More layoffs expected at state and local levels

Economists say state and local budget gaps are so vast that up to 30,000 public jobs will be cut each month at least through year’s end. And private companies that contract with states and localities are likely to cut even more deeply.

All told, 600,000 to 700,000 jobs will probably vanish over the next 12 months at states, localities, private contractors, and other businesses that depend on government business, according to the Center on Budget and Policy Priorities, a Washington think tank.

The July unemployment report, released Friday, showed state and local governments cut 48,000 jobs last month — more than in any month in the last year.

State and local governments already have shed 169,000 jobs this year. And since their peak in 2008, state and local payrolls have shrunk by 316,000, a figure that does not include private sector jobs tied to government spending.

Federal Reserve Chairman Ben Bernanke warned last week that cuts in spending and jobs at the state and local level were helping to slow the economic recovery. And two-thirds of economists who responded to the latest quarterly AP Economy Survey said they thought states’ budget crises posed a significant or severe threat to the economy.

When states and localities slash services and jobs, so do companies that contract with those governments to build school buildings or repair bridges. The cutbacks ripple through the national economy, causing individuals to spend less, too. Full-time state and local government workers earn an average of $82,800 in wages and benefits annually, according to Labor Department data.

The drop in state and local government spending in the first three months of this year shaved about half a percentage point off national economic activity.

The cuts stem from shrinking state income and tax revenue resulting from the recession. Total state revenue fell 11 percent from fiscal year 2008, when the recession began, to fiscal 2010, the National Association of State Budget Officers has estimated.

Colorado Springs has turned off thousands of streetlights to save $1.2 million a year, The Gazette of Colorado Springs reported. In Pittsburgh, the transit authority unveiled a plan last month to reduce service and at least 500 of its 2,700 jobs, according to the Pittsburgh Post-Gazette.

An expected infusion of federal aid will help blunt the damage. The Senate last week approved a $26 billion package of aid to states in hopes of saving the jobs of teachers and other public workers. Approval by the House is expected this week.

“Without the money, I would have to say the worst of the layoffs would be yet to come,’’ said Brian Sigritz, director of state fiscal studies at the budget officers’ association. “It’s definitely a help.’’

But even with the aid, states face a collective gap of $62.3 billion in the 2011 budget year, which started July 1 for most states. An additional $53.4 billion shortfall is expected in the 2012 fiscal year, Sigritz said.

Unlike the federal government, every state but Vermont requires a balanced budget. That is why the pace of both service cuts and layoffs is expected to persist, even while the struggling economy forces more people to turn to states for health care and other social services.

States’ spending and revenue are not likely to return to prerecession levels until fiscal year 2012 or later, the budget officers’ group says.