Calculated Risk has good news:
State and local government austerity is over, by Bill McBride : ... This "good news" is ... a significant change from state and local governments being a headwind for the economy to becoming a slight tailwind.
Here are two graphs that show the aggregate austerity is over. The first graph shows the contribution to percent change in GDP for residential investment and state and local governments since 2005.
The blue bars are for residential investment (RI), and RI was a significant drag on GDP for several years. Now RI has been adding added to GDP growth.
The red bars are the contribution from state and local governments. ... Now state and local governments have added to GDP for two consecutive quarters, and I expect state and local governments to continue to make small positive contributions to GDP going forward. ...
[The second graph shows that in] 2013, state and local government employment is up 74 thousand through October. ...
I think most of the recession related state and local government layoffs are over, and it appears state and local government employment has bottomed. Of course Federal government layoffs are ongoing, but it appears state and local government austerity is over (in the aggregate).