Says the current issue of “Moody’s Weekly Credit Outlook for Public Finance”: “The federal government shutdown … is credit negative .. because some government employees are furloughed, some federal procurement contracts are cut or reduced, and other discretionary federal services and programs are closed.”
About 29% of the nation’s 2.8 million federal workers have been furloughed, which is ominous for the Washington region where federal employees comprise 12.6% of the workforce versus 2.1% nationally. Also, Virginia localities can expect to suffer a decline in sales tax revenue (which constituted about 6.4% of Fairfax County operating revenues) as well as cuts in Virginia state aid to local governments. Aid from the state, which acts as a conduit for much federal spending, accounts for 10% to 11% of local government spending in the metro area.
Nevertheless, the credit outlook concludes, “Most DC metro area local governments have strong credit fundamentals that will help them withstand a prolonged government shutdown. These strengths include large tax bases, high wealth levels and solid reserves. … DC area local governments reserves average a robust 22.9% of operating revenues.”
— JAB