Surrounding jurisdictions develop shutdown game plans

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A shutdown of the federal government next week could have a significant impact on the budgets of local governments across the Washington region, where officials are preparing to find alternative funds to pay for local services, officials say.

Furloughs of federal workers could cost Maryland $5 million a day in income and sales tax collections and hinder the state’s economic recovery, according to a memo circulating in the office of Gov. Martin O’Malley (D).

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Countdown to the (possible) shutdown
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Countdown to the (possible) shutdown

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Across Washington, there’s a lot of business to catch up on and money to be earned.

In Fairfax County, officials recently blamed a decision to deny pay raises for its workers on the federal spending cuts known as sequestration and the uncertainty brought on by the fight in Congress over whether to fund the Affordable Care Act.

Though not as directly affected as the District — where all local government activity depends on a federal appropriation — suburban communities nonetheless expect that a prolonged federal shutdown could mean more instability in a region that is recovering from the 2008 recession, officials said.

Fairfax, Montgomery and Prince George’s counties — where tens of thousands of federal workers live — are particularly vulnerable.

Those suburban communities are home to an array of federal agencies, including the CIA, the Food and Drug Administration and the National Institutes of Health.

Fairfax is also home to about 4,100 federal contractors, who, in 2012, took in a combined $26.4 billion in federal contracts, according to the county’s economic development authority.

“We’re all trying to read the tea leaves on what’s happening at the federal level,” said Sharon Bulova (D), chairman of the Fairfax County Board of Supervisors. “Sequestration and the whole federal picture absolutely plays into the pressures that we’re experiencing locally with our budget choices.”

The sequestration cuts have meant that contractors have spent less and, subsequently, led to stagnant commercial tax revenue during the past year, Bulova said. That, in turn, has hampered the county’s spending decisions — causing some tension among employees.

During a recent county board meeting, Fairfax workers showed up to push for a cost-of-living increase in their salaries after officials revealed that there was a $93 million surplus from the previous fiscal year.

But, there is a projected $25 million budget shortfall for the next fiscal year, largely because of the effects of sequestration cuts, officials said.

With a government shutdown threatening to increase that shortfall, county officials voted against raises and, instead, decided to grant one-time bonuses of $850 — or $500 after taxes. The rest of the surplus will go toward other services, or to shore up next year’s budget, officials said.

The workers, who haven’t had a raise in five years, walked away furious.

“The minute the job market opens up, they’re leaving,” predicted Randy Creller, an IT specialist who serves on the county employee advisory council for about 12,000 employees.

Bulova said the board hopes to grant raises in the spring but is now trying to be prudent in the face of so much uncertainty.

“You never know how severely we could be affected by inaction on the part of Congress, and that would be tragic because I think Fairfax County is doing its best to put ourselves into a responsible position,” she said.

Federal employment is also a key component of Maryland’s economy, with annual wages totaling about $25 billion, according to a memo prepared by O'Malley's budget advisers in anticipation of a congressional budget stalemate.

If the federal government shuts down Tuesday, state budget officials anticipate a loss of about $42 million in state income tax revenue and $9 million in state sales tax revenue over a two-week period — the equivalent of about $5 million for each shutdown day, according to the memo.

Prince George’s, home to 72,000 federal workers, could lose about $270,000 in income tax revenue for every day the government is shuttered. Also at risk: the approximately $250 million the county receives annually from the federal government for schools, housing and other programs.

In hopes of avoiding such hard choices, local officials have been setting aside contingency funds to account for sequestration cuts and the possibility of a federal shutdown.

In Maryland, state officials said they are assessing whether, in the event of a shutdown, they would be able to tap a $100 million fund set up this year by the legislature to deal with fallout from the federal sequester.

Montgomery accounted for a $60 million reduction in tax revenue in its current budget, officials said.

In Virginia, there is $13.6 million available in its FACT Fund, which was established in 2012 to counter military base closures or other federal action that might adversely affect residents and the economy. At this point, there are no plans to tap it, spokesman Tucker Martin said. The Governor’s Economic Contingency Account, which has $2.3 million, also could be used, he said.

Arlington County set aside $3 million earlier this year and Fairfax has set aside $8 million, officials there said.

“The impact of a federal government shutdown could be potentially devastating to Prince William County,” said Board of County Supervisors Chairman Corey Stewart (R). “Washington needs to grow up and start balancing their budgets just like localities do every year.”

Susan Svrulga, Bill Turque, Miranda S. Spivack, Laura Vozzella and Caitlin Gibson contributed to this report.

 
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