I hate the taste of crow, or, How Using Stimulus for Layoffs Can Save Jobs

One of the claims I made was that it makes no sense to take stimulus money intended to save and use it to pay for layoffs.

Now I've learned more, and the argument that it makes sense is not so hard.

Suppose we need to cut $1M for the biennium, and that I make $50,000 per year. Cutting me saves $100,000 for the biennium, but there is a one-time cost of $50,000 for laying me off. The faculty contract says I get to work next year even though I've been laid off, but you could think of this as a severance cost if you want.

So cutting me only save $50,000 if there is no stimulus money, and to get the $1M in cuts you need to lay off 20 people like me (because 20x$50,000 = $1M).

If there is stimulus then cutting me saves $100,000 because the stimulus money pays for the severance costs. To get the $1M in cuts you need to lay off 10 people like me, because 10x$100,000=$1M.

So using to the stimulus pay for the one-time lay off costs saves 10 jobs.

The same kind of argument would work for early retirement. The university gets the savings, the federal government pays the costs.