Texas could lose more than 125,000 jobs if the Texas Legislature goes through with its plan to close the state’s $26 billion budget deficit with cuts to state services and public education. Because of the multiplier effect, the private sector will likely suffer more job losses than the public sector.
“Multiplier effect” is a term used by economists to calculate the indirect impact of business or government spending. For instance, when a company adds new jobs, the new employees stimulate business activity by spending their money at community businesses, which in turn makes it possible for them to add more workers to their payroll. The standard multiplier effect calculation is that one new job creates 1.5 other new jobs in a community.
If that’s the case, then the opposite holds true. If one job is lost, then because of the multiplier effect, 1.5 other jobs in the community will be lost. That’s what former Lt Governor Bill Hobby said would be the impact of cutting 9,000 state employee jobs.
In a letter to Texas business leaders urging their support for a more balanced approach to reducing the budget deficit, Hobby said that “Texas would suffer direct private-sector job loss because of reduced state spending on contracting, and we would suffer indirect private-sector job loss because (state employee) job losses would further reduce demand for goods and services. Dr Ray Perryman, a leading Texas economist estimates that for every one job directly lost as a result of state budget reductions, roughly 1.5 jobs would be lost indirectly. Job losses of this magnitude would not be good for Texas businesses and or our communities.”
Eva Castro, senior budget analyst for the Center for Public Policy Priorities, an Austin-based research group, said that because of the multiplier effect, the eliminating 9,000 state jobs would result in a total loss of 23,000 jobs in the state.
The cuts to public education could have an even bigger impact. Hobby in his letter says that “one of the state’s leading school finance experts has estimated that school districts would be forced to lay off as many as 100,000 employees, including teachers.”
But that’s not all the jobs that would be lost. As Castro points out, “the state is a huge contributor to the economy through health care and through schools, both of which are the largest employers – at least, in most communities.”
Take for example Ranger College, a public junior college in the North Texas town of Ranger about 65 miles west of Fort Worth. The college is the biggest employer in the town whose population is 2,500. In fact, the college is the hub of the town’s business activity, which is why residents of Ranger were alarmed to hear that the college may be forced to close because the proposed House budget eliminates all state funding for the college.
Shutting down the college “would be a death knell to Ranger,” Clara Mathews told the Fort Worth Star Telegram. Mathews husband Wayne is a former member of Rangers’ Board of Regents. “What will we have if the college is not here.”