[SmokyMtn]

The other issue to consider is that states are dependant on federal funding to keep programs going. Also, many employees that work for state and local governments are actually funded by the federal government.

Already straining to make ends meet as the longest downturn since the Great Depression grinds on, state and local governments are now facing a new, unwelcome question: What would a shutdown of the federal government mean for their struggles to balance their budgets?

If a shutdown were to happen, the federal money that helps states pay the administrative costs of their stretched unemployment programs could dry up, forcing states to advance the money to keep the programs running. Federal grants for a variety of programs — including research, higher education and training local law enforcement officers — could be delayed.

Furloughing nonessential federal workers and halting payments to federal contractors could have a domino effect as local tax collections plummet in the Washington area and other places with many federal workers. And if national parks were closed, some states could lose tourism business, and the local tax revenues they generate.

“It all comes down to timing,” said Scott D. Pattison, the executive director of the National Association of State Budget Officers, which has been fielding calls this week from nervous state officials. “If it’s just a few days, you can deal with it. But if it’s over a week or two, the financial management people’s foreheads start to get a little sweaty.”

The impact of a short federal shutdown would be minimal, the association wrote in a recent briefing paper. A longer shutdown could pose problems. Even if many of the potential fiscal effects are relatively small, they could create cash-flow problems for some states already operating on tight budgets.

Illinois, for example, is currently trying to pay off a $4.5 billion backlog of bills to vendors going back to October. Bradley C. Hahn, a spokesman for the Illinois comptroller, Judy Baar Topinka, said, “A shutdown would be particularly devastating for states like ours that have no margins to cover the costs.”

Most of the largest federal programs that states rely on — for crucial safety net programs like Medicaid and food stamps, among other things — would most likely continue to function in the event of a shutdown.

But interruptions of smaller programs could still strain states in the short run, as they find themselves forced to pay the salaries of workers normally paid with federal funds.

The budget officers’ association noted that during the shutdown in 1995, Maryland spent $1.4 million a day to keep its federally paid employees at work.

While those kinds of expenses would probably be reimbursed, they are coming as many states are unusually vulnerable.

http://www.nytimes.com/2011/04/06/us/06states.html