A Response to Fiscal Stress: Public Sector Employment Reduction across States during a Budget Crisis

ABSTRACT

This paper incorporates measurements of the four financial condition dimensions of cash, budget, long-run, and service solvency to explore the link between financial condition and public sector employment among states in the context of the Great Recession of 2008–2009. The finding is that the severity of this economic recession led states to reduce public workers as one type of fiscal response to cope with budget shortfalls. The results suggest that not all dimensions of state financial condition affect public sector employment.

KEYWORDS:

• Fiscal stress
• public employment
• budget crisis

Disclosure statement

No potential conflicts of interest was reported by the authors.

Notes

1. Statement No. 63 of the Government Accounting Standards Board (GASB), financial reporting of deferred outflows of resources, deferred inflows of resources, and net position, identifies the net position as the residual of all other elements presented in the statement of financial position. It renames the term “net assets” as “net position.”

2. Census data does not report the number of contracted employees.

3. More details can be found here: http://www.unionstats.com/.