FROM THE EVP: A little Less Government Goes a Long Way
In Alabama, we have endured more than 9,500 direct jobs (18%) lost in the forestry sector since 2005 while jobs across all sectors have decreased by 6%. There has been, however, one sector in our economy where job growth has continued. Can you guess which sector?
If you said “government” you’d be right. From 2005 thru 2011, state employment increased by 1%. In fact, since 1971, Alabama’s state workforce has grown by almost 50%.
Now, I realize that some of you reading this column either work for the State or have family members on the State payroll. This is by no means a criticism of state employees. There are vital services that only the state government can perform and we need skilled, well-paid and adequately equipped professionals performing those functions.
Rather, my comments are intended to focus our attention on the economic realities of funding state government. We must begin with a discussion of how much state government we need and how we ensure it is functioning as efficiently as possible. In reality, this is the same type of discussion that many of you have had within your companies and your homes…What are the essentials?...How can I streamline and be as efficient as possible?...How much will it cost?
In a study published by the American Legislative Exchange Council (Rich States, Poor States) economist Arthur Laffer notes that Alabama’s number of nonfederal public employees as a portion of the state’s population ranks us as the nations 11th highest at 600 per 10,000 people, higher than big government states like Massachusetts (502.2), California (478.2), Illinois (498.2) and New Jersey (580.2).
So, what to do? The answer is simple, but implementing it is difficult. A few agency heads have been proactive in reducing payroll in anticipation of less revenue. Leading the way has been Ag Commissioner John McMillan (17% reduction) and State Forester Linda Casey (21% reduction). At least 9 state agencies, however, have increased payrolls during this period when private sector jobs have plummeted.
Why haven’t many state officials made the necessary cutbacks when they knew General Fund Budgets would come up short? Why would some agency heads continue to expand knowing it would make the problem worse? During a recent presentation to the Alabama Forestry Council, a state Senator offered one comment that might help explain this. “The federal stimulus money that Alabama has received has allowed our state government to kick the can down the road and delay making the tough decisions.”
Fortunately, there is a plan. Officials in the Governor’s office have developed an “early out” package for state employees that are currently eligible for retirement (6,100 or 19% of the workforce). If 1,750 employees (5% of the workforce) accept the package it will yield an average savings over the next 5 years of $95 million annually. If the retirements are effective on December 31st (end of the 1st fiscal quarter) the state could save $71 million in FY2013.
Given the budget shortfall for FY2013, it would seem prudent to implement this plan as soon as possible. If voters reject the September 18th Constitutional Amendment, this savings would make up almost half of the $145 million that will not be available from the Alabama Trust Fund.
We had originally been told that the plan would be announced in early August, but for some reason they have chosen to delay the announcement. Perhaps this is “Plan B”. I hope we don’t miss this opportunity to shrink the size of state government. When it comes to “big government states”, that’s one list where we definitely want to be at the bottom!
As Always... Thanks for Your Support!