As lawmakers in Washington work to avoid a shutdown of the federal government this week, the tenor of the negotiations could provide a window for states and localities into what to expect from future budget debates on Capitol Hill.
“The big picture is how well the Republican conference gets along in terms of this run-of-the-mill budget stuff,” says Dan White, a director at Moody’s Analytics. “If they take it down to the wire, that portends some very uncertain fiscal times over the next couple months.”
The federal government has been running on a continuing resolution that funds agencies at 2016 levels. Congress has until midnight on April 28 -- this Friday night -- to agree on a spending plan for the remainder of the federal fiscal year, which ends Sept. 30, or approve another short-term resolution.
In the aftermath of the Republican party’s failure to repeal the Affordable Care Act (ACA), observers are eyeing the amount of drama it takes for Congressional leaders to agree on the budget. A political squabble now over closing out fiscal year 2017 wouldn't bode well for hopes of getting through a new fiscal 2018 budget, which must be approved by Oct. 1.
“If it takes this much to do four months of spending," says White, "what’s it going to take for a whole year of spending?”
In some ways, it's that question about the 2018 federal budget, in which President Donald Trump has proposed massive cuts to domestic spending programs, that weighs more heavily on state and local governments.
“If the shutdown really happens, that’s a real headache,” says John Hicks, executive director of the National Association of State Budget Officers. “But the longer view of what fiscal federalism is going to look like -- that’s the larger question.”
Still, states and localities are watching this week’s developments with a wary eye. A federal shutdown of a few days won’t break budgets. Any longer, however, and it becomes a genuine economic concern.
That's what happened in October 2013 when the federal budget agreement was stalled by lawmakers who wanted to strip funding for the ACA. The government shut down for 16 days, more than 800,000 nonessential civilian federal workers were sent home, and states and localities were plagued with the logistics of staying open amid federal funding uncertainty.
Health programs like Medicaid and the Children's Health Insurance Program, which rely on federal funding but are administered by states, continued running during the 2013 shutdown, as did food assistance programs for the poor.
But elsewhere, governments had to make choices about whether to cover the federal gap.
Head Start programs were the hit the hardest. As many as 23 programs in 11 states faced temporary closure because they rely solely on federal funding. Some dipped into reserve funds or found outside assistance, but many did not. In Mississippi, for example, 900 Head Start children went without school and 220 employees went without work during the shutdown.
National parks were also closed during the previous shutdown, impacting tourism revenues in scores of nearby towns. The National Park Service (NPS) reached agreements with six states to reopen and temporarily operate 14 parks, but nearly 400 park sites remained closed. The NPS estimates that those towns and cities lost out on a combined $414 million in parks tourism spending.
“For a lot of those rural communities where those parks are located, that’s a lifeline to them,” says Irma Esparza-Diggs, federal advocacy director for the National League of Cities (NLC).
The NLC and National Association of Counties are holding an event in Washington on Thursday to warn Congress about the local impacts of a federal shutdown.
At the state level, those with the most federal civilian employees (California, Georgia, Maryland, Texas and Virginia), had the overwhelming administrative task in 2013 of dealing with furloughed workers who showed up in droves to state unemployment offices. For example, Maryland's Department of Labor, Licensing and Regulation received roughly 4,000 applications during the first six hours it was open following the shutdown. That was more federal claim applications than the department usually receives in an entire year.
Nationally, the Office of Management and Budget analysis pegged the total cost of the 2013 shutdown at more than $2 billion, although much of that was compensation to employees paid not to work for a combined 6.6 million days.
The Bureau of Economic Analysis also found the shutdown made a small dent in the economy's growth rate. The Washington, D.C. region, where many federal contractors and employees are based, saw the largest impact.