READ: Full coverage of the shutdown's impact on states and localities
States running programs on cash reserves are uncertain whether the federal government will repay them for the absent federal funds and might cut back spending of state money if the shutdown continues, says Scott Pattison, executive director of the National Association of State Budget Officers (NASB). Approximately one-third of the $1.7 trillion that states spent in 2012 came from federal funds, he explains.
"If this goes on another few days you are going to see states begin to make announcements that they are going to have layoffs," Pattison says. Those notices will likely set the end of October as a time when layoffs would occur, he added.
Some states have already laid off federally-funded employees or sent them home on unpaid leave in response to the shutdown, or sent them notices to prepare for layoffs or furloughs, according to a report published on Thursday by the NASB.
"States are also seeking information on any possible legal ramifications that could result from furloughing employees, such as jeopardizing reimbursement from the federal government or compliance with entitlement program requirements," the report stated. "Several states have also issued formal or informal hiring freezes for federally-funded positions for the duration of the shutdown."
