Federal Shutdown Cripples D.C. – Your State Might be Next

October 16, 2013 — Leave a comment

If there were any doubt as to how much our nation’s capital relies on the federal government, consider this: the D.C. government has just announced that it will stop issuing tax refunds for individuals and businesses due to the federal shutdown.

So what’s the connection, exactly? Federal funds make up a quarter of the District of Columbia’s local budget. That dependency, combined with the collective hit to the city as tourists flee and workers stay home, has lead to an economic crunch. The city spends about $18 million per day on city services and payroll but currently only has about a week’s worth of cash ($153 million) left in its coffers. There’s an additional $110 million in emergency funds but that will only stretch out for another week. If the shutdown continues, woes won’t stop at delayed refund checks: chances are, payroll for city employees will be delayed.

Federal Workers Protest Government Shutdown

Federal Workers Protest Government Shutdown (Photo credit: cool revolution)

It’s easy to point fingers at D.C. and pretend that’s what they get for relying so heavily on federal funds. But that would be a bit hypocritical if you live in, say, FloridaLouisiana or South Carolina, which sit at the top of a government list provided by the Office of Management and Budget of states which receive federal funding. In fact, nearly 10% of all states rely just as heavily as D.C. on federal funding as a percentage of their budget.

Florida easily tops the list, spending $30,318 of federal funds per capita. But the ranking can’t be explained simply on the basis of population: for the last fiscal year, the Sunshine State received the most federal funds both in total and on a per capita basis. Those funds are used to run government agencies (Florida, in particular, saw a number of dollars directed to Health and Human Services and Homeland Security), pay contractors and fund entitlement programs.

If you focus on dollars flowing out of the federal government and into the hands of state residents, Alaska takes honors, receiving more than $15,000 per person.

And when you start peeling apart by category, Hawaii tops the list in terms of defense spending (who would have guessed?) while California leads in defense spending procurements (followed by Virginia).

When it comes to spending, there are a number of ways to interpret the numbers. You can focus on total expenditures per state for programming; spending per capita for programming; or net contributions per capita, taking into consideration revenue received and spending. The nature of expenditures can vary, too, including direct payments for programming, subsidies and contractor payments.

The bottom line is that, on some level, no matter the demographics or political leanings, states all rely on federal funding on some level: one state, two states, red state, blue states. All states are feeling the effects of the government shutdown. It’s not just about parks and museums or IRS or defense – It’s about how our government functions in our society. The shutdown is affecting more than federal employees. And the lost dollars tied to government spending inside our states – for better or worse – can’t be easily recaptured.



JDKatz: Attorney's At Law

JDKatz, P.C. is a full-service law firm focused on tax lawbusiness and transactional lawestate planning and elder law. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys, or visit http://www.jdkatz.com.

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