Arnold Kling  

Recession-Proof

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A newspaper in Anne Arundel County, Maryland reports,


the number of school employees earning more than $100,000 doubled from 213 in 2007 to 450 in fiscal 2009, which started in July.

...62 school employees received pay hikes of more than $20,000 over the two years and four saw raises of more than $30,000 over two years.

Meanwhile, concerning some other local counties, the Washington Post editorializes,

Montgomery County, which faces a shortfall of $250 million for fiscal 2010, isn't the only Washington area locality to confront financial challenges. Prince George's County faces a $48 million shortfall and is also considering furloughs; Fairfax County is bracing for higher taxes to make up a $430 million deficit. In Montgomery County, however, budget problems present a unique opportunity for change. The deficit has drawn public attention to the excessive pay increases demanded by the unions -- and many residents are outraged. Mr. Leggett and the council must capitalize on this opportunity by pushing for a reduction in cost-of-living increases for county employees in the spring.

Read the whole thing. It turns out that outlandish pay increases for public sector unions are what is recession-proof. The local communities are not.


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CATEGORIES: Political Economy



COMMENTS (1 to date)
Bob Knaus writes:

Local governments aren't recession-proof, they are recession-lagged.

The NBER official dates for the last recession are March-November 2001. The management consulting firm that I worked for at the time serves state and local governments. We continued expanding staff and opened a new office. It was not until late 2002 that spending cutbacks in our clients finally caught up with us... and the partners took me up on my suggestion of closing down the Miami office that I managed to save money.

A bit later I worked with them to analyze IT spending for LA County. The numbers are instructive. Total IT staffing at the County:
FY02 - 3,120
FY03 - 3,255
FY04 - 2,868

Total IT spending for the County:
FY02 - $687M
FY03 - $703M
FY04 - $564M

The fiscal years end in June. The budget process sets the spending levels for the upcoming budget year in the March-June timeframe. So we see that a recession which ended in November 2001 did not affect County IT spending decisions until March 2003.

Overall LA County spending showed a very similar pattern.

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