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April 07, 2011

 

DiNapoli: Federal Shutdown Poses Wide-Ranging Impacts for New York State


A looming shutdown of the federal government could have wide-ranging implications for New York State residents and governmental functions, according to a report released today by New York State Comptroller Thomas P. DiNapoli.

"New York is trying to get its fiscal house in order," DiNapoli said. "A federal shutdown would be disruptive in the short term and damaging in the long term. It could create a cash flow problem for our state and interrupt important capital projects. A shutdown would result in waste and inefficiency, at both the federal and state level, at a time when states – and taxpayers – can least afford it."

In state fiscal year (SFY) 2010-11 nearly 37 percent, or almost $50 billion, of New York's total All Governmental Funds disbursements were federally financed. While the immediate impact is likely to be modest, an extended inability to draw down certain federal funds could cause cash flow challenges for the state. More than 126,500 civilian federal employees work in New York state. In addition, approximately $687 million in federal funds were used to either partially or fully fund state employees. An undetermined number of these employees would be impacted by a shutdown.

Federal funds pay for approximately 20 percent of the state's capital spending. State infrastructure projects, which included $1.6 billion in federal funds for transportation and $263 million for environmental and parks projects in SFY 2010-11, may be impacted, depending on the duration of the shutdown. This would have a ripple effect through the state and local economies, as contractors and subcontractors working on these projects may be forced to delay or stop work. This impact would be compounded by New York's relatively short construction season.

Many public authorities and municipal governments that receive transportation-related and other funding rely on these funds for day-to-day activities, and may resort to other temporary financing means to pay for such costs until they are reimbursed by the state and the federal government. A prolonged delay could undermine their ability to finance these projects. In addition, DiNapoli noted that if the shutdown does occur, President Obama has stated that troops – including those stationed in New York bases such as Fort Drum – would receive one week's pay instead of two in their next paycheck.

Processing of federal services such as visas, passports, and certain income tax returns could be delayed, along with enrollments in certain federal programs. Any suspension of activity at important federal projects, such as the 115 Superfund sites in the state, could stall progress in moving these projects to completion. The state's federal share of Medicaid funding, which totals $28 billion, is not expected to be impacted by a federal shutdown.

DiNapoli's report can be found at:http://www.osc.state.ny.us/reports/economic/fed_shutdown_impact.pdf



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