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Assessing the shutdown

Government shutdownCould have small impact on state government, big effect on Arizona economy

State agencies that rely heavily on federal funds won’t be affected much by the government shutdown, at least in the short term.

In some cases, the federal funding that state agencies receive won’t be jeopardized unless the shutdown is still in effect through the end of December, which is the end of the current fiscal quarter. Other funding is expected to last at least for a few weeks.

But, Arizona government isn’t impervious. Dozens of state employees whose salaries are paid with federal money will be furloughed until the impasse in Washington, D.C., is broken. Funding for some social welfare programs at the Department of Economic Security is not expected to last for long. And the economic impact to the state as a whole may be significant, depending on how long the shutdown lasts.

For the most part, state government operations that are dependent on federal grants or other funding won’t see much disruption during the shutdown.

“In the short-term, not a lot happens,” said John Arnold, the director of Gov. Jan Brewer’s budget office. “Certainly there’s some programs that get hit.”

Brewer is awaiting contingency plans and reports from agencies that receive federal funding. Some of the biggest Arizona recipients of federal money include the Department of Economic Security, Department of Education, Arizona Health Care Cost Containment System, Department of Health Services and Department of Transportation.

Arnold said much of the federal grant money comes in the form of reimbursements for money that has already been spent by the state. The frequency of the reimbursements varies from program to program, and is dependent on which federal agency distributes the funds.

But Arnold said state agencies are not expecting any problems through December in their ability to draw down those federal funds. In fact, the feds informed some that reimbursements are automatic and will keep coming during the shutdown.

That is somewhat reassuring, though Arnold said some agencies are concerned about potential glitches that could cause cash flow problems.

“One concern I’ve heard over and over is if federal agencies have fewer admin people who are there to process grants, will the grants get processed? What the feds have told us is a lot of that is automatic. You don’t need a body there. But there’s always the potential for disruption,” he said.

Much of the federal money received by the state is “forward-funded,” meaning the federal dollars are provided ahead of time. In other cases, agencies have leftover funding that they can carry over from the previous fiscal quarter.

For example, DES spokeswoman Tasya Peterson said most of the agency’s federal money, which accounts for about 80 percent of its total funding, is forward-funded. Money for the current fiscal quarter was already approved in the previous fiscal year.

ADHS is urging people in the Women, Infants and Children program, which provides money for healthy food to about 160,000 women and children, to keep meeting their appointments and cashing the checks they receive. Agency spokeswoman Laura Oxley said the program is forward-funded, and no disruptions are expected for now.

Federal grants that ADHS receives for children’s vaccinations, valley fever and extreme weather, among others, likely won’t be disrupted as well, she said.

“The way the system is set up it sort of protects us from a bomb like this,” Oxley said.

Brewer said WIC and other social service programs at ADHS and DES were of particular concern to her. But the governor said the state is doing everything it can to minimize the impact of the shutdown on state government.

“We’ve got concerns over at DES with regards to the WIC program. We’ve got issues with food for the elderly. Those are the kinds of things that are human and affect people directly,” she said.

ADOT spokesman Timothy Tait said the Federal Highway Administration is still operating during the shutdown. Construction and maintenance on Arizona’s highways will continue, Tait said, because the money comes from the federal Highway Trust Fund, which is not part of the annual appropriations process.

“For most of what we do, dealing with highways, there’s really no impact at this point,” Tait said.

And even though the Department of Education is budgeted to receive more than $1 billion in federal funds, it doesn’t expect to have any funding problems during the shutdown.

In a statement posted on its website a few days before the shutdown began on Oct. 1, the agency warned that it may be unable to draw down federal money to process new payment requests that it receives during the shutdown. But it urged recipients of federal grants to continue submitting payment requests, and said it didn’t believe there was any need to draw down excess cash in anticipation of the shutdown.

With regard to the federal money that the agency passes on to school districts throughout the state, spokesman Mary Marshall said the Department of Education is essentially funded for the entire school year.

“If they’re still shut down in July we’re going to have a problem,” she said.

Some facets of state government will still feel the pinch.

At DES, some programs are likely to run dry in the near future if an agreement isn’t reached in Washington. Peterson said cash payments to low-income families from the Temporary Assistance for Needy Families program, which average about $207 a month, were expected to cease on Oct. 3. And Social Services Block Grants that DES distributes to local governments and nonprofit organizations for elderly assistance, domestic violence shelters, housing for the homeless and other programs will be delayed until the feds issue grants to the department. DES’s supplemental nutritional assistance program would run out of funds by the end of October, Arnold said.

Money that ADOT provides for local transit programs, especially in rural areas, could dry up. That means bus service and dial-a-ride programs in places like Flagstaff, Lake Havasu City and Yuma could be temporarily shut down, Tait said.

“That’s a possibility. It depends on what their individual cash flow situations are,” Tait said.

Marshall said the Department of Education could run short on funding for its school lunch program, which is funded through the U.S. Department of Agriculture, not the U.S. Department of Education.

And some state employees are likely to be furloughed during the shutdown. More than 100 employees at the Department of Emergency and Military Affairs were immediately furloughed, Arnold said. A small number of employees at the Arizona Department of Administration who work in the agency’s population statistics division will be furloughed as well. And the Arizona Department of Environmental Quality will see some furloughs if the shutdown lasts longer than a few weeks, Arnold said.

While the impact to state government is expected to minimal in the short term, the economic impact could be substantial. National parks that drive a lot of tourism to Arizona, such as Grand Canyon National Park, are shuttered for the time being. According to Cronkite News Service, visitors to Arizona’s national parks spend an average of $2.7 million per day, including $1.2 million alone at the Grand Canyon.

Unlike former Gov. Fife Symington, who served during the 1995 federal shutdown, Brewer said she won’t keep the park open with state funds.

Arnold said the economic impact is hard to gauge.

“I think it’s going to depend on how long this thing lasts and what public reaction to it is. The public side of it so far has been access to federal parks and the World War II memorial. I just think we’ll have to watch,” he said.

 

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