It is the last day of June, which means it is time for another round of government layoffs. Some state governments will be shutting down tonight, sending most workers home, because they haven’t put together a budget. Others will be preparing for layoffs because they do have a new budget, but one that is smaller than last year’s. Layoffs and reduced hours also affect businesses that depend on state funding or that provide supplies and services to state operations. Schools and local governments may follow with layoffs if the details of the state budget are disappointing.
California, at least, will not be one of the states without a budget this year. The budget agreement announced yesterday may be ugly and socially unacceptable, but it is better than having a more rationally constructed budget that arrives in September. California’s new budget makes lofty economic assumptions that may have to be revisited as soon as then, probably resulting in layoffs at schools. In the meantime, the big bite in the California budget compromise is $2 billion taken away from redevelopment efforts. At least 25,000 job cuts will have to follow across the state starting next week after that particular budget cut.
It may be a similar story in Pennsylvania, which looks to have a new budget nearly on time, but with more than $2 billion in education cuts. Schools across the state will be shedding 20,000 jobs — and 100,000 students.
These kind of budget cuts may appear short-sighted, and the job cuts that result from state budget cuts will likely be enough to bump up the unemployment rate and stall the national economy, but it is easy to underestimate the value of having a budget in place. When people are waiting for the budget, they’re not working productively, and the ultimate economic costs of the worry, uncertainty, and distraction are just as real as those of unemployment.