Government shutdown may hit the poor hard. Will states ride to rescue?

Benefit programs that aid the most vulnerable Americans will themselves become vulnerable by late October, when most states will run out of money to keep them going unless lawmakers in Washington can end the federal government shutdown before then.

If Congress does not come to terms to resume the flow of aid money from Washington, governors will then face difficult questions: which programs for the neediest population to keep going, and which ones to shutter for the duration.

Programs for the poor are less popular in Republican-led states – as witnessed when 26 states, mostly in the South, refused to expand their Medicaid programs for low-income Americans despite the fiscal incentives offered through Obamacare. Some GOP governors also rejected federal "stimulus" money intended to help pull the country out of the Great Recession, citing the small-government principle often embraced by their party. Many analysts expect that a scenario will play out as federal funds dry up for welfare, nutrition aid for new mothers, and other programs that benefit the needy, with "blue" states scrambling to keep benefits flowing and "red" states more inclined to let them lapse.

“Our past history tells us there probably will be a political dimension if the shutdown is drawn out long enough," says Robert Preuhs, a political scientist at Metropolitan State University of Denver. "When we had major budgetary cuts since the recession, those became big opportunities for state governments to reprioritize as much as they could,” he adds. “More-liberal states have built in some of the funding that the federal government has cut back, whereas conservative states see an opportunity to take advantage of the situation to generally reduce the government’s role.”

In Republican strongholds such as Missouri, Florida, Virginia, and Texas, governors are likely to “see this as a justification to close those programs and get in line with the congressional tea party,” says Bruce Buchanan, a political scientist at the University of Texas in Austin. And because the political balance of power lopsidedly favors conservatives, they will feel emboldened to “take action with some impunity,” he adds.

There's a disincentive for states to shore up alternative funding for programs like the Supplemental Nutrition Assistance Program (SNAP) and Special Supplemental Nutrition Program for Women, Infants and Children (WIC) because Congress has not guaranteed that new state dollars spent on those programs, to make up for missing federal funds, will be reimbursed. That worries advocates such as Douglas Greenaway, president and CEO of the National WIC Association in Washington. As many as 9 million mothers and young children who rely on nutrition and health-care services will soon be at risk, he says.

“This is an uncertain environment. A lot of states are in a precarious budget situation themselves, so the last thing they need is having to face taking up the slack from Congress, which is failing to do its job,” Mr. Greenaway says.

For now, many states are funding programs like WIC by tapping money budgeted for fiscal year 2014 and contingency funds provided by the US Department of Agriculture/Food and Nutrition Service (USDA/FNS). That funding is expected to last two to three weeks.

“We haven’t identified [any funding] after that point. We’ve explored all of our options,” says Angela Minicuci, a spokeswoman for the Department of Community Health in Michigan, over which Gov. Rick Snyder (R) presides.

Programs for the poor are among those likely to feel the early pinch of the government shutdown, because they depend on annual appropriations from Congress. States, which administer and help to fund these federal programs, are reluctant to identify their criteria for choosing which ones to keep funding and which to let languish. The bottom line, they say, will be cost.

Stephanie Marquis, communications director for the Wisconsin Department of Administration, says the office of Gov. Scott Walker (R) “will be working with [state] agencies to gather the cost our state may incur if we are required to fund essential federal programs and services on our own, and how we minimize the impact to our taxpayers in the process.”

Ms. Marquis says state agencies are being asked to “identify which federally funded programs have appropriations in them and the balance,” in order to determine which ones may require highest priority for emergency funding.

In Michigan, decisionmaking will focus on “citizen safety, citizen needs, citizen health and well being, politics aside,” says Kurt Weiss, spokesman for the state Department of Technology, Management, and Budget. Mandatory programs like Medicaid and Social Security are protected, but others, like welfare benefits or home heating programs, will likely get slashed, he says.

“If this thing drags out for a couple of weeks, the state simply can’t be the bank for the federal government. Basically we’ll just shut those programs down,” Mr. Weiss says.

States in general are not in an ideal situation to step up and fill the void, and many cannot realistically afford to keep aid programs going. In fiscal year 2011, 35 percent of states' total revenue came from federal stimulus dollars stemming from the American Recovery and Reinvestment Act that Congress had approved two years earlier. But that funding stream has now dwindled, and many states are again in crisis, saddled with spending imbalances and eroding tax bases. According to US Bureau of Economic Analysis projections, state and local government deficits soared 95 percent, from $129 billion to $252.7 billion, in fiscal year 2013.

If the partial government shutdown in Washington slows the economy and the US plunges into a second recession, “all of the sudden the extra margin that came about because of economic growth that could be spent on these programs disappears,” says Paul Allen Beck, a political scientist at Ohio State University in Columbus.

“There could be economic growth and more revenue coming in, but the truth is, if the shutdown lasts for awhile and we get into the whole business of raising the debt ceiling and that doesn’t go well, the economies in these states will take a hit as well,” Professor Beck says. “The money will be very hard to find.”