Local Governments Prepare for Economic Blows of Looming Federal Shutdown

With Congress no closer to agreeing on a spending plan to keep government funding going, it appears this morning that the federal government is cruising full-speed toward its first shutdown in more than 17 years. And come midnight, when the current fiscal year expires, the Washington area can expect to get economically hammered.

One estimate says the Washington area stands to lose as much as $200 million a day in lost wages and tax revenues if more than 700,000 workers are furloughed. That worrisome forecast comes from Stephen Fuller, the director of George Mason University’s Center for Regional Analysis, who tells the Washington Post that a government shutdown will be like a “tsunami” on the local economy.

Fuller’s projection doesn’t include tourism, the area’s second-largest industry after government. A federal government shutdown would close the Smithsonian Institution (including, yes, the National Zoo), national parks, and other publicly funded cultural institutions.

The predictions from local governments aren’t as severe as Fuller’s, but communities around Washington are still bracing for a rough stretch. Last week, Maryland Governor Martin O’Malley said his state could lose $5 million a day in tax revenue. The impact on spending at Maryland businesses could be three times as much.

Virginia officials have not given any numbers yet, but in a statewide memorandum last week, Governor Bob McDonnell’s chief of staff, Martin Kent, asked agency heads and public university administrators to prepare to be cut off from any federal grants.

The District of Columbia stands to lose between $1 million and $6 million per week as long as the government is shut down, says Natalie Wilson, a spokeswoman for the office of DC’s chief financial officer. The District government, whose budget is subject to federal oversight, is also preparing to maneuver around having to suspend many local services by declaring all city employees as “essential” personnel and tapping into a contingency fund to pay them.

But in the event of a prolonged shutdown—the 1995-96 shutdowns lasted 28 days—DC will have about two weeks before its $144 million rainy day account is depleted. That’s enough to carry the District’s 32,000 employees through their next $98 million pay period, but Mayor Vince Gray is still waiting to hear back from the White House Office of Management and Budget to see if his request to exempt all city workers from being furloughed will be accepted. If it is, the District won’t have to use its emergency fund.

Using the emergency fund to finance city operations was approved late last week by DC Attorney General Irv Nathan, who previously warned that keeping the District government running during a federal shutdown could violate the Anti-Deficiency Act, a federal law that prohibits the spending of funds that are not appropriated. Still, even though city officials now have the legal go-ahead, some are still striking a defiant tone.

“Unless somebody takes me out in handcuffs, I’m not shutting down anything,” Gray said Saturday, according to the Post.

Either way, says Gray’s spokesman Pedro Ribeiro, DC residents should not fear a repeat of the 1995-96 shutdown, when services like libraries, trash pickup, the Department of Motor Vehicles, and building inspections were truncated. “The District government will be open tomorrow,” Ribeiro says.

The trains will run, too, even if there are far fewer workers making their daily commutes. Metro says it will operate on its normal weekday schedule, though if ridership drops, it may start running smaller trains.