Washington Area Needs to Diversify to Offset Federal Cut Backs

Federal sequestration and the Washington area’s reliance on federal spending has created significant shortfalls in the budgets of state and local governments in the surrounding area.   As reported by the Washington Post,

George Mason University’s Center for Regional Analysis estimates that the federal government spent $13.4 billion less in the Washington area in 2013 than in 2010. That decrease, economists say, contributed to the following: Virginia is struggling to fill a projected $2.4 billion revenue gap in its state budget over the next three years, even though the national economy is improving; Maryland faces a $600 million budget deficit next fiscal year and nearly $300 million for the current fiscal year; the District last week announced a possible revenue shortfall of $163 million for fiscal 2016.

This funding shift has led business leaders to contact elected officials urging measures to diversify the area’s economy.

The shift has helped drive down the region’s gross regional product, an indicator of an economy’s health, by nearly $243 million since last year.

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Without a fundamental shift in the region’s economic base, area leaders say, future declines in federal spending will result in more shortfall announcements and more hasty budget revisions.

Counties in the area are also feeling the effects.

“A lot of people have talked about this being the new normal,” said Susan Datta, budget director for Fairfax County in Northern Virginia, which will announce Tuesday its seventh consecutive budget deficit since the 2008 recession. “We anticipate it’s going to be a very, very difficult budget year.”

Jennifer Hughes, director of the Office of Management and Budget in Maryland’s Montgomery County, struck a similarly dark tone after the county learned that the state’s November distribution of income tax revenue was $96 million short of projections.

Prince George’s County is facing a $59 million deficit that threatens its bond rating and prompted officials to cancel recruitment for police and firefighters, slash funding for various programs and reduce overtime hours for emergency workers.