The newspaper I just retired from here in Ogden has done this too. When 4/6ths of the photo staff quit last year for better jobs that actually gave you pay raises, the photo editor bought a bunch of point and shoots and handed them out.
I asked if we could be paid at least $5 each for any picture that ran -- incentive, what a concept -- and was told to be glad I still had a job. The paper has since added a couple of new photographers who also write stories, but the output from the reporters with those point and shoots is iffy at best.
The problem that is causing all this is the severe decline in ad revenue, coupled with the firm belief by the bean counters who've bought all the papers in this country that the readers won't notice the difference.