Storm Damage in the Public Sector

by Nate Dorr - nathan.dorr@state.mn.us
September 2011

Gone are the lazy, crazy days of summer. With school days here and everyone back from summer vacation, it’s almost as if the state government shutdown was no more than a passing wild summer storm. Looking back, we now have a better assessment of the legislative fallout from the summer of 2011. The shutdown created ripple effects that forced highway projects to cease, delayed payments to schools, and put medical and social assistance programs on ice. State colleges and legal services were among the few public sectors that remained open during the shutdown.

The 26-county northwest Minnesota region shows 6,662 state workers (see Table 1), which represents 3.2 percent of the regional workforce. Educational services accounted for more than half of the regional state workforce at 3,436 jobs. Since colleges continued operations during the shutdown, we can focus on the next largest sector. Public administration held 27.8 percent of the regional state workforce (1,854 jobs). Only 12.5 percent of the public administration industry is made up of state workers, while the rest is made up of local government (77.9 percent or 35,107 jobs) and federal government (7.4 percent or 3,316 jobs). In total, state worker payroll adds more than $335 million annually to the regional economy.

Northwest Minnesota relies on government activities and subsequent payroll dollars to keep local economies stable. During the recent recession, public administration, health care, and agriculture consistently showed positive growth rates. This trend offset massive layoffs in construction, manufacturing, and retail sales industries. As a result of the poor economy, the shrinking private sector led to reduced government revenues. This current wave of the Great Recession is now hitting public sector jobs.

Who are these state workers?

Highly paid public servants often create ire among conservative groups and citizens loathing any increase in public spending. As Table 2, titled Top 20 Occupations in Public Administration, demonstrates, public administration jobs do pay higher wages than other occupations. However, a look at the jobs helps explain why. Public safety occupations like police, corrections workers, firefighters, nurses, and social workers are at the frontline of many crisis situations. These workers help keep area residents safe, often putting themselves at risk. Other occupations in public administration, like managers of public programs, judges and lawyers, nurses, and financial or business specialists often require advanced college degrees and relevant work experience. Intense training or occupational hazards for many of these occupations require higher wages to attract and retain qualified workers. Categories like “all other” managers ($36.81), lawyers ($32.16), and nurses ($29.40) are the three highest paying occupations in the region in the public administration sector.

A look at employment projections shows the public administration sector is expected to grow 4.3 percent from 2009 to 2019 despite tough budget constraints. Compared to a 7.6 percent growth rate for all industries in the region, public administration lags overall regional projections. The greatest growth is expected for social and human service assistance (33.8 percent), compliance officers (26.8 percent), and registered nurses (24.2 percent) occupations. On the other hand, janitors and cleaners (-1.1 percent), and court, municipal, and licensing administration clerks may grow the least (3.9 percent).

Unemployment insurance claims data from July 2011 may offer the best source for measuring the state government shutdown. Technically, laid-off state workers may have initiated their unemployment claims in either June when the layoff slips were sent out, or in July when layoffs actually occurred. As demonstrated in Table 3, initial claims jumped in July by 54 percent for all industries from the previous year, while initial claims in public administration skyrocketed by 734 percent or 756 claims. Regular continuing claims showed a moderate increase for all industries at 7 percent, while public administration sector workers’ claims leapt to 1,616, a 426 percent or 1,309 increase from the previous year. The education sector had fewer claims compared to the public administration sector since colleges continued to operate during the shutdown.

What’s the damage?

The month of July 2011 will prove to be a bump in the road creating all sorts of data outliers across the state. Analysts like smooth trends but also enjoy dissecting nuances and data anomalies. This last spring was headed in the right direction with seasonal jobs coming back, job vacancies (as measured by the Minnesota Job Vacancy Survey) up, job postings on www.MinnesotaWorks.net increasing from the last two years, and signs of improving consumer confidence. Unfortunately, the lingering effects of weakening public spending and market uncertainty continue to hinder economic growth in the region.

Finding a bottom-line number for assessing the state government shutdown is simply unrealistic in such a brief article. A single number may assume too much. It may also discount impacts in tertiary sectors related to state government funding or operations. Clearly the jump in unemployment claims for public administration provides some account of the state shutdown, but it’s not the whole story. State funding for local governments and non-profit programs also was halted, as was funding for 50 highway and road construction projects in the region.[1 ]Important revenue streams from lottery sales and state parks were derailed, too. Where data fails to paint a complete picture, we turn to anecdotal accounts from those impacted.

For example, Rural Minnesota Concentrated Employment Program (Rural MNCEP) and the Northwest Private Industry Council (NWPIC), which run 11 WorkForce Centers in the region, had to close their doors and programs during the state shutdown. This means roughly 75 percent of Rural MNCEP staff was furloughed, while NWPIC staff operated on a drastically reduced schedule and also furloughed workers. Youth and dislocated workers lost work programs and earned income, which trickled down to local employers losing staff acquired through these programs. Additionally, time and energy spent preparing for and worrying about the shutdown could instead have been spent on constructive workforce and economic development efforts. 

Vacationers with reservations at state parks also faced the storm cloud. At Lake Itasca State Park near Park Rapids, more than 400 campsites and many more cabins and lodges were left vacant during peak camping season. With fewer vacationers in the area, grocery stores and rental businesses around Itasca are still recovering from lost revenues.

Calm after the Storm

By now, everything is quite calm, and the summer storm season is past. State workers are back, and news of the 20-day state of Minnesota shutdown has quickly become overshadowed by the unstable stock market. With school in session, we have almost moved on and forgotten about the crazy days of summer. This article is simply meant to peel back the surface of the state shutdown and remind us that the state shutdown impacted a wide range of people from state workers to job seekers to vacationers to private businesses. For now we are left looking to the future for signs of stability and clarity.

[1]Minnesota Department of Transportation, 2011 Greater Minnesota Construction Projects

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