STEVE INSKEEP, host:
California is not alone when it comes to budget gaps. Shortfalls across the nation are forcing the layoffs of thousands of workers, and they also mean deep cuts to services. North Country Public Radio's Brian Mann profiles Elizabethtown in northern New York State, where local leaders may be forced to close a county-run nursing home.
BRIAN MANN: Walk along Elizabethtown's picture-perfect Main Street and you see 19th century brick buildings haloed by the Adirondack Mountains. You'd never guess that this village is hardwired over the budget crisis roiling Albany, the state capital.
But drop by Greg Krieger's(ph) deli just down the street from the county office, and you get a sense for just how important those tax dollars are for him.
How many people who come in here are local government or school district workers?
Mr. GREG KREIGER: I'd say about 70, 75 percent.
MANN: It turns out nearly every major employer - the nursing home, the public school, the town highway department, the county health program - they're all run by local government. Dan Palmer, manager of Essex County, says all these local agencies rely heavily on funding from Albany and Washington, D.C.
Mr. DAN PALMER (Manager, Essex County): You talk about welfare, social service programs, people tend to think that's a state program or a federal program. Well, the dollars come from there but the service comes from here.
MANN: Unemployment here spiked nearly a third over the last two years, climbing to 11 percent. That pushed up demand for services, like Medicaid and heating oil subsidies, Palmer says, just when there are fewer dollars. The federal stimulus helped but property and sales taxes are way down.
And a few weeks ago, Governor David Patterson announced that cash-strapped New York State would freeze hundreds of millions of dollars in payments promised to local governments and schools.
Governor DAVID PATTERSON (Democrat, New York): You see, at this point, we would be kiting, we'd be writing checks but we don't have the money.
MANN: New York's biggest teacher's union sued, demanding that the payments be restored.
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Unidentified Man: More cuts in the middle of the year threaten student progress, stall economic recovery and pass the burden onto local taxpayers.
MANN: But with New York State nearly insolvent Elizabethtown School Superintendent Gail Else moved to freeze hiring and cut programs.
Ms. GAIL ELSE (School Superintendent, Elizabethtown): We have reduced our language offerings. We are going to one language offering. I think it's a realistic thing to do.
MANN: Around the country, thousands of schools and local governments face the same big squeeze.
Mr. CHRIS JAIME(ph) (Lead Researcher, American League of Cities): The worst of the impact of the recession for local governments is still coming in 2010, 2011 and 2012.
MANN: Chris Jaime is lead researcher for the American League of Cities. He says two-thirds of local governments around the country report making some kind of layoffs or furloughs, but for many communities, small tweaks - freezing new hires or laying off a few highway workers - won't be enough.
Mr. JAIME: You know, some services just wholesale(ph) are going away. Parks and recreation, libraries, nursing homes, health services.
MANN: Here in Elizabethtown, the most painful debate centers around the county-run nursing home, which serves 100 elderly residents and it counts for nearly 200 high-paying jobs.
Mr. PALMER: Either we stay in the nursing home business or we don't. I'm not sure that we can.
MANN: Essex County Manager Dan Palmer says the recession is forcing his community to consider cuts that would've been unthinkable just a few years ago.
Mr. PALMER: It's an emotional issue. You know, nobody wants to feel like they're throwing their grandmother out in the streets, and we don't want to feel that way either.
MANN: Decisions like this one will shape the quality of life in these communities long after the recession is over. But Chris Jaime thinks in some part of the country, local government layoffs could actually prolong the recession.
Mr. JAIME: Well, I think that's one of the untold stories here is that the role of the state and local government sector in the economy is significant. And if they're cutting, it can actually have an impact on the ability of the nation's economy to recovery.
MANN: One in seven American workers draws a paycheck from a local or state agency. That's a lot of jobs on the line at a time when unemployment already tops 10 percent.
For NPR News, I'm Brian Mann in Essex County, New York.
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INSKEEP: This is NPR News. Transcript provided by NPR, Copyright NPR.
