Local Economy Could Take Hit from Government Shutdown
Friday, April 8, 2011
Federal officials have released limited information on the potential government shutdown. The U.S. Treasury says tax audits would stop and local IRS offices would close. So as the April 18th tax deadline nears, you may get little help.
Aaron Blau, an accountant in Tempe, Arizona, said he’s most concerned that people filing taxes at the last minute would have trouble getting help.
“I would see a bigger concern with the government shut down dealing with the service and support,” Blau said.
However, Blau isn’t all that worried. He said taxpayers who send in paper returns might have to wait a few extra weeks to get their refund.
Meanwhile, treasury officials say even if the government shuts down, there will be a skeleton crew staffing the IRS hotline.
A local economist believes a shutdown of the federal government would have a significant impact on the local economy as well. Erik Bruvold, President of the National University System Institute for Policy Research, said a shutdown “lasting more than 10 days” has the potential to affect local businesses.
San Diego, which has the largest number of federal employees of any county in the the country, could see temporary layoffs and loss of pay. The lost income for military personnel and employees of defense contractors has the potential “to trickle down to everyone from grocers to the auto-repair shop,” Bruvold said.
This trickle down could also impact about 350 workers who were given notice they may be laid off indefinitely between May and June. General Dynamics NASSCO employs about 36,000 people in San Diego and its contracts with the Navy are on hold until a federal spending plan is reached.
NASSCO, the only major ship builder on the West Coast, has built 11 cargo ships for the Navy and is currently working on three more.
A company official said a long budget delay could mean 1,500 job cuts this year.
As the deadline for a federal government shutdown approaches, the decision of which government employees will be laid off generally comes down to who is deemed essential and non-essential. Essential sectors include those responsible for protecting life and property.
Agencies like the FBI, the Coast Guard and the Transportation Security Administration would continue to operate, according to federal officials. The Federal Aviation Administration and the National Weather Service are also deemed essential.
Federal contractors working on transportation projects, or for the military, may be impacted.
John Pettit, president of the San Diego Military Advisory Council (SDMAC), said the effects of a shutdown depend on the nature of a specific project or program.
“If funding for a project is in place, these contractors may be able to keep operating,” said Pettit, a leader of the local group advocating for military interests. “Those being paid by the federal government on a continuous basis are frantically trying to figure out where they can find funding to keep people working.”
Pettit, who is also an executive at Northrop Grumman, said it is the smaller defense companies that have the most to lose. That’s because larger companies get the money for big-contracts up front, while smaller ones tend to work on a pay-as-you-go basis.
Other services by the federal government that operate on fees would stay open, like the U.S. Postal Service and federal courts.
Deemed essential, border-related services figure to be largely unaffected by a shutdown as the Border Patrol and Customs and Border Protection will continue to operate.
More than 50,000 people a day go back and forth between San Diego and Tijuana. About $20 billion worth of merchandise goes between California and Mexico annually.
With the shutdown looming, it would seem like people in the region would worry about what will happen come Saturday. Though the border is people’s lifeline, there does not seem to be much concern.
"Nobody would be working without a border crossing in this area," said Alejandra Mier y Teran, who directs the Otay Mesa Chamber of Commerce. "And I think it’s because in this community, people think and realize that providing land port-of-entry services both on the cargo and passenger side are essential."
Despite remaining open, some people still may get stuck on one side or the other of the border. Officials say they will stop issuing the passports and visas that U.S. and Mexican citizens need to cross the border, unless it’s a life or death situation.
Besides federal employees and contractors, hundreds of thousands of companies may need to screen new employees the old-fashioned way. A system called E-Verify would be turned off. Employers use it to verify that new hires are authorized to work.
Shawna Wilson is with Costco and uses the system to check about 300 employees a month.
"It’s just one less thing that we’d be doing," she said indifferently.
Some states, like Arizona, require employers to use E-Verify. It’s not clear if the state will fine companies if they don’t use the system if it goes down.
Another consequence would be tourists to the nation's park system. That includes Lake Mead and more than 90 other recreation areas in the southwest.
“This is one of my favorite spots,” said William Banister, a camper at Lake Mead. “Great time to come out and spend the springtime in a trailer by the lake."
Banister parked his trailer at the Lake Mead campgrounds Wednesday night. He is one of more than 150,000 people expected to visit the park in April and plans to stay a month.
“Once we hit the 9 p.m. on Friday, and don't have authorization to spend money, then we have to start closing the park,” said Andrew Muñoz, a park spokesperson.
Muñoz said if that happens, rangers would tell visitors staying at campsites and houseboats that they have to leave. Most likely, by Tuesday.
That means Banister will have to come up with Plan B.
“Now I'm going to have to start thinking about where the next campsite is going to be,” Bannister said.
If the park stays closed for long, all sorts of other costs will add up. Last April, the park collected $350,000 in fees from visitors, restaurants, motels, while boat rental companies earned more than $2 million. All of that revenue could be in jeopardy.
A budget compromise in Washington D.C. before midnight Friday would prevent a shutdown. Another option is that officials could agree to extend the deadline.
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