 

In Madison, protesting workers are settling in for a long fight over legislation they feel is aimed at weakening their unions. The 14 Democrat state senators, meanwhile, who recently fled the capital in order to prevent a quorum and therefore a vote on the bill have still not returned to Madison, and as of Sunday, they had no plans to return, one of their spokespeople said.l

On “Meet the Press,” Walker said that he’s done everything possible “to avoid layoffs,” and that his action wasn’t a value judgment about employees. “Our proposal is less restrictive than the federal government is today.” About 36 percent of all government workers, or 7.6 million people, are members of unions, according to the Bureau of Labor Statistics.

Governor Mitch Daniels, also a Republican, put an end to collective bargaining for public workers in the Hoosier state six years ago, right after he took office, and today is considered a “great inspiration” by Wisconsin’s Scott Walker. But Daniels still has an ambitious fiscal agenda and a truckload of political challenges in front of him. A package of bills that the Republican majority put forward, including limits on collective bargaining for teachers, was denied a quorum last week when Democratic lawmakers fled the state rather than risk a losing vote (sound familiar?). Their main objection: the controversial “right to work” measure, which essentially bars unions from forcing employers to fire nonunion workers who don’t pay dues to the unions, according to the National Legal and Policy Center. (Currently 22 states have right to work laws; most were instituted decades ago.)

Education changes in the state remain high on Daniels’s list of priorities as his state faces a ticking fiscal time bomb: Indiana is looking at a $270 million projected budget shortfall for 2012 and is  also carrying $9.8 billion in unfunded pension liabilities, as well as $442 million in unfunded health care and other liabilities – all of which gives it the dubious moniker of the eighth likeliest state  to go bankrupt, according to a recent analysis of all 50 states by The Daily Beast.

With a budget coming due in the next few weeks, Governor John Kasich – another Republican – has been enduring noisy protests in recent days because of  his support for a bill severely limiting collective bargaining rights for public unions (is there an echo in the room?). As his state looks at a yawning $8 billion deficit, the governor is trying to push public workers to pay more for their health care and pension benefits. (All told, the states face deficits that may reach a cumulative $125 billion in the next fiscal year.)

On Sunday at the National Governors Association meeting, Kasich said during a press conference, “People really don’t like to embrace change. I’m a change agent. I’ve always been a change agent.” The former House Budget Committee chairman said that protesting workers won’t deter him from his goal of getting “Ohio turned around,” adding, “This is going to be the toughest year of the program.”
Hardly a day goes by without the tough-talking Governor Chris Christie appearing somewhere in the national press for his budget-cutting leadership role as he presses relentlessly for greater fiscal stability in the Garden State. In an effort to trim a projected 2012 budget shortfall of more than $10 billion, Christie has taken aim at the public pension system and health care costs for government workers, and he was also, of course, at the center of discussion this weekend at the National Governors Association meeting. He’s asked teachers in New Jersey to accept pay freezes and pay 1.5 percent of their salaries toward health care.

The state has unfunded pension liabilities of $34.4 billion and unfunded health care and other liabilities of a whopping $69 billion. With numbers like these, it’s no wonder New Jersey is currently considered the sixth most likely state to go bankrupt.

“Whenever anyone else is zigging, we’re zagging,” according to Ed Goedhart, a Republican assemblyman from northern Nevada. But his state is unfortunately looking a lot like its troubled brethren.  Nevada faces a $440 million shortfall in its education budget – and that has landed the Las Vegas school district in precarious financial straits, according to Business Insider, since state funding is its primary source of revenue.

Nevada Governor Brian Sandoval, a Republican, has floated the idea of taking $300 million from the Clark County’s  school district bond reserve to help reduce the state's operating funding for the district. It’s an unusual transfer of funds – but then again, these are desperate times. According to school officials,  the plan would force the district to either raise property taxes or pay twice as much on the principal and interest of its outstanding debt. Any debt restructuring would likely have an additional negative impact on the district's bond rating.

Related Links:
States Fear Budget Cuts, Shutdown Threats (Reuters)
State and Local Budget Cuts Are Slowing U.S. Economy (Huffington Post)