Written by Chriss W. Street
State and local governments are very familiar with the impact of a federal government shutdown, since there have been 17 since 1976. Presidents Jimmy Carter and Ronald Reagan each dealt with six shutdowns that lasted from one to eighteen days during their terms in office. The United States Treasury estimates that if an agreement on the $16.7 trillion debt ceiling is not reached by Oct. 17, it will have only $30 billion per day to fund commitments. Net daily expenditures reach as high as $60 billion, but actual default on missed payments would not happen until November 1st. If the U.S. debt ceiling is not raised, then all spending — including non-discretionary spending protected in a government shutdown — would be eligible for cuts.
“A couple of days is a pain in the neck … but doable; nobody likes it, but it happens,” says Scott Pattison, executive director of the National Association of State Budget Officers. “The longer a shutdown goes, the longer the impact it starts to have.”
The United States Office of Management and Budget issued a memo on Sept. 17 to government finance officers directing the appropriate response to the shutdown. “In reality, a week or two weeks or even three weeks – you’ll have little effect,” according to Lars Etzkorn, the program director for federal relations at the National League of Cities. State and local budget officials are more worried about how the federal shutdown will affect the economy and the level of tax revenue to spend on services and infrastructure.
In the past shutdowns, the focus was on cutting spending. But the current fight is really only over a one year delay in implementing the Patient Protection and Affordable Care Act (Obamacare). Other than a fraction of federal employees, the October 1st government shutdown will have only a modest impact on the economy. But on October 17th the federal government needs to expand the debt ceiling to raise $30 billion to pay bills or default. The “stopgap” funding measure approved by the House Republicans,
Marcia Howard, executive director of Federal Funds Information for States (FFIS), speculated that there are workarounds for disbursing money to states — even in scenarios where states are expecting difficulty. ”I have never seen a statute that Congress and the administration haven’t figured out a way to get around,” says Howard, whose organization tracks the impact of federal budgets and spending on states. “Even if there’s a ‘shutdown,’ it’s not like the vault doors get closed, and no money comes out of the doors. It doesn’t work that way.”
Highway programs will not shutdown, because they are largely funded from a special account called the Highway Trust Fund that collects gasoline taxes. But the impact of the shutdown on the food stamps program, known as SNAP, can only continue to pay benefits through the end of October. Many other “non-essential” programs are “forward funded” by Congress, such as Medicaid, Title I and Special Education grants, and the federal COPS program supporting state and local police hiring. Every program that is not funded will eventually be paid back.
But Social Services Block Grant, which provides state funding for things like welfare, elder abuse protection, senior services, and child care expired on October 1st and need to be extended in a continuing resolution.
Low Income Home Energy Assistance Program that provides poor people with money to pay heating and cooling bills and school breakfast and lunch programs for children are affected. In the case of the nutrition programs, states can continue to borrow draw on a line of credit through the end of October.
Marcia Hale, who led the White House office that served as liaison to state and local governments during the last shutdown, says today’s shutdown seems different from the one in 1996. Back then, Hale says, “we were in uncharted territory.” At that time, state and local officials had less of an understanding of what a potential shutdown meant. They also didn’t believe Congress would really let it happen. Today, states have more experience with the issue, since Congress has faced a slew of threats over shutdown and default in recent years.
Local governments that get relatively little direct federal funding are likely to face fewer challenges than states, according to officials with the National League of Cities. But Philip Joyce, a professor of management at the University of Maryland, says that if citizens start noticing a lack of services they depended on from the feds, they may expect their state and local governments to pick up the tab. Citizens, he says, don’t notice or care much about the distinction between different levels of government.
Listen to Chriss Street and Paul Preston on “AGENDA 21 Radio” Streaming Monday through Friday at 6-9 AM Pacific Standard Time
Click Here To Listen: (RED STATE TALK RADIO)