A Relic of the Recession: Fewer Local Government Workers

Our analysis shows the agencies and states that have suffered the largest payroll cuts.
by | January 23, 2017
Nonsworn police employees, like the crime lab worker pictured above, have experienced the largest payroll cuts since their pre-2010 peak. (AP/Damian Dovarganes)

For years, Queen Creek, Ariz., was booming with a steady influx of families moving to the community outside Phoenix. That all came to a halt in 2006 when town officials started noticing a dramatic drop-off in housing construction.

The eventual nationwide housing market collapse resulted in round after round of mid-year budget reductions, followed by years of cuts to the city's workforce. The town consolidated or eliminated multiple departments. An entire police beat was cut. And the public employees who were left saw their hours or pay reduced as revenues continued to decline.

“For Queen Creek, the recession was six very-long years,” said John Kross, the town manager.

While few local governments across the country felt the recession's effects quite to the level that Queen Creek did, most were forced to make some form of payroll reductions. Going on nearly a decade since the start of the recession, localities in many parts of the country have since restored public payrolls to prior levels. But some still employ far fewer workers than they did before the downturn.

The U.S. Census Bureau recently published updated state-level estimates of public employment and payrolls from its annual survey of local governments. Governing compared each state's pre-2010 peak aggregate totals to the latest 2015 data, excluding the education sector.

In all, local governments in 26 states had yet to see payroll expenditures return to prior levels when adjusted for inflation. Similarly, local public employment remains below previous highs in most states and is down 3.5 percent nationally from 2008.

Some of the steepest declines of any state were in Arizona, where local governments' payroll expenses were 17 percent below their prior peak. In addition to laying off staff, a number of cities also responded by going to four-day workweeks or privatizing services. Housing and zoning jobs, in particular, plummeted statewide.

In Michigan, another state with among the sharpest declines, revenues started declining years before the recession as the economy gradually weakened. Payroll expenses in 2015 were 18 percent below their previous high from 2003.

Figures represent aggregate totals for all areas of local government, excluding education, for March of each year. Peak totals adjusted for inflation are shown in March 2015 dollars. Delaware's payrolls temporarily spiked in 2007, so the state's peak is inflated. (See methodology.)

Other states with the largest declines include Massachusetts, Nevada and Rhode Island. Meanwhile, North Dakota, South Dakota and Wyoming recorded the biggest increases in noneducation payrolls.

Where localities opted to make cuts varies, but a few patterns emerge in the Census data.

When national employment estimates are compared with 2008 levels, nonsworn police employees sustained the single largest reduction of any major category of workers. That’s likely a result of police departments trimming civilian staff to maintain the size of police forces out on the streets.

Legislative and government-wide administrative agencies (such as personnel offices) shed about 10 percent of their workforces. Other areas of local government with larger reductions nationwide included highways, courts and health departments.

Faced with tight budgets, local officials often sought to preserve funding for public safety, instead applying cuts elsewhere. Nationally, numbers of police and firefighters were down 2.6 percent from 2008. Meanwhile, all other areas of local government, excluding education and hospitals, experienced a larger 4.5 percent decline.

“Prior to the recession, we used to say the amount of the general fund that went to public safety was around 50 percent,” said Ken Strobeck, executive director of the League of Arizona Cities and Towns. “Now, it’s more in the 60 percent range or even higher.”

On top of job reductions, local governments trimmed benefits and, in some cases, imposed temporary pay cuts. Consequently, some of the hardest-hit jurisdictions struggled with employee morale and retention.

“There’s not only the pain of having to release people from employment, but those left behind have to deal with it as well,” said Queen Creek’s Kross. “We really paid attention to that.”

Kross said Queen Creek sought to apply cuts in a strategic manner. The town also formed a committee of representatives from each department that devised more than 150 ideas to save money.

How well public payrolls recovered from the recession -- or whether they did at all -- depends largely on localities’ tax structures and the performance of their economies.

Nevada’s municipalities, for example, rely significantly on property taxes. Although home values there have largely recovered, a statewide cap on annual property tax collections has meant that localities’ revenues haven’t rebounded as quickly, said Wes Henderson, executive director of the Nevada League of Cities and Municipalities. The state's local government payrolls suffered a decline of 14 percent from their prior peak. In recent years, Nevada has sought to diversify its economy by targeting tech and other firms.

Despite the slow recovery across many regions of the country, signs of growth are appearing.

U.S. local government payroll spending recorded a 3 percent nationwide uptick between 2014 and 2015. And in a few states where public employment suffered mightily in the aftermath of the recession, stronger gains have been recently reported, particularly in Florida and Rhode Island.

In Arizona, homebuilding has begun to pick back up. Queen Creek’s property tax revenues are finally forecasted to return near previous highs, and the town’s steady population growth has resumed. In other parts of the state, however, Strobeck said jurisdictions still haven’t rehired laid-off police officers and some face major backlogs in road maintenance.

“We’re in for very slight growth overall but nothing like what we saw pre-recession when growth was really exceptional,” he said.

 

Use our data tool showing detailed payroll and employment data for localities in each state. 

Methodology

Local governments report total monthly payroll costs for March of each year as part of the Census Bureau’s Annual Survey of Public Employment & Payroll. The Census Bureau publishes aggregate estimated statewide totals for payrolls in each state. Governing adjusted each state’s aggregate monthly local government payroll cost for inflation and subtracted out costs classified as education related. The most recent estimates for March 2015 were then compared with each state’s peak levels prior to 2010 (which was 2009 for the majority of states).

Payroll costs reflect all expenses pertaining to salaries, fees, commissions and overtime pay before withholdings. They do not include retirement, health and other benefits.