Job Losses & State Fiscal Crises: Time for More Federal Stimulus Spending

Job Losses & State Fiscal Crises: Time for More Federal Stimulus Spending

Thursday, October 8, 2009




Job Losses & State Fiscal Crises: Time for More Federal Stimulus Spending

The numbers from this month's job report were brutal: 263,000 payroll jobs lost in a month and the unemployment rate hit 9.8 percent.  Since the pre-recession peak, the economy has lost 7.2 million jobs and overall hours worked have now declined by 8.6 percent.  A record share of the unemployed (35.6 percent) are “long-term unemployed” and have been out of work for at least six months.  (See graph courtesy of Center for American Progress)

Public Layoffs Threatening to Make Things Worse:  One of the most disturbing parts of this trend is that the government sector lost 53,000 jobs in September, compared with a loss of 19,000 jobs in August.  This is tied to the fiscal crisis hitting the states. 

The initial federal recovery funds from the Spring have held off far worse cuts than were originally projected; in fact, before last month, state and local government layoffs had amounted to just 110,000 jobs lost over two years.  However, projections are that fewer recovery funds will be available for fiscal year 2011, so government job losses will inevitably mount as states seek to balance their budgets going into next year.

Avoiding Fifty Herbert Hoovers with a New Stimulus:  History tells us that government should be hiring when the private sector is laying people off to act to act as a counter-cyclical economic lever on the economy.  A wide range of economists, including Nobel Laureates Paul Krugman, Robert Solow, and Paul Samuelson, are now calling for an additional federal stimulus to counter these jobs losses.

Back in February, as we noted at the time, the U.S. House had originally proposed tens of billions of dollars more in help for the states in the recovery plan, but those funds were cut during U.S. Senate negotiations to overcome a filibuster.  But this reflects the fact that even then, many understood that more help to the states was needed to deal with the severity of the recession we face. 

Already the Obama administration is talking about a broader transportation bill, extensions of a homebuyer tax credit and extended unemployment benefits as part of additional spending to deal with the economic crisis.  All of these are necessary, but priority should be to extend further aid to the states to stem the layoffs of teachers, nurses, and public safety officers which is needed not just to avoid further unemployment but is critical to provide the services to a public in even greater need of help during this economic crisis.  And other funds should go directly towards additional forward-looking job creation programs tied to green jobs, broadband deployment and rebuilding our overall infrastructure to both employ people in the short-term while improving the global economic competitiveness of our communities over the longer-term.

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Local Law Enforcement Backs Away from Punitive 287g Programs

Local communities are increasingly rejecting punitive anti-immigrant law enforcement policies such as 287g from the previous administration. They are walking away from agreements to have local police serve as federal immigration authorities, rejecting both their budgetary costs and the way they damage relationships and trust between police and the communities they serve.  The program has been opposed by over 521 organizations, the Congressional Hispanic Caucus, the Government Accountability Office, and the Police Foundation for being out of control, full of abuses, and not actually fulfilling its stated mission of catching criminals.  Most recently, two localities in Massachusetts and Middlesex County, NJ, have dropped their controversial agreements with the federal government.  The Framingham, Mass. police chief was quite clear on the importance of the local police authority's ability to set their own priorities:

“It doesn’t benefit the Police Department to engage in deportation and immigration enforcement,’’ Framingham’s chief, Steven Carl, said yesterday. . . Carl said he signed up two years ago for the sole purpose of accessing federal computer databases to aid in criminal investigations. He assigned two officers to the program, and said the databases helped, but only two or three people were arrested as a result.   He said he decided to withdraw over the summer after federal officials asked him to expand the officers’ duties to detaining immigrants for deportation, transporting detainees, and having police testify in immigration cases.

Houston's Mayor Bill White has also decided to back off of a proposed 287g agreement after being accepted into the federal program, in another victory for advocates for public safety and immigrant rights. However, he is still open to participating in the Secure Communities program which has less oversight than the 287g program, and is harder to track as it does not necessitate formal Memorandums of Agreement with the federal government. Legislators can take proactive stances against such intrusive and unnecessary policies by passing bills to encourage victims and witnesses of crime, particularly those suffering from domestic violence, to come forward without fear of police inquiry into their immigration status.

A Negative Lesson from Maricopa County: Local law enforcement have taken a lesson in what not to do from Arizona's Maricopa County, where one sheriff has flagrantly violated civil rights and liberties under the guise of immigration enforcement. The Department of Homeland Security's newly revised 287g agreement with Maricopa County's infamous Sheriff Joe Arpaio finally curtails his dubious authority to conduct wide-ranging "street sweeps" of entire communities. Arpaio has used his power to terrorize neighborhoods and engaged in massive racial profiling, resulting in a track record of over 2700 lawsuits -- 50 times as many prison-related suits as New York, Los Angeles, Chicago, and Houston combined -- costing the county over $40 million. Moreover, a local newspaper's investigative series found that Arpaio's single-minded focus on immigration shortchanged the general public safety and resulted in slower response times to emergency calls and decreased arrests. The revised agreement comes shortly after the Homeland Security Advisory Council (HSAC) Southwest Border Task Force, a government body, recently recommended that the federal Department of Homeland Security scale back the 287g initiative that allows local authorities to enforce the country’s immigration law.

Better Solutions on Community Policing: At a time of severe budget cuts, local police officials can ill afford to divert their attention from major criminals and abrogate the trust that residents place in them. Smart, effective policies like Hawaii's HB2140 which protects undocumented victims of crime or the 2007 Oregon Revised Statutes 181.850, which prevents local police from using agency resources to pursue immigrants whose only crime is being out of status, will help protect the right of public safety for all communities and prevent racial profiling, unnecessary deportations of immigrants for minor offenses, and separation of immigrant families.

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Health Insurer Sues Maine for Guaranteed Profits

A story from Maine offers up another reason why we need the choice of a public health insurance option, and it's a doozy.  Anthem Blue Cross and Blue Shield of Maine, a subsidiary of the insurance giant Wellpoint, is suing the State of Maine because the insurance commissioner refused to approve its request for a rate increase of 18.5% for its individual products, which included a guaranteed 3% profit. Commissioner Mila Koffman found Anthem's request "excessive" and approved a 10.9% average increase in premiums.

Anthem, of course, is not being denied a profit.  As a lawyer in the Attorney General's office pointed out, the company can still earn a profit in its individual line by trimming its corpulent waistline, "if they reduce administrative expenses".  As a hint for how they could do this, the nine highest-paid Anthem administrators in Maine made more than $4.3 million in 2006.  The Attorney General, which is representing the Commissioner, noted that Anthem averaged a 3.2% annual profit in its individual line in the nine years since it bought the non-profit Blue Cross and Blue Shield of Maine and that going a year without a guaranteed profit would not drain the company.

Indeed, despite the economic downturn and the financial strains being placed on families and small businesses, it's as if health insurers like Anthem never have a down year.  Since purchasing the non-profit Blue Cross and Blue Shield, Anthem has raised individual premium rates 8 out of 10 years, and often in double digits.   Across all its business lines (individual, small and large group), Anthem's profits ranged from a low of 5.4% to a high of 9.4% from 2004 through 2008.  For its part, Wellpoint is doing very well by its subsidiary.  From 2006 to 2008, Anthem has paid its parent company $152 million in dividends.

Anthem dominates the insurance market in Maine, with 78% of the entire market.  As the state's largest daily newspaper, the Portland Press Herald, editorialized, "Because [individuals] have no market clout, they are vulnerable to rate increases that could price them out of coverage, like the ones at issue in the Anthem case." To that end, absent a single-payer program, the only way to bring choice and competition to a market like Maine's, which is similar to 35 other states, is to offer up a public health insurance option.  You can be sure that a non-profit public option will not be suing its creator, the public, for a guaranteed profit.

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In Wake of Scandals, Lawmakers Seek to Limit Film Tax Credits

Two weeks ago, both the Director and Deputy Director of the Iowa Department of Economic Development (IDED), Mike Tramontina and Vince Lintz, resigned abruptly, and the manager of the Iowa Film Office, Tom Wheeler, was forced to step down following allegations of corruption and abuse of public funds. Specifically, an internal IDED audit discovered issues with the state’s film tax credit including improper oversight, the purchase of luxury vehicles unnecessary for the completion of films, and filmmakers claiming payments for multiple production jobs.

Concerned that an agency could so frivolously misuse taxpayer dollars as the state continues to search for methods to alleviate the fiscal crisis, Gov. Chet Culver temporarily suspended the program and Iowa lawmakers released information regarding applicants and recipients of film tax credits, which is normally not disclosed publicly.

This will certainly spur review of Iowa's tax credit program and disclosure policy. Transparency will allow Iowa to better evaluate whether or not the program provides sufficient social, economic, and fiscal benefits. Such accountability measures are undoubtedly necessary as state expenditures on business tax credits have increased at more than three times the rate of economic growth.

A National Film Credit Problem: This problem is not limited to Iowa, as reports by advocacy organizations and government bodies, including the Oregon Center for Public Policy, Connecticut Voices for Children, New Mexico Fiscal Policy Project, the Massachusetts Department of Revenue, and the Wisconsin Department of Commerce, have found that offering these tax credits are ineffective and provide little to no economic benefit to a state or its residents. Other states have taken tangible steps to address these problems:

  • Connecticut: Gov. M. Jodi Rell estimated that a $25 million cap for film tax credits would save the state $70 million in the next two years.
  • Massachusetts: Rep. Steven D'Amico introduced legislation, HB 3854, to limit state spending on incentives for the film industry.
  • Michigan: Gov. Jennifer M. Granholm proposed reducing the 42% refundable tax credit to approximately 37%.
  • Wisconsin: Gov. Jim Doyle offered a plan to completely eliminate the State's 25% film tax credit and replace it with a two-year, $1 million grant program to create permanent film industry jobs.

Eliminating Wasteful Tax Credits as a Budget Solution: According to the Center on Budget and Policy Priorities, Iowa had to close a $779 million gap coming into FY2010 and will likely face fiscal problems this year as well. This bleak projection is compounded by the $141 million, or 9.1%, decrease in overall state receipts in the past three months as compared to the same period last year. As government officials in Iowa and other states try to root out wasteful spending, they should also rethink allocating enormous and often inefficient business tax breaks as a better option than cutting programs for their most vulnerable residents. The public money squandered in this tax credit scandal demonstrates that blind giveaways are not a sustainable model for economic growth and a more transparent budget process is needed in the future.

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Research Roundup

The short- and long-term impact of the recession and what states can do about it-

  • Economic Scarring: The long-term impacts of the recession - This Economic Policy Institute briefing paper highlights long-term impacts of the recession on families, including how child education and nutrition suffer, and that since the downturn, 20% of young adults have delayed or dropped out of college.  One study found that employees entering the workforce during a recession have lower earnings even 15 years later.

  • The Impact of the Recession on Work and Family - This policy brief by the Sloan Work and Family Research Network outlines how the recession is effecting families, from jobs lost, lost health care coverage, and decreased time for care-giving among those who still have jobs.  The brief recommends increased benefits for part-time workers, more focus on pay parity for women who are the sole wage earners now in many families, and paid family leave/paid sick days for working caregivers.

  • Recommendations for Addressing Poverty in Tough Economic Times - While states have less revenue to help families and individuals, this CLASP brief outlines some low-cost policy changes (including options made available through the American Recovery and Reinvestment Act) states can make to help those who are struggling most, including ensuring child care is available, removing barriers to SNAP (Food Stamp) benefits, tapping into TANF Emergency Funds, adopting Unemployment Insurance reforms, connecting people in work sharing programs to part-time training programs, and establishing paid sick days policies.

  • Tracking American Recovery and Reinvestment Act Funds - CLASP is tracking how much each state has drawn down in Child Care and Development Block Grant (CCDBG) funds made available through the recovery act.  As of Sept. 18, 2009, states, territories, and tribes have drawn down $183.6 million, or 9 percent of available funds. 

The Cost of Failure to Enact Health Reform: Implications for States - In the absence of health care reform, the Urban Institute projects that in all states, employer sponsored insurance will fall, and Medicaid enrollment and the number of uninsured would increase.  Additionally, employer and government spending would continue to increase. In 29 states, the number of people without insurance would increase by more than 30 percent.

New reports on the foreclosure crisis-

  • Foreclosures: A Crisis in Legal Representation - This study by the Brennan Center for Justice shows that disturbing numbers of families, often as many as 86% in particular communities,  face foreclosure proceedings without the aid of legal counsel.  The report recommends that restrictions on the federal Legal Services Corporation be removed to encourage more help for the foreclosed upon, expanding alternative dispute mechanisms, and ensuring that all families facing foreclosure have a chance to consult with a trained housing counselor and, if needed, a lawyer.

  • State Anti-Predatory Lending Laws: Impacts and Federal Preemption - The UNC Center for Community Capital finds that states that adopted tough anti-predatory lending laws had lower foreclosure rates than states without those laws. The report also found that, after 2004 when the federal government exempted national banks from such state laws, those banks increased their subprime lending the most in states with those laws.

 Voting Rights in Indian Country - Based on litigation in a number of western states, the ACLU Voting Rights Project outlines the numerous barriers faced by Native Americans trying to exercise their right to vote, and makes recommendations for ensuring the right to vote in Indian Country.

Declining Public Assistance Voter Registration and Welfare Reform - Academic researchers affiliated with Demos debunk Heritage Foundation claims that decreases in voter registrations through public assistance agencies are due to welfare reform.

Migration Policy Institute is currently accepting applications for its E Pluribus Unum prizes for groups and individuals involved in immigrant integration initiatives.

Please email us leads on good research at


Job Losses & State Fiscal Crises: Time for More Federal Stimulus Spending

Center for Economic and Policy Research - Decreased Jobs and Hours Push Economy Back to 1997 Hours Level
Center for American Progress - Job Prospects Remain Dim for Millions of Workers
CEPR - Economists Who Make the Third Stimulus Honor Roll
Progressive States Network - Recovery Deal Reached; State Aid Slashed Compared to House Bill

Local Law Enforcement Backs Away from Punitive 287g Programs

NILC - More Questions than Answers about the Secure Communities Program
NCLR - State and Local Police Enforcement of Immigration Laws
Police Foundation - The Role of Local Police
Government Accountability Office
Progressive States Network - Protect Immigrant Victims and Witnesses to Crimes

Health Insurer Sues Maine for Guaranteed Profits

Progressive States Network - Federal Health Reform and the States
Progressive States Network - Priorities for Reform - Wellpoint Sued an Entire State to Increase Profits

In Wake of Scandals, Lawmakers Seek to Limit Film Tax Credits

Oregon Center for Public Policy - OCPP Calls for Audit and Investigation of Film Subsidy Program
Connecticut Voices for Children - Fiddling While Rome Burns
New Mexico Fiscal Project - Economic Development Tax Credits: Are They Doing the Job in New Mexico?
Massachusetts Department of Revenue - Report on the Massachusetts Film Industry Tax Incentives
The Business Journal of Milwaukee - Commerce study slams film incentives
Wisconsin State Journal - Study: Film incentives cost 20 times more a job than other state programs
Citizens for Tax Justice - State Film Tax Credits: Next on the Cutting Room Floor?
Good Jobs First - More States Yell "Cut" on Film Tax Credits
Rep. Steven D'Amico - A Primer on the Massachusetts Film Incentives
Iowa Fiscal Partnership - Iowa Budget Belt-Tightening: Focusing on the Largest Wheels


The Stateside Dispatch is written and edited by:

Nathan Newman, Executive Director
Nora Ranney, Legislative Director
Caroline Fan, Immigration and Workers' Rights Policy Specialist
Altaf Rahamatulla, Tax & Budget Policy Specialist
Julie Schwartz, Broadband and Technology Policy Specialist
Christian Smith-Socaris, Election Reform Policy Specialist
Adam Thompson, Health Care Policy Specialist
Julie Bero, Executive Administrator and Outreach Associate
Mike Maiorini, Online Technology Manager
Marisol Thomer, Outreach Director


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