From the manager's side, it nearly takes an act of fucking god to open up a new position. Citizens pay attention to the number of employees, and they get mad about it. You really don't want to be the one to cause citizens to angrily call elected officials if you're in an appointed government position (i.e., an at-will employee.)
I have an unsexy government job. I've seen the leader of a pretty well funded government org get mad at IT for asking for three new positions one year. The IT group was roughly 100 positions, and it was acknowledged that it was understaffed in some key areas. One group with an annual software license budget higher than their employee budget asked for and was denied a single new spot.
Instead, that org's IT asked for and received budget for contractors. Contractors definitely cost more and can absolutely produce lower quality work. Their knowledge is gone when their contract is done -- so, best case, it's a multi-year contract that's similar to just hiring the damn person, but it ends up being way more expensive.
My current employer is even stricter.
In a similar vein, I've some friends who worked at a hush hush defense facility. The vast majority of the people at the facility are hired through a contractor. The employees are unionized, have a pension, and when a new contractor wins the bid, they have to agree to keep the staff in their current positions. I'm sure that weirdness is due to a mix of pay scales, hush hush reasons, and probably other reasons that I'll never know.