California Governor Orders 10% layoff for State Emplo

Executive Summary - Arnold Schwarzenegger, the Governor of California ordered a hiring freeze and a 10% layoff of all state employees to ease the budget crisis. He also ordered the states 235,000 employees to take two days a month off from work without receiving any compensation for these days taken off.

Discussion – The Governor is not only a movie star and politician but he was an accomplished businessman before being elected to office. He understands a budget and making money quite well. He is trying to make things work and is getting resistance from their state legislature. California while only a state represents one of the largest budgets in the world. It is worthy of note that the law enforcement officers of California are not exempt from this layoff, neither are the state tax collectors.

England is laying off their tax collector agents in large quantities. Only time will tell if the US Federal Government will get realistic and layoff some from their overly padded payrolls. The fact that the UK did it is encouraging and is probably an indicator of what the USA will do – layoff coming. It is hard to believe Obama will not go to cuts in government spending including job cuts from the Federal payroll. To not do so in view of their financial insolvency would be insane.

You can’t realistically collect taxes from a nation of people out of work, with savings wiped out due to stock market crashes and real estate crashes. This is not the time for aggressive tax collection efforts since you can’t get blood from a stone. People working in some of the let us say not too popular jobs in government (you know who they are) will have to face going to the private sector for work when they get laid off. Their popularity with the private sector is going to be a hard to overcome obstacle due to their past job descriptions and the way they were perceived as performing their duties by the private sector. Their prospects for being absorbed into the private sector would be less than encouraging. This is something people holding these jobs thought they would never have to face in their lifetime.

The irony is that the USA economy is so very badly broken that even Obama is saying it may take at least his whole term to get things beginning to be on track again. The year 2009 is going to be worse than 2008 so the layoffs from the government sector is something we are first going to see come into its fullness next year. As people lose their jobs they of course pay less taxes. As business fail and close their doors less taxes from income, payroll etc. As more people go into foreclosure less taxes from property and sales of real estate. As people go bankrupt less taxes overall. As retail sales drop less taxes from sales tax and employment.

Another thing we may see is early release from the prisons in the USA since they have over 2 million people behind bars and that is probably running about $35,000 a year each. Then there are millions on supervised release, probation, parole etc. This too costs a lot of money. The California Governor tried this before bad the legislature rejected it. The reality is this will have to stop. The vast majority of people incarcerated never injured anyone physically.

Most just broke statues where the government statue was the victim so do not expect a massive crime wave from early release. Prospects for more government healthcare of course are dismal at best. Government programs and jobs across the board are going to have to be cut back.