Short-term Shutdown Would Have Small Impact on States

States may have to develop plans for employees funded by federal dollars.
by | April 5, 2011

President Obama and Republican leaders in Congress failed to reach an agreement this afternoon on the latest stop-gap measure to fund the federal government, narrowing the window of time remaining to avert a shutdown of the government.

The existing spending measure doesn't expire until midnight Friday, which means there is still time for negotiations to occur. But if the parties can't reach an agreement, would a shutdown affect state governments?
 
Not much, according to the National Association of State Budget Officers. In its Washington Report, NASBO told members that a short-term shutdown "would probably cause little significant harm to states." 
 
Local officials similarly tell Governing that a shutdown's impact would be minimal. There could be a slight effect if the shutdown happened at the end of a month, since it might mean Social Security checks and other benefits could be delayed to residents, increasing demand for local services like food pantries. But so far, all the near-shutdowns this year -- including the one that could begin Saturday -- don't fit that time line. 
 
Two areas that may be cause for some concern: state employees funded through federal grants, and state programs that rely on federal funds. Funding for programs like Medicaid and Temporary Assistance for Needy Families, however, would be expected to continue. 
 
Three weeks ago the comptroller and budget director of Massachusetts distributed a memo to department heads saying there are about 4,500 full-time employees statewide funded by federal sources. They told department heads to identify other funds to meet those payroll costs in the event of a shutdown.
 
State programs financed by federal dollars that are itemized on a grant-by-grant, account-by-account basis faces the greatest threat if a shutdown does occur, the officials wrote.
 
"To the extent continued spending depends on further federal budget legislation, you should not incur obligations against the grant beyond the date through which the federal granting department has made funding available," the memo said.
 
NASBO also directed its members toward other documents that may provide insight on how to handle a federal shutdown:
 

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