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Nov 12, 2019

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Marketplace Morning Report
Government shutdown 2019

The lasting effects of a record-breaking government shutdown

Kimberly Adams Jan 25, 2019
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Mayors and U.S. Representatives in Washington, D.C., wait to speak during a press conference calling on President Donald Trump and Congress to end the shutdown on Jan. 24, 2019.
Andrew Caballero-Reynolds/AFP/Getty Images

On Friday, President Donald Trump and congressional leaders finally reached a deal to end the country’s longest-running government shutdown. As the details for a continuing resolution that would reopen the federal government were being sorted out, mayors from all over the country were in Washington, D.C., for the winter meeting of the U.S. Conference of Mayors. Many were reflecting on the impact a reduced federal government had on their communities.

For Atlanta Mayor Keisha Lance Bottoms, news of the shutdown deal comes just in time. Atlanta is set to host the Super Bowl next weekend, and Lance Bottoms has been scrambling to make sure there will be enough Transportation Security Administration workers at the Atlanta airport after the big game.

“Nothing can ruin an experience more than having a bad experience when you’re trying to get back home and trying to get through an airport,” she said. “We’ve never had to think about how do we fill the gap for federal workers at our airport. … These are things that we will now have to think about in a very real way.”

The themes of the mayors’ conference were supposed to be infrastructure, innovation and inclusion, but talk of the shutdown dominated much of the conference, which began on Wednesday.  

John Giles, mayor of Mesa, Arizona, said his city has had to step in to provide a safety net for residents. The city-owned utility company has taken a financial hit as federal workers and others affected by the shutdown have struggled to pay their gas, electric and water bills. He said Mesa could handle the loss — in the short term.

“We have reserves, unlike the federal government,” Giles said. “We don’t print our own money and so we have rainy day funds, and we have planned for catastrophes — man-made and otherwise.”

Many of the mayors at the conference compared the shutdown to a natural disaster. And, like a natural disaster, it has been challenging to calculate the cost of the shutdown while it’s going on.

Kim Rueben studies state and local public finance at the Urban Institute, and said while it’s clear the partial government shutdown will have a negative effect on state and local government budgets, it’s hard to tell at this point the extent of the damage.

Once federal workers are paid, it will cover the estimated millions of dollars in missing state and local income taxes. But other revenue is not recoverable, like income and payroll taxes for government contractors who won’t  get back pay, or lost sales taxes as people cut back on spending.

But, said Rueben, the real lasting effect, especially for local communities, could be in how they think about their relationship with the federal government.

“What I hear from state and local officials is often not that the economy is affecting how they’re budgeting and forecasting,” she said. “It’s the uncertainty about what the federal government is or is not doing that sort of keeps them up at night.”

Mayors from all over the country say they will now include plans for federal government shutdowns in their resiliency and contingency planning moving forward.

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