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Washington, D.C. Could Lose $6 Million Per Week in Shutdown

BY: | October 4, 2013



Washington, D.C. could lose as much as $6 million per week in tax revenue as long as the federal government shutdown persists, ratings agencies said this week.

The news came as the city is dipping into its own reserve funds to continue operating during the shutdown as the city’s budget is handcuffed to approval by Congress. Washington has tapped a $218 million reserve fund which is expected to last the city through the middle of next week. But it also has several other reserves funds that it can access to pay for general government operations.

Moody’s Investors Service and Fitch Ratings issued the revenue loss estimates this week for D.C. While Moody’s notes that the $6 million figure is only about one-tenth of one percent of the city's annual general fund budget, the attractions add more than $6 billion annually to the local economy. Additionally, any prolonged shutdown could start to eat more significantly into the city’s annual income as observers are skeptical that the federal government will award its employees back pay as it did following the 1996 shutdown. Federal employees were 32.5 percent of D.C.'s employment in August 2013 and the hospitality sector (which relies heavily on many of the city’s now-shuttered attractions) makes up 9.4 percent of employment, Fitch said.

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Still Fitch said it believes “the district's substantial financial cushion can absorb this drawdown without negative credit implications.”

Region-wide, a prolonged shutdown is also concern for neighboring Maryland and Virginia as federal employees comprise 12.6 percent of the Washington metro area’s total employment, versus 2.1 percent nationally, Moody’s says. Montgomery County and Frederick County are especially susceptible to declines in income tax revenue as that income makes up 44 percent and 38 percent of their budgets, respectively.

In Virginia, the strain to local government might come in the form of reduced state aid as those governments rely more heavily on that revenue stream than their counterparts in Maryland.


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Liz Farmer

Liz Farmer is a GOVERNING finance writer.

E-mail: lfarmer@governing.com
Twitter: @LizFarmerTweets

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