Federal Government Shutdown: State, Local Governments Feel the Pinch

Federal-Shutdown-Graphic-Jan-14-2019 (1)The partial federal government shutdown is having a significant impact on state and local revenues, according to a new report from the State Comptroller’s Office.

Approximately 172,000 Marylanders impacted by the partial government shutdown have missed out on an estimated $778 million in wages, resulting in $57.5 million less in state and local income tax withholding and $2.1 million less in sales tax collections.

The partial federal government shutdown, which began on December 22, 2018, is now the longest government shutdown in U.S. history.

While furloughed federal workers are expected to receive back pay once the shutdown ends, there is no guarantee that federal contractors will be able to recoup lost wages.

 

According to the report:

Direct Federal Employees

  • We estimate that between 230,000 and 245,000 thousand direct federal jobs are held by residents
    • As many agencies are currently funded through other budget appropriations or special funds, we estimate that 90,000 are impacted by the shutdown (either furloughed or working without pay)
    • Assuming that those impacted employees are “average,” the bi-weekly wage loss is $408 million
    • We presume that these employees will be compensated for their lost time once a budget deal is reached

Government Contractor Full Time Equivalent (FTE) Employees

  • We estimate that there are 163,356 private sector residents that are federal contractors (excludes grant funded positions) and are impacted by the shutdown
    • Of those, some may receive a salary from their private sector employer, others may be paid based on the number of hours that they work; the former would still be compensated, the latter would lose compensation
    • There is not data to determine the number of residents in either compensation system, we assume that 50% would lose wages
    • The 50% assumption translates to 82,000 employees
    • Assuming that private sector FTE compensation in commensurate with direct employment, the bi-weekly wage loss is $369 million
    • It is unlikely that these employees will be compensated for their lost time once a budget deal is reached

According to Andrew Schaufele, Director of the Board of Revenue Estimates:

These estimates account for only the direct impact, the macro impact would be somewhat larger. Additionally, other less immediately visible impacts may materialize, uncertainty always reduces business investment.

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Read the Full Report for More Information.

Previous Conduit Street Coverage: Partial Federal Shutdown – Who’s Affected, What’s Happening

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