Davis: "Government's going to have to get smaller...No doubt about it. We'll do position reductions through compliment reductions, we've got a hiring freeze on, you can take positions out through attrition, but we don't think it makes sense to lay people off."

Davis says, in many ways, layoffs could actually have a negative impact...Making it more cost effective to keep people on the payroll.

Davis: "We know that that affects the economy immediately through loss of personal income tax, it also requires additional funds be appropriated for things like their unemployment insurance, and they qualify for government services."

Davis says while tough decisions lie ahead, the administration wants to send an important message to important people.

Davis: "We care about our employees and they do good work, and we want to have them to have the ability to go and continue to do their jobs."