Making of the States’ Unnecessary Fiscal Crises and the Attack on Government and Public Employees

Abstract

This paper reviews the politics and economics of the retrenchment in public employment and the rollback in rights for public employee bargaining rights. The states faced revenue shortfalls, primarily because of an inadequate federal stimulus program to respond to the financial crisis. Enacting a second stimulus became impossible with the Republican sweep of the 2010 elections in the House of Representatives and in many states. Many states legislatures refused to enact increases in taxes or fees. Instead, the Republican Party advocated tax cuts and budget reductions to restore the economy. Each state is constitutionally required to balance its budget, so they were unable to engage in deficit spending to stimulate their economies. Consequently, the states were forced to look at expenditure reductions, and employee staffing and compensation became their main target for cuts.