As (Another) Shutdown Looms, Maryland Activates Loan Program for Federal Workers

With (another) looming threat of a federal government shutdown, the Maryland Board of Public Works activated a program to offer no-interest loans to “essential” federal employees in the state who must report to work without pay.

On September 30, Congress passed a 45-day continuing resolution — a temporary spending bill that allows federal government operations to continue when final appropriations have not been approved by Congress and the President — to fund the federal government through November 17, averting an October 1 shutdown.

If Congress fails to pass appropriations or does not pass another continuing resolution by the mid-November deadline, a full or partial federal government shutdown will begin on Saturday, November 18.

Maryland has a disproportionate number of federal employees and contractors because of its proximity to Washington, DC. Maryland is home to more than 150,000 federal employees, tens of thousands more federal contractors, and many Maryland businesses tied directly to providing services to those workers.

According to the Maryland Comptroller, in Tax Year 2021, 1 in 9 individual income tax filers were either federal workers or retirees, and 352,000 Maryland households directly benefitted from either wages or retirement income from the federal government. These individuals accounted for a total income of $31 billion or 10.5 percent of all income earned in Maryland.

Under a shutdown scenario, most federal employees are told not to report for work as all but essential services are suspended. Federal workers are not paid while the government is shut down, even if they are working. Even though they will eventually get paid, many workers cannot afford to go without a paycheck.

In response to the longest protracted shutdown in US history — lasting 35 days from late 2018 into early 2019 and significantly impacting federal employees and related segments of the Maryland and regional economies — the Maryland General Assembly passed the Federal Shutdown Paycheck Protection Act, which provides no-interest loans to essential government employees who must report to work without pay. Eligible Marylanders can apply for a no-interest loan of $700 that must be repaid within 45 days after the shutdown ends.

The CBO estimates that the historic 2018-2019 five-week shutdown delayed approximately $18 billion in federal discretionary spending for compensation and purchases of goods and services and suspended some federal services. In addition, a 2019 US Senate report found that the three government shutdowns in 2013, 2018, and 2019 cost taxpayers nearly $4 billion.

As previously reported on Conduit Street, approximately 172,000 Marylanders affected by the 2018-2019 partial government shutdown 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. While furloughed federal workers received back pay once the shutdown ended, it’s unlikely that federal contractors could recoup lost wages.

Stay tuned to Conduit Street for more information.

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