Archive for April, 2009

State Budget Crisis = Human Service Funding Crisis

April 29th, 2009 1 comment

One of the key themes in my book Out of Reach and this blog’s discussion of the recession, is the pro-cyclical nature of public expenditures for programs that help low-income populations. Funding for many human or social service programs that assist low-income workers increases during periods of growth, but contracts during economic downturns right at the moment when need is greatest. The current recession has hurt almost every source of government revenue and almost every source of funding for social service organizations that help low-income populations.

As governors and state legislatures begin to grasp the program cuts necessary to balance budgets in the next few years, the fragility of the safety net for low-income populations becomes more and more apparent. The safety net has come to rely more heavily upon state and local government for human service funding in the past twenty years. Yet, government programs are under budgetary pressures unprecedented in recent years.

Many regional and local newspapers track proposed social program cuts within their states, but National Public Radio and the New York Times both have recent pieces that use the budget crisis in Arizona to frame some of the broader issues at hand. According to the NPR story:

Arizona, which faced a $1.6 billion budget gap this year, has been among the hardest hit. Funding was trimmed for food banks, community health centers and home health care for the elderly. Monthly payments for foster care parents were reduced, and more than 1,100 children with chronic or disabling conditions were dropped from the state Children’s Rehabilitative Services program.

The New York Times continues:

Arizona’s crunch came on fast and hard. In January, the newly seated Republican governor, Jan Brewer, had to address a $1.6 billion budget gap by cutting $580 million in general-fund spending, taking more than $500 million from agencies financed with fees or other sources, and using $500 million in federal stimulus money — squeezing all the reductions into the final five months of the fiscal year ending June 30. Arizona expects a $3 billion shortfall in the next fiscal year. In a speech to legislators in March, Ms. Brewer proposed to fill the chasm with $1 billion in spending cuts, $1 billion in federal stimulus money and — in a risky idea she floated after emphasizing her conservative credentials — $1 billion raised through “a temporary tax increase.”

States are in a tricky spot right now – they are faced with falling revenues amidst rising program costs, even if social programs are not expanded or made more generous. For instance, inflation makes it more expensive to operate programs. Population growth and trends in demographics matter as well. Growth in population and the aging of the population both translate into greater numbers of individuals that may benefit from programs.

Few social programs or clients groups are buffered from program cuts.  Looking at surveys with almost 2,000 government and nonprofit social service organizations that I completed in years following the 2001 recession, I find that about half of all organizations reported recently losing funding. The results are likely to be more dramatic if one was collecting data today. It is surprising when I look at the data that there is no particular pattern to it.  Government agencies and nonprofits were equally likely to lose funds. Reliance on different revenue streams made little difference – those receiving public funds were as vulnerable as those reliant on private giving or charitable organizations. No service mission or client focus was immune – employment services, emergency assistance, housing, mental health and addiction services all seemed equally likely to face cuts.

What we should be worried about, is what happens to agencies after funding cuts.  We hope organizations can make up the lost revenue or get by until the economy improves.  But my survey data collected a few years ago suggest this is not the case.  First, about 70 percent of service providers that lose funds report cutting staff, clients, and services as a result.  Second, and perhaps more alarming, I found that about 30-40 percent of programs listed in community directories in the years following the 2001 recession were no longer offering programs or were nonoperational. Both are a sobering indication of what tough budget times mean for organizations that serve the poor.

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Outlook Brightening for Markets, What About For Workers?

April 11th, 2009 No comments

Even though the stock market has been on the rise recently and optimism is emerging that the economy may start rebounding in coming months, millions of Americans are still having trouble finding work and providing for their families. News and research highlight the many challenges working poor families and communities face today. Food Pantries are facing unprecedented need for help.  More than 30 million Americans today receive help from the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps). Homelessness is on the rise. Nonprofits that help low-income families are in trouble. The foundations that typically serve as the safety net for nonprofits are struggling. As a result of mounting needs and inadequate assistance to meet those needs, people are turning to family for help.

Even though the outlook for markets may be brightening, the outlook for workers – particularly those at the lower end of the income ladder – may not be so bright. How could a recession end without improvement in the labor market? The end of recessionary periods do not correlate with immediate increases in employment opportunities because the starting and stopping points of recessions are defined by trends in GDP, not by changes in unemployment rates. Recessions are deemed to have ended when sustained GDP growth is observed.  This growth can occur due to a range of factors – like increases in productivity – without increasing overall employment rates.  Thus, unemployment can increase or remain high early on during an economic recovery.

The previous recession that lasted from March 2001 to November 2001 exemplifies this seeming contradiction. According to Bureau of Labor Statistics data, the seasonally adjusted unemployment rate among adults 25 and older without a high school degree rose from 6.8% in March 2001 to 8.0% in November 2001. Yet, the unemployment rate among this group peaked in 2003 and did not fall below 8.0% until 2005. Similarly, the unemployment rate for adults 25 and older with a high school degree increased during the recession of 2001 to 5.0% and remained at or above that level until late 2004.

In March 2009, the unemployment rate was 13.3% for adults without a high school degree and 9.0% for those with a high school degree. Even if GDP and the Dow rise in the latter half of 2009, we should expect jobseekers at the bottom of the income distribution to continue to struggle to find work.  Safety net programs, food pantries, and social service providers should be expected to see historically high levels of demand well into 2010 and 2011, maybe even beyond. In short, rosy stock market news and initial signs of turn-around may distract the news media, but they should not divert our attention from the very real investments we need to continue to make in education, training, work supports, and aid to low-skill jobseekers unable to find employment.

Rising Job Sprawl and Poverty in Urban America

April 8th, 2009 No comments

A recent report for the Brookings Institution’s Metropolitan Policy Program by Elizabeth Kneebone examines recent trends in job sprawl across metropolitan areas.  Despite the resurgence of urban living during the 1990s, there were relatively few job gains in downtown or central city areas between 1998 and 2006. Instead, most of the job growth appears to have occurred in suburbs far away from downtown areas.

Over the course of the 1990s, downtowns in major metro areas throughout the country experienced a sort of renaissance. The population living in downtowns grew by 10 percent over that decade, after 20 years of decline. While that upswing has continued to a certain extent in this decade, the “rebirth” of downtowns appears to have remained a residential rather than a jobs-based phenomenon. From 1998 to 2006, the top 98 metro areas experienced a 10 percent increase in the number of jobs within 35 miles of downtown. However, the urban core [within 3 miles of downtown central business district (CBD)] saw an increase of less than one percent, compared to job growth of 9 percent in the middle ring [3 to 10 miles from CBD] and more than 17 percent growth in the outer ring [10 to 35 miles from CBD]. As a result, the geographic distribution of employment steadily decentralized in the top 98 metro areas over this time period.

While these data do not reflect changes in the distribution of employment since the recent recession began, these data are consistent with evidence that poverty rates in central cities have not diminished in the years following the recession of late 2001. Moreover, they suggest that we should expect poverty and jobless rates to increase during and remain higher after we recover as a nation from the current recession.

Categories: Employment, Poverty Tags: