With the federal government approaching another possible shutdown, Congress grapples with unresolved budgetary disagreements, leaving Maryland’s federal workforce and economy particularly vulnerable to the potential fallout.

As the September 30 fiscal deadline approaches, Maryland — home to over 144,000 federal employees, tens of thousands of contractors, and numerous businesses reliant on federal operations — faces significant consequences if lawmakers fail to secure government funding.

What’s Causing the Stalemate in Congress?

Federal funding expires September 30, when the federal government’s fiscal year ends. Congress’s failure to pass any of the 12 required appropriations bills to fund government operations for fiscal 2024 is at the heart of the current impasse.

Republican US House Speaker Mike Johnson recently introduced a temporary funding proposal to tie a controversial provision requiring proof of citizenship for voter registration to the stopgap bill. However, the House defeated that measure by a vote of 220-202, with Democrats and Republicans expressing opposition.

While Speaker Johnson is working on an alternative plan to prevent a shutdown, deep divisions within the US GOP House make it challenging to gather enough votes for any short-term funding resolution. Some members of Johnson’s party oppose continuing resolutions entirely, insisting that Congress return to passing individual spending bills on time.

Meanwhile, Democrats have vehemently opposed the voter registration mandate and similar policy riders tied to a bill that funds the federal government. The stalemate has raised concerns that Congress cannot agree on a temporary fix before the new fiscal year begins.

Why Maryland Is Particularly Vulnerable

Federal shutdowns disproportionately impact Maryland due to its proximity to Washington, DC. The state has a significant federal workforce and is home to tens of thousands of contractors and businesses that rely on federal operations.

Last year, the Maryland Comptroller reported that in 2021, one in nine Maryland taxpayers was either a federal employee or retiree, collectively accounting for over $31 billion in total income.

A partial shutdown occurs when Congress passes some appropriations bills, allowing certain agencies and departments to remain funded and operational while those without approved funding must shut down.

On the other hand, a full shutdown happens when no appropriations bills have been enacted by the deadline, causing the closure of nearly all non-essential government operations across all departments.

Regardless of the type of shutdown, essential workers must continue working without immediate pay. In addition, furloughs affect non-essential federal workers during partial and full government shutdowns.

In a partial shutdown, agencies and departments without funding furlough their employees while other agencies continue operating as usual. Nearly all non-essential government employees stop working in a full shutdown because departments lack the necessary appropriations to stay operational.

Though furloughed workers typically receive back pay after the government reopens, many families cannot afford to go without a paycheck for weeks or months. Federal contractors, however, rarely receive retroactive pay, meaning many Marylanders would lose income permanently.

As previously reported on Conduit Street, during the 2018-2019 partial government shutdown, approximately 172,000 Marylanders were directly affected. They missed $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.

In addition, a 2019 US Senate report found that the three government shutdowns in 2013, 2018, and 2019 cost taxpayers nearly $4 billion.

Since Congress has yet to pass any appropriations bills this time, a full shutdown could be even more devastating.

What’s at Stake Now?

With time running out, the chances of avoiding a partial or full shutdown are growing slimmer. The current deadlock highlights a fundamental breakdown in the federal budget process, where lawmakers remain divided over spending levels and unrelated policy mandates like the proof of citizenship requirement for voting.

Even if Congress passes a continuing resolution, it’s only a temporary fix highlighting a more profound, ongoing dysfunction in the federal budget process. The inability to pass full-year appropriations bills on time delays critical funding decisions and perpetuates uncertainty, forcing the government to rely on stopgap measures rather than long-term fiscal planning.

The uncertainty is troubling for Maryland. If Congress fails to act, businesses and residents tied to federal employment face looming financial uncertainty.

While Maryland’s Federal Shutdown Paycheck Protection Act offers some relief by ensuring unemployment benefits or no-interest loans for essential federal employees, it is a stopgap at best. The economic repercussions could ripple across the state’s economy, affecting not just federal workers but also the broader workforce and tax revenue streams.

Looking Ahead

If the House passes a funding measure, it must still pass the US Senate and gain approval from the President to prevent or end the shutdown.

Whether lawmakers can reach an agreement or the government faces another shutdown, the outcome will significantly affect federal workers, contractors, and Maryland’s economy. As the September 30 deadline draws near, uncertainty continues to grow, and the consequences of inaction become increasingly severe.

Stay tuned to Conduit Street for more information.