State and Local Governments in Crisis


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The present crisis of U.S. capitalism is now spilling over into a fiscal crisis for state and local governments.  American Big Business, through its control of the Democratic and Republican parties, has set up a system where money for war is funded through the coffers of the Federal government in Washington, DC, while education and many other public and social services are largely funded by the states, counties, cities and towns.

State and local governments make up a large part of the economy and employ many workers.  In the past year, as the private sector has shed jobs, state and local governments have been creating them, which has slowed the growth of unemployment. Now, however, the economic crisis is leading state and local governments to cut back on workers.

The wildly inflated property market has collapsed.  More and more businesses are laying off workers and cutting the hours and wages of remaining employees.  Major corporations such as Lehman Brothers have collapsed altogether. This means less revenue from property and real estate transfer taxes.  It also means less money from income taxes.  As workers cut purchases, revenue from state and local sales taxes will also decrease.  Many states and municipalities are being forced to sell bonds at higher interest rates, which cost them more in debt servicing, because investors do not want to purchase bonds that may turn out to be worthless if the entity cannot pay them off on schedule. Some states are even being forced to sell off publicly owned assets such as bridges, roads, land, buildings and more.

According to the Center on Budget and Policy Priorities, 29 states already have had to cut their budgets and/or increase taxes to balance their budgets, which began on July 1, 2008.  Already, Governor Schwarzenegger has called for increasing sales and other taxes, to get the California budget back in balance, after revenues had declined more than expected in the month of October.  California now faces an additional budget gap of $11 billion. In Rhode Island, the state budget gap is more than 10 percent of the entire state budget. More than 40 states face budget gaps of more that $30 billion and this gap will most likely double by the summer. In the next fiscal year, budget gaps are projected to double again to $120 billion.

California has also put a freeze on almost $4 billion in spending on public works infrastructure projects due to a gap in the capital budget.  The California State University system is planning on cutting enrollment by 10,000 students for the 2009-2010 school year.  This would be the first time in history that students who met the minimum academic requirements were not allowed to enroll. Keep in mind that overall tuition and fees at colleges and universities (including private schools) increased 439 percent from 1982 to 2007, while median family income went up only 147 percent for the same period.  Some states, like Nevada and Ohio, are running out of money to pay unemployment insurance, just at the time when unemployment is growing.

Remember when people used to tell you that if you wanted job security, then work for the government?  Now many governors and mayors are throwing government workers out of their jobs.  Mayor Bloomberg in NYC is laying off 600 employees and eliminating another 2,400 jobs through attrition.  He has warned that more layoffs could come as soon as January 2009.

It should be noted that New York Governor Paterson is considered a “very good friend of labor,” by leaders of many labor unions in NYC.  Eliot Spitzer and Patterson were elected as Governor and Lieutenant Governor in the last election with the support of most of the public employee unions.  Paterson took over when Spitzer resigned over his sex scandal.  Now Governor Paterson has proposed layoffs of 521 state employees and threatened the state employee unions with more layoffs if they do not renegotiate their contacts, which means cuts to wages and benefits.  Patterson is promising cuts to eliminate the $12 billion state budget gap and he said he would cut Medicaid, education and other programs. 

The Governor is also proposing a new pension tier for all newly hired state and local government workers, including NYC.  This new pension tier will mean that employees will pay for their benefits with larger permanent wage contributions and they will have to work more years before they can retire.  More work for less money is the slogan of capitalism. But of course, if concessions are granted to the Governor, and the economic situation continues to worsen – as is likely – the workers may well get laid off anyway! 

Public sector:  35 percent Unionized

We do not have to take this!  We can fight back.  More than 35 percent of the state and local government workers are unionized.  The major unions for public employees are as follows:  Teachers Unions (National Education Association & American Federation of Teachers), American Federation of State, County and Municipal Employees, Service Employees Union, Teamsters, Firefighters, Communication Workers of America, Transport Workers Union, Amalgamated Transportation Union and the Office and Professional Employees Union.

The leaders of these unions should coordinate a national campaign to address the budget crisis that the states, cities and towns are facing.  If these unions stand united across the nation, their power would be felt in Washington, DC.  It is these unions that must lead the fight back against the layoffs, attacks on worker pay and benefits, and cuts in education and government services. These labor unions can organize with students, parents and all who receive government services and fight to stop all of these cuts with the slogan:  Make the rich pay for their crisis!

1960s and 1970s: General Federal Revenue Sharing Program

As a result of the mass struggles against racism and Jim Crow segregation and against the Vietnam War in the 1960s, the federal government was forced to create a program known as General Revenue Sharing.  This program granted the states, counties, cities and towns money from the national treasury to fund education, housing and other programs and services.  When Ronald Reagan became President, this program was eliminated as part of his program of cuts. The Labor Movement must demand that the Federal government reactivate this program and fund it with whatever funds are necessary.  They can easily pay for this by ending the wars abroad and cutting the military budget.  The Bush government nationalized the losses of the big banks, leaving the profits in the pockets of the rich.  If the entire banking industry was nationalized under democratic workers’ control, this alone would provide more than enough revenue to not only preserve existing social services, but to expand them.

Some on the left, including a few union leaders, have raised the slogan of “tax the rich” as a way out of this crisis.  Although the WIL supports more taxes on the rich, we recognize that this will not solve the fundamental problem.  History shows time and again that whenever taxes are increased on the rich, the capitalists find ways to hide their money, send it out of the state, or even out of the country.  The rich will even sponsor a “strike of capital,” where they will not invest until the taxes are lowered.  Ultimately, we cannot control what we do not own and public ownership of the giant corporations is the only way forward.

The Cuts Can be Stopped!

The labor leadership must organize to stop any cuts, layoffs, increases in tuition or taxes on working people at the state and local level. No to concessions! Some labor leaders will argue that if this is accomplished, the states and local governments will run out of money before the end of the fiscal year.  However, the federal government will not let all state and local governments come to a halt.  The federal government and the Federal Reserve could easily purchase more state and local bonds to make up the difference in the budget gap.  The fact is that the money is there, in Washington (workers’ tax money), but it will not be released without a mass struggle.  Only the working class, mobilized for action, can force the Federal government to bail out the state and local governments.  If the labor leaders led a fight back in just one area, for example, New York, this could start a national movement on this issue.  Labor is not weak, labor is powerful!  Unfortunately, the policy of the present labor leaders has been grossly inadequate.

As of this time, the present leadership of the unions has not organized any opposition to the cutbacks.  These leaders have instead focused their energies and resources on mobilizing their membership to get the Democrats elected to office, claiming that things would then get better for working people. In New York, the Democrats now control the Governorship and both houses of the state legislature. And yet Governor Paterson is proposing steep cuts in services and threatening layoffs if the unions do not re-negotiate their contracts.

State and local government workers teach the students, put out the fires, pick up the trash, make sure we have clean water, fix and plow the roads and perform many other necessary functions.  This is tremendous power.  Mobilizing the support of workers in the private and federal sector, along with students and the unemployed, we can turn this situation around.  The key to the situation is to link up all those who agree with our program and strategy.  Caucuses of workers who want to change their union’s policies must be built in all the unions.  Students against the cuts must be organized and linked up nationally into an effective force.  Together we can change the present policies of the labor leadership.  Contact us today!


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