States With Big Military, Research Facilities Hurt Most by Shutdown

by Elaine S. Povich, StateLine

 U.S. Postal Service letter carrier Jacob Ribald peers into the window of the closed Bureau of Land Management office in Las Cruces, N.M. New Mexico is among the states hardest hit economically by the shutdown. (AP)

States with large military installations and major research institutions will suffer the greatest economic hit from the 16-day federal shutdown – especially the Washington, D.C. area, Hawaii and New Mexico, according to a new analysis from Moody’s Analytics.

To add insult to injury, states that paid to open national parks in their jurisdictions will not be automatically reimbursed for their expense. Instead they are fighting for reimbursement with a separate bill from Congress. The states that opened the national parks did so in part because of the economic hit they were taking from curtailed tourism during the shutdown, which affected surrounding communities and state tax revenue.

The U.S. economy will likely be back to recovery by early 2014 after Congress and the White House reached a bipartisan deal that reopened the federal government and raised the debt ceiling, according to Steven G. Cochrane, managing director of Moody's Analytics.

But the fallout will hurt states long after the federal workforce is up and running again. Hawaii and New Mexico are affected in an outsize way because of the concentrations of research institutions and civilian employment attached to military bases.  The economies of Arizona, Colorado, Idaho, Utah and Washington State are also affected more because of large concentrations of federal agencies related to natural resources and land management, Cochrane said.

The fact that civilian defense workers returned to work one week into the shutdown will help soften the blow. “But some spending on services cannot be made up, and the multiplier impacts from federal contractors shutting down will be more pernicious,” Cochrane said in his latest regional forecast.

Alabama, Kentucky, Mississippi and Georgia also will feel some impact, but again, that will be reduced by the early end of defense-related furloughs.

“The next question is how much uncertainty from the new deadlines … lead to a broader slowdown in the economy,” he said. “Given the statements from the congressional leadership and probably the fatigue in Congress of just going through this, they will find ways to breeze through those January and February deadlines without creating any issues. I don’t think anyone wants to relive the events of the past three weeks so soon again.”

The bill to reopen the government, which passed early Thursday, did not include funds to pay back states that opened national parks from Liberty Island in New York to the Grand Canyon in Arizona.

Sen. Lamar Alexander, D-Tenn., has introduced a bill that would compensate the states for the money they spent in reopening the national parks within their borders. But there is no exact amount included in the bill and passage is not guaranteed.

Mike Saccone, press secretary for Sen. Mark Udall, D-Colo., who is co-sponsoring the bill, said it would refund the states for the funds they used to open the national parks. In Colorado, he said, opening Rocky Mountain National Park was essential, not just for the economic benefit, but because the roads in the park connect to U.S. 34 and U.S. 36, which were washed away in the recent severe flooding suffered by the state.

Visitors spend about $76 million a day in communities near national parks, the National Park Service estimated.

Among the states that ponied up funds to keep the parks open:

• Arizona announced it would pay $651,000 to keep the Grand Canyon open;
• New York paid $61,600 a day to re-open the Statue of Liberty;
• South Dakota shelled out $152,000 to fund Mount Rushmore for 10 days;
• Utah paid $1.7 million for eight sites that opened for 10 days starting Oct. 11;
• Colorado’s $362,700 to re-open Rocky Mountain National Park for 10 days.

The bill to open the government and lift the debt ceiling did include back pay for federally funded state workers who were kept on the job during the shutdown. Any states that used their own money to pay these workers will be reimbursed, according to an analysis by the National Association of State Budget Officers.

The bill also had a few goodies tucked into it for states. Kentucky, home to Republican Sen. Mitch McConnell, who was instrumental in passing the bill, got $2.9 billion for dams and locks on the Lower Ohio River. Colorado also got $450 million for emergency repairs to highways damaged by flooding.

The shutdown debacle and the resulting financial hits have hurt Congress’ reputation in a much more personal way than in years past. Now, four in 10 Americans want to see their own representative defeated next year, according to a Pew Research Center survey, the highest number in two decades.

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Stateline reporter Pamela M. Prah contributed to this report.

Copyright(c) 2013 The Pew Charitable Trusts.