The congressionally-mandated sequestration could take about $60 million of income and sales tax revenue from the District of Columbia's economy and cause the city to lose about $30 million in federal grants and payments in fiscal 2014, district officials said Tuesday.

The cuts would include $11 million to the District of Columbia Housing Authority and $6.3 million to the Office of the State Superintendent of Education. The cuts could lead to 200 to 250 fewer housing vouchers for families and reduced grants to public schools for special education, free and reduced-price lunches and early-childhood education, officials said.

The cuts would be part of $1.2 trillion that must be slashed from federal spending from March 1, 2013 through the next 10 years under sequestration, which was triggered by Congress' failure to reach agreement over how to significantly cut the deficit.

Sequestration led to the elimination of some federal jobs in the district. D.C.'s unemployment rate inched up to 8.6% by July from 8.4% in December 2012. Prior to that, the district's unemployment rate had been reduced from its peak of 10.3% in August 2011. City officials said unemployment rate could have been as low as 8% had sequestration not occurred.

Between January and July of this year, the district saw a decrease of 7,000 government jobs. Between January 2011 and July 2013, it lost 14,600 public-sector jobs but created 23,700 private-sector jobs, officials said.

"My administration has worked aggressively to strengthen the district's economy and bring down the unemployment rate," D.C. Mayor Vincent Gray said in a news release. "We've helped spur the creation of 23,700 new private-sector jobs. But our growth is being hampered by sequestration's elimination of federal jobs, grants and revenue. We are calling on Congress to end sequestration and balance the budget responsibly."

Moody's Investors Service revised its outlook in July for the district's general obligation bonds to stable from negative. The revision occurred in part because the rating agency thinks the impact of federal budget cuts on the district's economy will not be as significant as it had expected when it had assigned a negative outlook in September 2011. Moody's gives D.C.'s GO bonds an Aa2 rating.

Standard and Poor's upgraded D.C.'s GO bonds to AA- from A+ in March despite the challenges posed by sequestration. Reasons for the upgrade included the district's renewed commitment to fiscal stability, robust revenue growth and declining unemployment. Fitch Ratings also gives the district's GO bonds a AA- rating.

"We have proactively created strategies to do our best to mitigate the negative impacts of sequestration," said Lisa Mallory, director of the district's department of employment services. "And if not for our ongoing efforts to grow private sector employment, the unemployment picture would be far worse than it is now."

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.