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How a Prolonged Government Shutdown May Ripple Down to States

How a Prolonged Government Shutdown May Ripple Down to States

Bloomberg.com
By Amanda Albright, Danielle Moran and Martin Z Braun
January 11, 2019, 6:20 AM CST

  •  Economic impact seen in Virginia, elsewhere as paychecks halt
  •  Public housing projects, transit systems rely on U.S. grants

Almost a third of the $2 trillion that U.S. states spend each year comes from Washington, so the partial shutdown of the federal government would seem to spell major financial trouble in America’s statehouses. So far, the impact has been relatively limited, because only about a quarter of the government has been closed and funding for the biggest state-run program, Medicaid, will continue no matter how long the impasse persists.

While the president has said he’d be willing to keep some of the government shut for months if lawmakers don’t agree to fund a wall on the Mexican border, he may seek to circumvent Congress in a bid to end the standoff. But if the closure persists, the impact on states may grow, particularly in those with a large number of federal employees. Here’s how:

Missing Paychecks

As some 800,000 employees begin missing paychecks, the impact will ripple through economies with a big share of federal workers, including Virginia, Maryland, Hawaii and Alaska, where about 5 percent of workers are employed by the federal government, according to Fitch Ratings. Virginia Governor Ralph Northam, a Democrat whose state has some 130,000 federal employees, said the 2013 shutdown cost residents in the area around the capital $217 million a day in wages -- a hit that was minimized because Congress decided to pay them back... FULL ARTICLE

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