August 10, 2009

State buyouts come with hidden costs

Six states have turned to worker buyout programs this year to cut costs while the U.S. economy remains sluggish, state officials said.

The incentives offered by Vermont, Maine, Louisiana, Oklahoma, Connecticut and New York should trim state payrolls by a combined 9,000 workers, far short of the 54,000 state workers who have been laid off since the recession began, the American Federation of State, County and Municipal Employees said.

The National Conference of State Legislatures said the combined state budgets were projected to have a shortfall of $139.4 billion in 2010.

The states expect various savings. Officials in New York expect $173 million in cost savings by 2011, reported Monday.

But Connecticut state Rep. Christopher Caruso said adding three years to work histories results in experienced workers leaving early. Frankly (we) drain those agencies of institutional histories, of experience, he said.

In Connecticut 10 of the state's 23 prison wardens and 200 college professors retired this year.

With cheaper, inexperienced new workers there are training costs and slower productivity to consider, said Nancy Dering Martin, a consultant at the Pew Center on States' Government Performance Project.

Hiring replacements is not without its costs. It's not without its implications for performance, she said.