Oct. 10 (Bloomberg) -- States are planning to idle workers and cut services because federal funding is drying up as a partial U.S. government shutdown extends into a 10th day.
Michigan is preparing to put as many as 20,000 workers on unpaid leave and eliminate cash and food aid to the poor. North Carolina sent 366 employees home and closed its nutrition aid program to tens of thousands of women and children. Illinois this week may issue furloughs to hundreds of federally funded employees, including workplace safety inspectors.
The state-level fallout shows the widening impact of the first partial U.S. government shutdown since 1996, as Republicans won’t pass spending bills unless President Barack Obama agrees to roll back part of his signature health-care law, which he refuses to do. About a third of the $1.7 trillion that states spent in 2012 came from federal sources, according to the National Association of State Budget Officers.
“You send people to D.C. to work,” South Carolina Governor Nikki Haley, a Republican who drew support from the Tea Party movement, said Oct. 8 at a luncheon for business and civic leaders in North Charleston. “You don’t send them to shut something down. So I am frustrated with both the Republicans and the Democrats. There are no saints in Washington right now.”
The U.S. is poised to reach its statutory borrowing limit next week, which would cut even more deeply into the government’s ability to spend.
The shutdown, which began Oct. 1, closed national parks, idled workers and curbed economic activity. It has also crimped funding for state programs run on the U.S. government’s behalf.
While the largest of these, Medicaid, the joint state and federal health insurer for the poor, hasn’t been affected, other programs will run out of cash unless funding is passed or governors use local money to keep them afloat.
“We’re right on the cusp of the point where they are going to have to make some difficult decisions,” said Scott Pattison, executive director of the Washington-based budget officers’ group. “Do they put their own money into these programs that are not being funded, or do they not fund them either?”
In Augusta, Maine, Republican Governor Paul LePage declared a civil emergency yesterday, citing a “failure of leadership in Washington” and the effects of the shutdown on programs in his state. He said more than 2,700 Maine workers are paid partly or entirely with U.S. funds.
“This means that a large number of our federally funded state employees may have to be laid off,” LePage said in a statement. “Maine simply cannot fill the financial gap created by the prolonged loss of federal dollars. It would be unlawful for the state to ask our federally funded employees to continue to work without having the authority to pay them.”
LePage said a civil emergency will give him flexibility to deal with the effects of the lost funding.
Even with the shutdown and default threat, the $3.7 trillion U.S. municipal-bond market is near its highest in three months, according to Standard & Poor’s index data.
Without a resolution in coming weeks, state officials say they would be forced to cut programs including: Temporary Assistance for Needy Families, which provides cash to the poor; the Supplemental Nutrition Assistance Program, known as food stamps; and grants to help residents pay their energy bills.
Congress’s failure has drawn criticism from governors of both parties in the most populous states. Florida’s Rick Scott and Rick Perry of Texas, both Republicans, faulted Obama, while California Governor Jerry Brown, a Democrat, blamed “extreme radicals” in the House of Representatives. New Jersey’s Chris Christie, a potential Republican presidential candidate in 2016, criticized both sides.
“People who say that they want to be in public life to try to run the government and then their solution to doing that is to not speak to each other, not work with each other, and shut our government down, that’s a failure,” Christie told reporters Oct. 1. “What we pay them to do when we send them down there is to run the government, not to shut it down.”
Arizona Governor Jan Brewer, a Republican, this week ordered welfare officials to use state money to restore assistance that ran out because of the shutdown for thousands of families. Democratic lawmakers in Ohio proposed using as much as $25 million in state money to keep a supplemental food program for women, infants and children in operation.
Colorado Governor John Hickenlooper, a Democrat, is picking up the cost of National Guard work in areas recently hit by flooding. Indiana is paying $33,000 a day to keep employees on the job assisting the Guard there.
Most states won’t be able to cover the cost of major programs should the shutdown persist through this month, said Pattison, of the budget officers group.
“In most cases, they are going to say if the federal government isn’t funding it, you have to shut it,” he said.
California, the most populous state, has enough money to continue providing food stamps, school lunches and aid to poor mothers and children through the end of October, said H.D. Palmer, a Finance Department spokesman.
“We can’t say there is going to be enough to fully cover November,” Palmer said. “The longer this shutdown goes on, the more questionable the funding is for those programs.”
In North Carolina, more workers may be idled. Last week, the state’s Department of Health and Human Services said as many as 4,500 may be put on leave or have their hours cut.
In Michigan, Republican Governor Rick Snyder’s office gave unionized employees notice that the state may issue furloughs to as many as 20,000. As many as 6,600 may be put on leave as soon as Oct. 15, with the rest delayed until the end of the month, because of notice required under contracts, said Kurt Weiss, a spokesman for the budget office.
The state may end cash and food aid next month, Weiss said. Almost one in every five Michigan residents gets food assistance.
“We’re hopeful it doesn’t get to that point,” he said. “But it looks like both sides are pretty polarized and firmly dug in.”
In South Carolina, Governor Haley said her state is ensuring that unemployment benefits for the jobless and aid to poor and pregnant women aren’t cut off. The state’s health and environment department said last week that it may put its 3,500 employees on leave to free money for a women’s nutrition program if federal funding doesn’t come through.
“They have got to get into a room and not leave until they solve the problem, because you can’t do this on the backs of the people,” Haley said. “You just can’t. There’s too many people hurting from this.”
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