States and Localities Count Dollars, Eye Options as Shutdown Continues

As the federal shutdown hits 10 days, state and local governments are looking for ways to support their federal workers who are going without pay. They’re also counting their dollars to see how long they can maintain safety net programs.

Lawmakers in Congress could reach an agreement before consequences become too severe. But the Trump administration and Congress have shown a willingness to endure shutdowns. The last federal shutdown took place under President Donald Trump’s first term and broke records when it lasted 35 days. Trump’s first term saw three shutdowns.

Can Federal Workers Get a Break?

Federal workers who fall behind on bills while going without pay run the risk of late fees and long-lasting hits to their credit scores. To ease the burden, some local governments are mulling whether their budget is sufficient to temporarily cover utility bills, says Irma Esparza-Diggs, senior executive and director of federal advocacy at the National League of Cities.

State governments are looking at options, too. The shutdown hits at a tricky time for Connecticut, where the legislature is out of session until February. Democratic Sen. Bob Duff says he wants to allow federal employees to collect unemployment benefits, but this requires passing new legislation because these workers technically still have a job. It’ll take a special legislative session to adjust unemployment benefit policies, and legislators are considering convening in November if the shutdown drags on till then.

“Average people may not be paying attention or may not feel [the effects of the shutdown] on day one, but they’ll feel it maybe day five or six or 10,” Duff says. “Bigger than that, you actually have people who are not getting paid and who are still going to work. And that puts a real strain on families and paying the mortgage, paying the rent, putting food on the table.”

Colorado is telling furloughed workers that they can receive unemployment benefits without being required to conduct job search activities during this time. The workers will have to repay the benefits once the federal government gives them back pay. A dedicated state webpage guides federal employees through the benefits application process.

Over in Pennsylvania, Gov. Josh Shapiro is reportedly considering if there are enough funds to pay the salaries of nearly 8,000 federally funded positions in state government.

There have been new moves on the federal level as well that could affect federal workers’ financial prospects. U.S. Rep. Ilhan Omar, D-Minn., recently proposed a bill to reimburse federal workers for child-care costs during the shutdown.

At the same time, President Trump suggested this week that not all furloughed workers will automatically be guaranteed back pay when the shutdown ends, in apparent violation of a law Trump signed during his first term in 2019. While Trump insists the action is valid, the national president of the American Federation of Government Employees reportedly called Trump’s statement an “obvious misinterpretation of the law.” This comes after the administration’s earlier suggestion that it might permanently lay off some federal workers during the shutdown.

Economies Start to Feel a Chill

As federal workers and their families lose pay, local economies will feel a hit through reduced spending at local businesses and fewer tourism dollars, says Democratic Colorado Rep. Shannon Bird. Travel in her state is already down, she says.

Some of consumers’ wariness may also stem from the debates that led to the federal shutdown — in particular, congressional disagreement over whether to continue a tax credit that lowers health-care premiums. Bird says consumers are spending less as residents brace for the possibility that subsidies will end and health-care premiums will rise across the board.

Can States Keep Programs (and Parks) Running?

Some social safety net programs co-funded by the federal government are running low on money. Some states are dipping into their coffers for a temporary reprieve.

As the shutdown hit, Colorado invested $7.5 million of the general fund’s money into the Special Supplemental Nutrition Program for Women, Infants and Children (WIC). This created “a bit of a stopgap,” Bird says. “[But] I'm not confident that that will last for very long.” Without the federal share of funding, community health clinics will also be strained and — if it drags out for long enough — some may close, she says.

In West Virginia, Republican Gov. Patrick Morrisey provided $98,000 of state funding to keep national parks running for 14 days. The state will not be reimbursed but will get back any unspent funds if the shutdown ends sooner. In the meantime, New River Gorge National Park and Preserve and Harpers Ferry National Historic Park are fully operational.

In Kentucky, employees from several local governments have long staffed a table at the Mammoth Cave’s visitor center. During the shutdown, these local employees are reportedly now greeting people to let them know that the caves are closed (while above-ground trails remain available) and directing them instead to privately run cave tours elsewhere. Kentucky Senate President Robert Stivers, a Republican, was unavailable to discuss the shutdown, his office said.

Where Local Governments Feel the Pinch

Local governments getting federal contributions to infrastructure projects may cover costs up front, then seek reimbursement. That includes for some projects around highway maintenance, airport expansion and water infrastructure. Local jurisdictions may come to the conclusion that they need to slow or stop work eventually, “not knowing how long it'll take for them to receive reimbursement from the federal government once it opens,” Esparza-Diggs says.

There’s also some concern over whether funding will come at all. Esparza-Diggs notes the possibility that the White House could try to permanently cancel projects whose funding ended Sept. 30, if the administration believes they don’t align with its agenda. Since the shutdown, the administration has canceled or delayed federal aid to various projects in liberal jurisdictions, including a tunnel between New York City and New Jersey and various energy projects.

Local governments are also considering how long they can maintain programs like Head Start, the Children’s Health Insurance Program, Temporary Assistance for Needy Families and rental assistance in absence of federal reimbursement.

“Cities are going to be making budgetary decisions pretty soon that may change what they already have in the works,” Esparza-Diggs says. Grant-funded programs that require federal staff review before payments can be drawn down will likely be delayed, said Dr. Barbara Ferrer, director of the Los Angeles County Department of Public Health, during a Board of Supervisors meeting.

In Los Angeles County, federal funding will continue to cover Section 8 housing rental vouchers and operating costs for public housing facilities until mid-November. After that, the county’s reserves can cover the Section 8 costs for one month and public housing costs for less than a month, said Emilio Salas, executive director of the Los Angeles County Development Authority, during the meeting.

California’s Supplemental Nutrition Assistance Program and Temporary Assistance for Needy Families program are funded through October.

“If the shutdown continues without resolution beyond next week, we’ll start messaging to the public to make sure our customers are well aware of the potential impacts and start to refer them to other resources such as food banks,” said Michael Sylvester, assistant director and chief information officer for the county’s Department of Public Social Services, during the meeting.  

The county is also seeing two impacts to the Disproportionate Share Hospital Payments (DSH payment), which help hospitals that serve high numbers of patients on Medicaid or without insurance. For one, the latest quarterly DSH payment is due in October and will be delayed, said Christina Ghaly, director of Los Angeles County Health Services, during the meeting. This will create a cash-flow problem in the new year.

The other impact was a long time coming: Over a decade ago, Congress agreed cuts to DSH would begin in fiscal year 2014; however, Congress has since repeatedly pushed back the start date for the cuts. The latest measure delaying the cuts expired on Sept. 30, meaning cuts are now in effect; if Congress doesn’t pass another cut delay and retroactively apply it, Health Services could see a revenue problem, Ghaly said.

If Federal Departments Can’t Lend a Hand

The shutdown hits as some communities are in hurricane and wildfire season. During the shutdown, cities may bear the brunt of disaster management and response, Esparza-Diggs says.

Reduced Food and Drug Administration staffing will delay efforts to investigate bird flu risks at poultry and cattle farms, Los Angeles County’s Ferrer said. The shutdown also stops some information sharing about emerging diseases and outbreaks. “We have no sense, as we head into respiratory virus season, of what the scope of the work is that needs to be done to get prepared, because all of our national data reports and national meetings to connect with each other are paused indefinitely,” Ferrer said at the Board of Supervisors meeting.

Ultimately, the shutdown further strains the partnership between states, localities and the federal government, as the latter shows itself to be unpredictable, says Rob Puentes, vice president and director of Brookings Metro: “The shutdown is an accelerant [of] the fraying of this relationship that's occurred in recent years.”