Frequent Shutdown Threats Prompt State and Local Safeguards

This story was originally published by Stateline, an initiative of The Pew Charitable Trusts.

President Donald Trump and Congress took the federal government to the brink of another shutdown this week. And yet again, states and cities had to prepare for the worst.

Still reeling from the longest government shutdown in U.S. history, state and local officials once again had to grapple with how they might provide aid to their poorest residents, keep open national parks and deliver a host of other services without federal dollars.

Already during Trump’s tenure, there have been three government shutdowns, and the Democratic takeover of the U.S. House might make such impasses even more likely. The looming threat of future shutdowns has prompted some cities and states to create permanent safeguards, from emergency funds to keep national parks open to measures that would extend unemployment insurance and interest-free loans to help furloughed federal workers.

Oregon, for example, is considering legislation that would provide unemployment benefits for essential federal employees, such as members of the Coast Guard, who are compelled to work without pay during shutdowns.

During the last shutdown, Oregon state Rep. Tiffiny Mitchell, the author of the bill, saw a group of Coast Guard wives create a food pantry for struggling families of service members. If another shutdown hits, she wants to make sure those families are protected.

“It’s incredibly frustrating for me,” said the first-term Democrat. “If the federal government isn’t willing to provide stability to people, it’s then the responsibility of the state.”

Lawmakers in Maine are moving ahead with similar legislation that would apply to all federal workers. Those affected by any future shutdown in 2019 lasting longer than 14 days would be able to apply for up to $15,000 in interest-free loans through participating credit unions and banks.

Maine state Sen. Heather Sanborn, who helped pass the legislation out of committee, said she expects the full Senate to pass the bill quickly. Lawmakers didn’t want to wait for another government shutdown to have this debate, worried “the wheels of state government move relatively slowly” and federal workers would be hurt waiting for legislation to get through, the Democrat said.

During the shutdown in January, states including Delaware and Rhode Island also considered aid packages that would have allowed federal workers to either apply for unemployment benefits, receive low- or no-interest loans through public-private partnerships or petition a court to have their rent or mortgage payments suspended during the shutdown. While most of these conversations ceased when the shutdown ended, Connecticut did pass a no-interest loan measure.

‘Prepared and Ready’

Shutdowns have changed the way Minnesota budget officials oversee the state’s finances.

Over the past six years, Minnesota Management and Budget has had to plan for a dozen potential federal government shutdowns—four of which took place. When Congress appears to be at an impasse and the state is at risk of losing federal dollars, the office puts together a statewide contingency and response team, to assess how long agencies can run with their current coffers and how soon they may have to begin layoffs.

“We treat shutdowns like we would any natural disaster,” said Commissioner Myron Frans. “We have to find out pretty quickly if we’re going to be able to provide all the services to Minnesotans.”

The damage to Joshua Tree National Park during this last government shutdown will be felt for at least 200 years, officials in Southern California said in late January. Left unprotected by a mostly furloughed staff, the trees were vandalized by some visitors.

Many states, determined to prevent such damage and to avoid the loss of critical tourism dollars, dipped into their own pockets to keep their national parks open.

At least one, Arizona, created a special fund in 2018 to ensure that its crown jewel, the Grand Canyon, will remain staffed and open no matter what the federal government does.

During the most recent shutdown, Arizona spent more than $193,000 to keep the park open, for which the state was “prepared and ready,” said Patrick Ptak, communications director for Republican Gov. Doug Ducey. “I don’t think it’s any surprise that Washington is operating this way,” Ptak said, “and that’s why we have plans like this in place.”

Impact on Cities

Cities are “incredulous” that the federal government repeatedly shutters, said Mike Wallace, National League of Cities program director for community and economic development.

Many cities already are struggling because of stagnant federal funding, the result of automatic spending cuts enacted during the Obama administration. And cities now have less leeway to raise local taxes because residents can no longer deduct all of those payments on their federal returns, thanks to Trump’s new tax law.

“It’s out of their control,” Wallace said. “Cities rely on certainty from the federal government.”

Without that certainty, some cities are enacting ordinances designed to protect federal workers and temporarily prop up federally funded programs.

During the last shutdown, Lancaster, California, implemented a series of assistance programs for federal workers, including deferring payments for various municipal fees like business licensing, parking citation and recreational programs. The city is prepared to trigger those programs once again should another shutdown hit.

Salt Lake City just approved a new program that would draw money from the city's general fund to provide federal employees with up to $1,500 in a one-time, no-interest loan in the case of a future shutdown

But even the most extensive preparations can’t protect states and localities from all the damage a shutdown causes. The most recent one drained tax revenue from regions across the country. Just around the nation’s capital, where 400,000 federal and contract employees work, D.C., Virginia and Maryland lost nearly $200 million in tax revenue.

The 35-day shutdown pushed many cities and states to a financial breaking point. If there is ever another one that lasts longer, it will be nearly impossible for them to shield residents from the effects.

When negotiations between congressional Democrats and Republicans weren’t going well late last week, the Michigan State Budget Office sent an email to department heads asking how long they could fund vital programs without a renewal of federal funds.

The office did the same thing in December, at the outset of a shutdown that ended Jan. 25. Generally, the response from departments was that they could hold out for about 45 days.

“Unfortunately, it’s become so commonplace now,” said Kurt Weiss, a spokesman for the Michigan office. “It’s a constant feeling of, ‘Will we have another shutdown?’ It’s just one of those looming things over your head that adds to the stress of the job.”

Kristen Cox, executive director of the Utah Governor’s Office of Management and Budget, used a harsher tone.

“It’s so pathetic,” Cox said. “If there’s another shutdown, we have to go into worst-case-scenario mode. We can’t float these federal programs. It’s not our job. I don’t care what side of the aisle you’re on—do your job.”

No federal shutdown, not even the recent record-breaker, has lasted so long that states have had to stop a federal aid program or use state dollars to keep it going, said John Hicks, executive director of the Washington, D.C.-based National Association of State Budget Officers.

But the threat of prolonged or repeated shutdowns risks states’ financial health, Hicks said. States must prepare for the possibility that a future shutdown might force them to furlough or temporarily lay off some of their own workers and use state money to pay for federal programs.

“It’s a cloud,” he said.

And then there are the less tangible, but no less profound, effects of repeated shutdowns.

Frans, at Minnesota Management and Budget, said shutdowns have had a corrosive effect on public confidence, “damaging the brand of good government.”

“People lose faith when you have these shutdowns,” he said. “People roll their eyes and don’t differentiate between state and federal government. … They think all government doesn’t work.”