Eleven weeks after Congress settled on a stimulus package that provided $135 billion to limit layoffs in state governments, many states are finding that the funds are not enough and are moving to lay off thousands of public employees.
The state of Washington settled on a budget two weeks ago that will mean 1,000 layoffs at public colleges and several times that many in elementary and high schools.
The governor of Massachusetts, who cut 1,000 positions late last year, just announced 250 layoffs, with more likely to come soon.
Arizona has already laid off 800 social service workers this year and is facing the likelihood of deeper cuts over the next two. The state no longer investigates all complaints of child or elder abuse.
"Don't be a child or a vulnerable adult in Arizona," said Tim Schmaltz, of the Protecting Arizona's Family Coalition.
In some states, layoffs are occurring partly because legislators are not taking every step to avoid them. Republican lawmakers in Missouri want to use less than a third of the state's $2.1 billion in flexible stimulus funds to close budget shortfalls. They want to proceed with cutbacks and return $1 billion of the money to residents in the form of tax cuts. Using the money to plug budget gaps, they argue, will leave a deficit once the stimulus money is gone in 2011.
The layoffs are one early indication of how the stimulus funding could be coming up short against the economic downturn. As the stimulus plan was being drawn up, there was agreement among the White House, congressional Democrats and many economists that a key goal was to keep states from making big layoffs at a time when 700,000 Americans were losing their jobs every month.
The House passed a stimulus bill with $87 billion in extra Medicaid funding for states, as well as $79 billion in "stabilization" money to plug gaps in states' budgets for education and other areas.
But in the Senate, the stabilization funding was cut by $40 billion to secure the support of the three Republicans who were needed for a filibuster-proof 60 votes — Sens. Susan Collins and Olympia Snowe of Maine and Sen. Arlen Specter of Pennsylvania — as well as to gain the support of conservative Democrats such as Sen. Ben Nelson of Nebraska. The senators wanted to reduce the package to less than $800 billion, and several wanted to make room for a $70 billion patch of the alternative minimum tax.
Supporters of the final $787 billion bill, which included $25 billion less in state aid than the House plan, said it would help states avoid severe cuts. But tax revenue is coming in even lower than feared.
Ray Scheppach, executive director of the National Governors Association, told a Senate committee last month that states are facing a $200 billion deficit over the next two years. At least a dozen states, including California, Georgia and New Jersey, have ordered furloughs of workers, and increasingly, layoffs loom as the next step.
Jake Thompson, a spokesman for Nelson, defended the stimulus, saying that forestalling state layoffs had not been its main goal. "This is a stimulus bill, not a state bailout bill," he said. "While the economic recovery bill will undoubtedly help states with their budgets and employment, the primary intent was to stimulate the economy."
Collins was equally blunt: "The fundamental purpose of the stimulus bill is to save and create jobs and help get our economy moving again," she said. "The bloated House-passed bill stood no chance of passing the Senate."
The White House, meanwhile, has conceded that the final package was smaller than it had expected. Shortly before the bill was signed, chief of staff Rahm Emanuel said, "We clearly thought that economic activity needed (a larger stimulus), but it was more important to get it done than argue about just that."
Officials in some states say they are grateful for and satisfied with the money. Maine has had to lay off 250 people, but because of the stimulus it will be able to avoid more layoffs, even after discovering a new $570 million shortfall. "Without any recovery funds ... we would be in a very, very different situation," said Maine finance commissioner Ryan Low.
Scott Pattison, executive director of the National Association of State Budget Officers, noted that some cuts may be justified. "You never want to see an individual be removed, but sometimes lost in the discussions is whether some of these positions should be eliminated," he said.
But in most states facing big layoffs, officials say they made the easy trims long ago. For instance, Florida's court system has cut 200 employees in the past 18 months. Judges lack staff members to prepare materials for trials at a time when property crimes and foreclosures are up significantly. The state cut so many hearing officers for traffic infractions that drivers started to realize that there was no one to hear cases and contested more tickets. This meant a big drop in revenue — leading the state to rehire some of the officers.