So AFSCME is not going to offer an endorsement for the Democratic Gov. Primary. I don't think an official AFSCME endorsement would have led to any more AFSCME members voting for him anyway since he is not really popular with state employees anyway.
I think this might actually help Blagojevich in the general election. He can show that he is in fact no friend of government and government employees and he is being careful with state funds. He can rail against bureaucrats and the like and talk about how he has shrunk government.
There are some real risks to this approach, for example if some of the stuff AFSCME points out in their report (read it by the way) on prisons leads to some sort of major prison disturbance that leads to loss of life. Then the staff cuts the governor seems so proud of can come back to haunt him.
Then again I might be wrong.