The costs for human resources (also known as personnel or human capital) represent the largest single share of local government budgets. Therefore, to meet budget reduction needs, reducing human resources costs must be a part of the strategy. Local governments have several options available to cut human resources costs, including hiring freezes, pay freezes or reductions, reduced work hours with a corresponding loss of pay, lay-offs, use of volunteers, and incentives for early retirement. The availability
and means of implementation of each of these approaches vary with the local government’s context such as state law, local human resources policy, and collective bargaining contracts if they exist. Of course, all options also must comply with federal policies such as equal employment opportunity, nondiscrimination, and labor policy. The approaches are discussed in the order usually pursued by employers starting with the quickest to achieve savings with the least negative impact on employees.

This article is supporting documentation for the Alliance for Innovation Navigating the Fiscal Crisis white paper.