Arizona lawmakers and the governor recently approved a new state budget, which closed a combined deficit of roughly $1.4 billion for the fiscal year that ended on June 30, and the new one that starts today. This isn’t the only state that has been dealing with shortfalls this year, nor is Arizona the only state in which the size of the state workforce has become an issue.
This spring, Gov. Hobbs ordered what essentially amounts to a hiring freeze for state employees. California and Massachusetts have taken similar steps.
The Show talked more about this earlier with Reid Wilson, founder and editor of Pluribus News, which covers state legislatures across the country. The Show started with what Wilson is seeing nationwide when it comes to the sizes of state governments.
Full conversation
REID WILSON: So we've seen a couple of states recently begin to make cuts or impose hiring freezes on state level employment. California is going through a real budget crunch right now. So they've frozen hiring at about 10,000 jobs across the state. Massachusetts is doing something of the same thing implementing a hiring freeze similar to what Governor Hobbs is doing in Arizona, though governor Hobbs doesn't want to call it a hiring freeze.
The interesting thing about this is, you know, this comes at the end of many years of boom times for states,, after the pandemic or during the pandemic. One of the things the federal government did was they pumped a huge amount of money into states so that states wouldn't have to lay off the workers who were suddenly essential in running government services that were doing things like pandemic, prevention, pandemic response and even just the basic functioning of government.
And that is a contrast to what we saw 10 years ago, longer than that 15 years ago, in the wake of the great recession when so many states had to lay off so many workers that, that in and of itself contributed to sort of the long tail of the recession last time around.
MARK BRODIE: Did states end up hiring those workers back or, or when we're talking about, you know, potential layoffs or hiring freezes, is that coming from a smaller state government to begin with?
WILSON: The level of state employees are pretty much even with what they were, you know, 10 or 15 years ago, the state workforce has not grown substantially in the intervening time, but it also hasn't grown beyond what what the government was back then. So, you know, in, in a 15 year period, you would expect more jobs to be created as government gets bigger just across the country. We're really basically at parity with where we were 15 years ago.
BRODIE: Is it safe to call this a pretty predictable thing for states to do when they are going through budget deficits to sort of look inward and say, OK, how can we save a little bit of money by affecting the, the size and the scope of state government?
WILSON: Yeah, this is one of the easiest things that governments can turn to, to save money, effectively stopping the the hiring freeze is the, is the way to save money, right? You're not letting employees go, but maybe you're not filling the jobs that that have gone vacant.
Now, there are two sort of variables here that states are having to deal with. One I'd say broadly positive, one broadly negative. The positive one is that governments going through a pretty substantial streamlining right now as we begin to consider as a lot of states begin to consider how they can use AI, artificial intelligence, to streamline some of the jobs that for, you know, decades or centuries humans have done.
On the other hand, we're going through a period where the shape of the government workforce itself is changing. And that's because for, you know, the last several decades, the people who have held government jobs are largely members of the baby boom generation. Those people are at or near retirement age. And so tens of thousands of government workers across the country are retiring every month, which means that there are these new, open positions for either, for people who, are you younger folks who are coming into the workforce,, who may not see government as a, a as attractive as their parents or grandparents once did.
And at the same time, you're going through this brain drain where so many people held these government jobs are suddenly losing or suddenly retiring and, and leaving the stage. So on one hand, the government has an opportunity to get a lot more efficient. On the other hand, they're losing a lot of the brain power that's been developed over the course of the baby boom, generations, working career.
BRODIE: Yeah. In addition to the brain drain, it sounds like you're describing a great loss of institutional knowledge of how the government works and maybe what has been tried in the past and what's worked and what hasn't.
WILSON: Yeah. And on the other hand, here, there's also a, a problem with the fact that government salaries just don't keep up with the private workforce. We know that every industry in America faces a workforce challenge. Right now, there aren't enough people to be waiters or cops or teachers or, or, I mean, pretty much any industry in the country is having the same kind of workforce challenge.
Government salaries don't grow as fast as those private sector salaries do. So the government is having a hard time filling those jobs, even if they are more entry level positions. There simply aren't as many members of the millennial generation members of Gen Z, who find government service attractive and lucrative because the private sector is just paying more.
BRODIE: Are you expecting to see more states take these kinds of steps in the not too distant future?
WILSON: Yeah, I do. I, one of the things that we've seen in the last few years during the boom times, many states cut taxes, you know, income taxes and property taxes, the boom times are starting to wane. And so even in the states that aren't California or Arizona or Massachusetts, we're starting to see people put holds on tax cuts. Well, well, maybe we'll do that next year. Maybe we'll delay this tax cut for a few months or, or a few years.
That is sort of a precursor to me that tells me that their budget situation isn't fantastic and that they may need to consider things like cutting the workforce or freezing, freezing, hiring in, in the not too distant future.
BRODIE: Understanding that there are all sorts of variables and, you know, different states are putting hiring freezes in different departments or agencies, what kind of impact does this kind of move have on people who rely on the services that state governments provide?
WILSON: Yeah, that, that is gonna be the, the longer tail and the one that people that, that states are gonna try to solve through things like AI and government efficiencies. You can imagine that, you know, there, there are a number of states these days that have tried to streamline the process for say, going to the DMV.
If there are things that you can do online instead of standing in and waiting for your number to be called, those sort of basic interactions between citizens and government are the ones that are going to be challenged when workforces are shrinked or are frozen. But they're also the ones that can be most improved by new technology. The governments are only now beginning to understand the implications of the ramification zone.
BRODIE: What are you hearing from budget officials and state officials around the country about how long sort of these non boom times might be lasting and maybe when hiring freezes might be lifted or, you know, state governments might begin hiring people again.
WILSON: Yeah, so the non boom times are here to stay. I mean, it was the pandemic was unique in the amount of money that states found themselves with. Both because of the stronger than expected economy and because of the amount of money that the feds sent down to the state level. So boom times are not normal.
The, what we're headed back into is a sort of more normal time. Where states are gonna be breaking even or losing a little bit of money or gaining a little bit of money here and there. They're not gonna see the, the mammoth tax receipts and the mammoth influx of money from the feds. That has been unusual in the last few years.
What is much more likely is the government's gonna grow at a slower clip, for the long term, unless we run into a recession. In which case, you could start to see government shrink. That I think the big take away for me from the, the pandemic era is that the federal government and state governments realized that there are so many Americans employed at in governments at all level that they are that, that by shedding thousands or tens of thousands of those jobs, you make the consequence of a recession even worse. So it behooves the states and the federal government to make sure that those employees keep their jobs so that the overall economy can improve faster.
BRODIE: All right. That is Reid Wilson, founder and editor of Pluribus News. Reid, good to talk to you. Thank you.
WILSON: Thanks, Mark.
