The U.S. Capitol building at night. (File photo by Ashley Murray/States Newsroom)
Maryland lawmakers were warned Tuesday of the potential of tens of millions in lost economic activity and revenue under the federal government shutdown that began at 12:01 a.m. Wednesday.
Chief Deputy Comptroller Andrew Schaufele, in a briefing before the Joint Federal Action Oversight Committee, estimated that the state could lose $700,000 per day — possibly more — in tax revenue in a shutdown.
More than that, Schaufele warned that a shutdown compounds the state’s current economic instability that stems from President Donald Trump’s ongoing efforts to shrink the number of federal employees, agencies and spending.
“I think what is missing in all of this analysis I’ve given you here is that this is one more level of instability on top of what our federal ecosystem is going through right now … and how that amplifies the downsides of what our families and businesses are going through is very uncertain,” Schaufele said.
None of the estimates take into account the potential for massive firings of federal employees during a shutdown that Trump has threatened. Also, the estimates do not include federal employees who opted to take a buyout earlier this year and leave their jobs this fall — so-called “fork in the road” employees.
Annual federal spending in Maryland exceeds $150 billion. It is an amount that includes wages, retirement payments, contracts, grants, and other direct payments. About 13% of all households in the state have at least one person who receives a paycheck or retirement income from the federal government.
The last federal shutdown — which began at the end of 2018 and ended in 2019 — lasted more than a month. Nationally, the event curtailed an estimated $3 billion in economic activity, according to Schaufele, citing a Congressional Budget Office analysis.
Maryland would account for about 15% of that figure or roughly $13 million per day, he said. “if you make various assumptions about how that flows down into our revenue stream, that could be about $550,000 of lost revenue per day of government shutdown” last time, Schaufele said. Accounting for inflation since 2019, that would be about $700,000 today.
“It’s worth noting that that 34-day most-recent shutdown was not a complete shutdown, as this one would be,” Schaufele said.
But he told lawmakers “I think the risk is to the upside there that if anything, this one could be a bit more significant given what has taken place prior and the words that are coming out of the current administration.”
Even so, Schaufele said the lost revenue in 2019 was about 1% of what Maryland collected.
“So, while these things are intimidating and significant and they create uncertainty and distortions, the ending fiscal effect is not always as severe as the psychological effect, and I think the long-term economic effects,” he said.
“I think the irony of these federal government shutdowns is that they are likely to drive up federal costs over the long run,” Schaufele said. “The uncertainty is the worst aspect of this from a business point of view, from an employee point of view, uncertainty drives risk. Risk drives increased costs.”
The briefing to lawmakers Tuesday came less than 10 hours before the midnight deadline for a shutdown, when there was still a remote chance the Senate Republicans and Democrats might reach a deal to keep government open. Lt. Gov. Aruna Miller (D) was still holding out hope of a last-minute deal at the time
Lt. Gov Aruna Miller (D) held out hope for a last second deal to avert a federal shutdown. (File photo by Danielle E. Gaines/Maryland Matters)
“I believe in miracles, and that miracles do happen, but if the government does shut down, please note this, today’s conversation won’t be the last,” Miller said at Tuesday’s hearing.
Matthew Verghese, the state’s federal lobbyist, painted a more pessimistic picture of the final hours.
“We are essentially in the twilight hour of funding of the federal government today and without action by the Senate – the U.S. House of Representatives is out of session today — we will shut down for the first time in seven years,” Verghese said. “We are heading towards a full federal government shutdown.”
Verghese added that “very large differences” between Republicans and Democrats “continue to exist and show us why we’re barreling towards a shutdown today.”
The House, with its Republican majority, passed a bill Sept. 19 that would fund the government through Nov. 21.
That plan stalled in the Senate. While Republicans hold the majority in the chamber, they need the votes of a small number of Democrats to reach a required 60-vote threshold needed to head off any filibusters.
Senate Democrats are holding out for their own version of a budget extension that restores health insurance subsidies that are part of the Affordable Care Act. The program was cut this summer as part of a tax cut package backed by President Donald Trump.
Senate President Bill Ferguson said if the program is not restored, Maryland residents could see insurance premiums jump by as much as 20%.
Senate Minority Leader Stephen S. Hershey Jr. (R-Upper Shore) called on Gov. Wes Moore (D) to encourage Sens. Chris Van Hollen and Angela Alsobrooks to not use healthcare premiums as an excuse to force a shutdown.
“I mean, that’s a policy issue, and this committee, and as well as some other joint committees that we have here in Maryland are discussing Medicaid and the effects of that,” Hershey said. “But at the end of the day, this is a continuing resolution to keep the federal government open. Why are those issues being brought into this negotiation, rather than…the bipartisan support that’s needed and has been achieved every other time in order to keep the government open?”
