Cities and Counties Make Workforce Cuts as Coronavirus Financial Toll Mounts

Cincinnati Mayor John Cranley choked up as he delivered the news this week that hundreds of municipal workers would be furloughed as part of efforts to deal with the public health risks and fiscal stress the coronavirus outbreak is causing.

“You did nothing to deserve this. It is not your fault. This is only temporary. You will be back,” Cranley said at a press conference, reading from a message he’d sent to city employees. Cincinnati officials say that 601 full-time workers and 1,118 part-time employees will be subject to what the city is referring to as “unpaid temporary emergency leave.”

These workers have two options. One is that they can take the unpaid leave—in this case they would remain city employees and would retain health care coverage under the city’s plan. Or they can use any sick days, vacation, or other paid leave that they’ve accumulated. 

At this point, the temporary emergency leave program is scheduled to remain in place for about four weeks, according to a letter city manager Patrick Duhaney sent to staff. But he also said that this timeline is subject to change given the fluid situation with the virus.

The city overall has upwards of 6,000 employees. Cranley said that while it depends on how part-time workers are counted, the reductions apply to about one-fifth of the workforce. But police, firefighters, and water and sewer workers are largely shielded, meaning that other departments—like law, finance, recreation, and transportation—are bearing the brunt.

“To the departments that are impacted, the cuts are extreme and devastating,” Cranley said.

A big part of what is driving the furloughs is that Cincinnati is trying to rein in costs as the coronavirus interrupts the regular flow of tax revenue, and as response efforts drive unplanned expenses. City leaders say this has knocked the city’s budget out of balance. 

Cincinnati’s general fund revenues for the current 2020 fiscal year had been beating expectations by about $24 million, but now they’re slated to be around $27.5 million short.

The city is not alone right now in facing tough workforce decisions. There are other reports emerging out of cities and counties around the country that are turning to layoffs and furloughs as they try to weather a crisis that is both straining their finances and also making it difficult for some government workers to carry out their normal duties.

The overall economic devastation is ratcheting up each week, with 6.6 million people last week filing for unemployment, the U.S. Department of Labor reported on Thursday.

At the local government level, layoffs or furloughs weren’t as widespread, but are starting to be seen. Santa Barbara, California, for instance, sent out layoff notices to hundreds of hourly employees, the Santa Barbara Independent reported last Friday. New Orleans officials in recent weeks have also raised the possibility that workers could be furloughed or laid off due to budget pressure. (Attempts to reach officials in both cities for comment were unsuccessful.)

In St. Paul, Minnesota, the Pioneer Press reported last month that the city would make a decision on layoffs by April 4. A statement that a city spokesperson provided this week said that St. Paul was not announcing layoffs for any of its 3,500 employees at this time.

“Saint Paul will continue to work closely with our collective bargaining units under our current agreements to keep as many people working as possible,” the statement added.

The city did not directly respond to detailed questions about whether layoffs could be coming, or how many people those might affect.

Wichita, Kansas is implementing furloughs that could affect about 300 full- and part-time workers for 30 days, according to multiple news reports. Officials there said a program that allows employees to donate their own paid time off to a pool that other workers can draw from is one measure that could help ensure some people continue to get paid.

At the state level, Pennsylvania has placed about 2,500 part-time and seasonal employees and interns on leave without pay, Spotlight PA reported over the weekend.

Gerald Young, a researcher with the Center for State and Local Government Excellence, said that it’s still too soon to identify any clear trends when it comes to how local governments are going about managing staff levels as they adapt to the coronavirus crisis.

“What's really happening in terms of cities and counties right now is a very ad hoc approach,” he said. 

State and local governments are confronting multiple workforce challenges due to the virus.

Some frontline public health care and emergency workers are enduring immense workloads—and risks to their own health—as they respond to the outbreak. These difficulties have been exacerbated by widespread shortages of safety equipment, like protective masks.

Meanwhile, governments across the country have been ordering businesses to close and asking people to stay at home and to avoid groups—including at offices and other workplaces—as they seek to slow the spread of the highly contagious virus.

State and local government workplaces are not immune to these precautionary measures. They have been closing buildings and other facilities to the public and suspending in-person services at places like motor vehicle departments and permitting offices. Like many workers in the private sector, government employees who can are often working from home. 

In addition to the safety and public health concerns, there are the budget issues—like those bedeviling Cincinnati. The costs of the public health crisis are mounting, while at the same time the nation’s anemic economic activity is eroding tax collections and other revenues. And how severe or lengthy the economic slump will become is very much an unknown.

Young said that after the Great Recession set in at the end of 2007, freezes on hiring and pay were a common tool that state and local governments used to reduce their personnel costs. But he estimated that about 30% to 40% of jurisdictions did resort to furloughs and layoffs as they responded to that downturn.

The recession also prompted some places to look at restructuring staff or trimming services. Changes to benefits programs can be another cost-cutting option.

"All of those types of things end up on the chalkboard,” Young said. 

He noted that for state and local governments, staff reductions following the Great Recession were at their deepest in the 2009 to 2012 timeframe, and that staffing levels generally seemed to have recovered by around 2016. Before the virus, he said, projections showed local government employment growing by about 3% over the coming decade.

In Butler County, Pennsylvania, north of Pittsburgh, officials decided to furlough 168 of the county’s 635 full- and part-time employees. As of March 24, those workers were either temporarily not working and taking earned time off or they were on unpaid leave, according to a staffing update provided by the county.

Leslie Osche, who chairs the county’s board of commissioners, said that the decision to downsize the workforce didn’t have to do so much with the budget, but rather concerns about keeping workers safe and the reality that some employees didn’t have much to do. 

Osche said that within Butler County’s government there are concerns about fairness when it comes to remote work because employees like corrections officers don’t have this option. “It would really be unfair to say we're going to allow others to work from home,” she said.

At least 174 county workers, as of last week, had been deemed “essential.” These included prison staff, 911 dispatchers and certain maintenance and custodial workers. 

Furloughed workers are not getting paid, Osche said, but their health benefits will continue. The expectation is that these employees will be brought back on when the public health crisis wanes, and that in the meantime they’ll be eligible for unemployment benefits.

The massive federal relief package that President Trump signed last week includes provisions to make $600 in weekly unemployment insurance benefits available on top of the normal jobless benefits that a person would be eligible for in their state.

Cranley, the Cincinnati mayor, praised the president and lawmakers for approving the legislation. He said that provisions like the boosted unemployment benefit will make it easier for people to stay at home from their jobs until the disease subsides.

Duhaney, the city manager, this week suggested that for workers making $55,000 or less annually the unemployment benefits should provide equal or greater pay than what they were earning.

One of the budget problems that Cincinnati is dealing with is that Ohio—like most other states with income taxes—has moved its income tax filing deadline from April to July. This is meant to help give taxpayers more flexibility during the pandemic. 

But another effect in many states is that it is pushing a substantial chunk of tax collections beyond the end of state and local fiscal years. 

A memo that Duhaney sent to members of the city council this week said that the tax-filing date change and rising unemployment would reduce the city’s estimated general fund income tax collections by about $44 million in this budget cycle.

Income tax is an important source of revenue for the city. The memo says that it makes up almost 70% of general fund revenue, or an estimated $289 million of the current 2020 fiscal year budget.

The income tax issues aren’t the only problems for the city’s budget. Declines in revenues like parking meter collections, parking tickets and taxes on admissions and casinos are expected to decrease anticipated revenues by another $7 million, Duhaney's memo says.

All told, this leaves the city facing a $27.5 million deficit with three months to go in its fiscal year.

On the cost front, the city estimates that it could spend up to an additional $13 million per month on coronavirus-related expenses like supplies, equipment and overtime. Already the city has spent $1.3 million on protective equipment for workers in three weeks, according to Duhaney’s memo.

In addition to the temporary workforce cuts, Duhaney said he would recommend other cost-saving measures in a 2021 budget update due in late May, such as a freeze on cost-of-living adjustments, and a 10% salary cut for senior management, including himself.

Cranley said that, on an annual basis, the salaries of the workers forced to go on leave are worth roughly $40 million. The mayor remained upbeat about them returning to work soon. 

“We're hoping that we can reverse some or all of these decisions as early as four weeks from now,” he said.