Local leaders preparing for federal shutdown

Officials concerned about impacts on grants, salaries, taxes

April 07, 2011|By John Fritze, Arthur Hirsch and Annie Linskey, The Baltimore Sun

With Republicans and Democrats in Washington yet to reach a budget deal, officials in Maryland began taking steps Thursday to prepare for a shutdown of the federal government.

Gov. Martin O'Malley asked the Maryland Department of Budget and Management to assess the impact of a shutdown on the state, and his administration vowed to try to do "whatever possible" to help state workers who rely on federal grants for their salaries.

Local elected leaders said they, too, had begun to gauge the potential impact if Washington closes shop.

Officials and analysts said a shutdown that lasts only a few days would be unlikely to have a significant impact on state government operations, largely because federal funding is often distributed to local jurisdictions in advance. But if the closure dragged on for more than a week, they said, the situation would become far more challenging.

Among the top concerns for local officials are the tens of thousands of federal employees in Maryland who would be furloughed. If those workers are not paid, a two-week shutdown could reduce the state's income tax revenue by as much as $40 million, according to a state estimate.

"You don't slam the brakes on recovery to bring your government to a halt," said O'Malley, a Democrat. "I don't understand some of these folks who claim to love their country but hate their government."

President Barack Obama and leaders in Congress continued Thursday to search for an agreement on a spending measure to keep the government running through the end of September. If that effort fails, large swaths of the federal government would close down late Friday. Federal employees would be furloughed; agencies would close.

A shutdown would delay income tax refunds for taxpayers who file returns using paper forms, the Obama administration said this week. It would close national parks and museums, including Fort McHenry National Monument in Baltimore and the Smithsonian museums in Washington. Military members would continue to work, but their paychecks would be delayed.

The U.S. Postal Service would continue to deliver mail, Social Security recipients would receive checks and air traffic controllers would report for duty.

The House passed a proposal supported by Republican Speaker John Boehner that would continue funding the government for another week to give the sides more time to strike a deal. Obama threatened to veto the measure Thursday, calling it a "distraction" that would serve only to delay a final resolution.

And for the third straight day, congressional leaders met at the White House to continue talks with the president.

But as the fight raged on in Washington, officials in Maryland were preparing in case the talks failed. In the short term, many said, they did not anticipate much impact.

"We took such a hard hit from the state the last two years that we've positioned ourselves pretty good to handle anything that comes down the pike," Hagerstown Mayor Robert E. Bruchey II said.

"Nothing will be affected," Susan S. Harding, a spokeswoman for Frederick Mayor Randy McClement, said in an email.

Baltimore, which relies on millions of dollars in federal funding every year, might be more vulnerable to the effects of a shutdown.

Mayor Stephanie Rawlings-Blake met with senior staff Thursday to ask for estimates about what it would mean for the city, a spokesman said. The Democrat planned to call an emergency meeting to review contingency plans if the federal government does close.

"She feels very strongly that the consequences of a federal government shutdown in our fragile economy could be significant," spokesman Ryan O'Doherty said.

He said the greatest concern is for programs that deal with housing, health and employment development: "She's particularly concerned about the economic impact."

Michael Wallace, program director for housing and community development for the National League of Cities, said local governments probably would not face major problems over the span of a short-term shutdown. He described the possibility of a shutdown as a symptom of longstanding delays in the federal budget process that have created uncertainty for everyone.

"The bigger issue here is the government's inability to pass a budget on time," Wallace said. "It makes it impossible to start on … any sort of project because we simply don't know what the final outcome will be."

Brian Sigritz, director of state fiscal studies for the National Association of State Budget Officers, said his office has seen an increase in calls from state officials across the country seeking clarity on how to deal with a shutdown. In many cases, he said, that clarity is hard to come by.

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