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Economic harm looms for isles after shutdown

Hawaii's research and military dependence makes it vulnerable, Moody's Analytics says

By Elaine S. Povich

Stateline.org

POSTED:
LAST UPDATED: 01:33 p.m. HST, Oct 21, 2013


WASHINGTON » States with large military installations and major research institutions will suffer the most economically from the 16-day federal shutdown — especially the Washington, D.C., area, Hawaii and New Mexico, according to an analysis from Moody's Analytics.

To add insult to injury, states that paid to open national parks in their jurisdictions will not be automatically reimbursed for their expenses. Instead they are fighting for reimbursement with a separate bill in Congress. The states that opened the national parks did so in part because of the economic hit they were taking from curtailed tourism during the shutdown, which affected surrounding communities and state tax revenue.

Hawaii did not reopen national parks in part because there was no guarantee the state would be reimbursed, although each day thousands of tourists visit Hawai‘i Volcanoes National Park on Hawaii island and the USS Arizona Memorial in Pearl Harbor. The sites, along with Hale­akala National Park on Maui, are a major part of Hawaii's tourism-driven economy.

Abercrombie said in a statement before the shutdown ended that Congress shouldn't expect Hawaii or any other state to assume the obligations of the federal government.

The U.S. economy is likely to be back to recovery by early 2014, after Congress and the White House reached a bipartisan deal that reopened the federal government and raised the debt ceiling, according to Steven G. Cochrane, managing director of Moody's Analytics.

But the fallout will hurt states long after the deal. Hawaii and New Mexico are affected in an outsize way because of the concentrations of research institutions and civilian employment attached to military bases. The economies of Arizona, Colo­rado, Idaho, Utah and Washington state are also affected more because of large concentrations of federal agencies related to natural resources and land management, Cochrane said.

The fact that civilian defense workers returned to work one week into the shutdown will help soften the blow.

"But some spending on services cannot be made up, and the multiplier impacts from federal contractors shutting down will be more pernicious," Cochrane said in his latest regional forecast.

Alabama, Kentucky, Mississippi and Georgia also will feel some impact, but again, that will be reduced by the early end of defense-related furloughs.

"The next question is how much uncertainty from the new deadlines will lead to a broader slowdown in the economy," he said. "Given the statements from the congressional leadership and probably the fatigue in Congress of just going through this, they will find ways to breeze through those January and February deadlines without creating any issues. I don't think anyone wants to relive the events of the past three weeks so soon again."

The bill to reopen the government, which passed early Thursday, did not include funds to pay back states that opened national parks such as Liberty Island in New York and the Grand Canyon in Arizona.

U.S. Sen. Lamar Alexander, D-Tenn., has introduced a bill that would compensate the states for the money they spent to reopen. But there is no exact amount of money included in the bill, and passage is not guaranteed.

Mike Saccone, press secretary for U.S. Sen. Mark Udall, D-Colo., who is co-sponsoring the bill, said it would refund the states for the funds they used to open the national parks. In Colo­­rado, he said, opening Rocky Mountain National Park was essential not just for the economic benefit, but also because the roads in the park connect to U.S. 34 and U.S. 36, which were washed away in the recent severe flooding.

Visitors spend about $76 million a day in communities near national parks, the National Park Service estimated.

The bill to open the government and lift the debt ceiling did include back pay for federally funded state workers who were kept on the job during the shutdown. Any states that used their own money to pay these workers will be reimbursed, according to the National Association of State Budget Officers.

The bill also had a few goodies tucked into it for states. Kentucky, home to Republican U.S. Sen. Mitch McConnell, who was instrumental in passing the bill, got $2.9 billion for dams and locks on the Lower Ohio River. Colo­rado also got $450 million for emergency repairs to highways damaged by flooding.

Stateline reporter Pamela M. Prah and the Honolulu Star-Advertiser contributed to this report.

Stateline is a nonpartisan, nonprofit news service of the Pew Charitable Trusts that provides daily reporting and analysis on trends in state policy.






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