WASHINGTON -- Three rating agencies have found a limited impact on state and local governments so far from the partial federal government shutdown that stretched into its 20th day Thursday as House Democrats tried to separate from the deadlock another two 2019 spending bills.
As the shutdown wears on, analysts warned, the risk to state and local credit grows. Meanwhile, House Democrats are trying to put pressure on Republicans by passing spending measures piecemeal.
The House voted 244 to 180 Thursday to approve a 2019 spending bill for the departments of Transportation and Housing and Urban Development and 243 to 183 for 2019 funding for the Agriculture, Rural Development, the Food and Drug Administration, and Related Agencies Appropriations Act.
Both bills were approved by the Senate 92 to 6 in the last Congress as was a spending bill the House approved Wednesday for the Internal Revenue Service, Treasury Department, the Securities and Exchange Commission, other financial services agencies and general government operations.
But House Republicans criticized the spending bills because they are Senate measures that don’t include bipartisan House priorities that were subject to lengthy deliberations last year. The Republican-controlled Senate would still need to approve any of the House-passed bills for them to take effect, and President Trump would have to approve them.
“This bill means less for your state departments of transportation,” said Rep. Mario Diaz-Balart, R-Fla., ranking member of the Appropriations Subcommittee on Transportation and Housing and Urban Development. He said the Senate bill has $250 million less for seaports and $1.4 billion less for highways and bridges than the House bill.
The subcommittee’s new Democratic chairman, Rep. David Price of North Carolina, said Republicans missed their opportunity to pass the House bill last year and a vote on the Senate-passed bills represents the best opportunity to re-open the governments.
Earlier this week Moody’s Investors Service said the shutdown “has had minimal impact on municipal credits,’’ but qualified that assessment by saying “economic disruption will grow as the shutdown lingers.”
“Moody's Analytics estimates that the current partial shutdown is slowing GDP growth by 0.04 percentage points per week, less than the 0.1 percentage point effect of prior full shutdowns,” Moody’s said. “However, if the shutdown lasts through the end of the month, it will likely have a greater negative impact than prior shutdowns.”
States have received only a quarter of their fiscal 2019 federal funding of $44 billion for state DOTs and $11 billion for transit agencies, according to Jim Tymon, executive director of the American Association of State Highway and Transportation Officials.
“If we were operating under regular order and we had appropriations done before the first of the year on Oct. 1, then they get their entire appropriation for the year on Oct. 1,” Tymon told reporters in a conference call.
States also aren’t receiving their scheduled 2019 increase in transportation funding.
“The longer this drags on, you are going to see states I think start to drop back on their letting for new projects because they won’t have that money coming in yet,” Tymon said.
In the short term, states will find ways to move money around, Tymon said, but he added, “Eventually this is going to have an impact on operations and maintenance.”
The shutdown delayed for several days the opening of a new 27-mile passenger rail line in Texas between downtown Fort Worth and Dallas/Fort Worth International Airport because of a shortage of federal rail inspectors to give the final okay.
But the final inspection completed Monday allowed the new TexRail service to begin Thursday.
Fitch Ratings noted in the Thursday report that the impact of the partial shutdown is concentrated in local areas with a heavy concentration of federal employees but it only effects about 20% to 25% of the federal government.
“The federal government accounts for around 25% of non-farm payrolls in the District of Columbia,” Fitch said. “Maryland, Hawaii, Alaska and Virginia are the states with the highest proportion of federal employment but only account for around 5% in each of these states.”
The Defense Department and the U.S. Postal Service, which together employ about 40% of federal workers, are unaffected.
The Kroll Bond Rating Agency also said the impact will vary by locality while state and local governments “may incur unplanned cash outlays to cover costs normally funded through federal programs.”
