UPDATE: Congress passed a measure late Wednesday night to reopen the federal government, which President Obama has signed. For more, click here.
Furloughs from the federal government shutdown are already a cause for concern to local economist Lee Reynis. But if the shutdown continues into the next weeks, she says the bottom line could get shaky for Santa Fe and northern New Mexico.
Unless there’s a breakthrough in the Congressional stone wall, on Monday, Oct. 21, most employees at Los Alamos National Laboratory (LANL) and Sandia National Laboratories will have to stay home. The fallout doesn’t just apply to lab employees at the facilities that are two of the region’s biggest economic engines. At Los Alamos, for instance, at least 31 private subcontracting firms will see their work come to a halt.
All of this could spell significant trouble for New Mexico’s federally dependent economy.
“The longer something like this continues—the more uncertainty there is—the more hesitant people will become about making decisions,” says Reynis, who directs the University of New Mexico Bureau of Business and Economic Research. “All of that is going to adversely affect people’s willingness to buy.”
And when people don’t buy, businesses don’t make enough money to cover costs, investors get shy, and local governments don’t collect tax revenues that they depend on for basic operations.
Now into its third week, the federal shutdown shows no immediate signs of reprieve. As of press time, US Senate leaders were negotiating the framework of a deal to get the government back running, but House Republicans were still holding firm to not ending the shutdown without significant cuts to Obamacare.
In Santa Fe, federal offices in the downtown Montoya Federal Building except the post office and the passport center were closed. Calls to the local offices of the US Forest Service and National Park Service result only in recordings explaining that nobody is in the office.
Although LANL is funded by federal dollars, it’s partly managed by the private Bechtel Corporation, which has helped the lab avoid furloughs during the first two weeks of the shutdown. All of that may change within a few days.
Last week, House Republicans passed a bill to temporarily fund both labs on a party-line vote. New Mexico’s two House Democrats, however, voted against the bill, citing its failure to keep all lab employees from furlough and end the shutdown.
“This bill denies these national security labs the funding they need as it locks in the deep cuts that of sequester for two more months,” Rep. Ben Ray Luján, D-Santa Fe, said last week on the House floor.
The chance of the Democrat-controlled US Senate passing a LANL-only bill remains unlikely.
In the meantime, lab employees like Grigory Kagan, a LANL staff scientist who specializes in plasma physics and fusion energy, are already feeling the uncertainties of a potential furlough.
Kagan says he and his coworkers aren’t sure whether their salaries would be later reimbursed if a furlough indeed takes effect.
Though there’s precedent for government employees to receive backpay during shutdowns, Kagan says LANL’s management by a private corporation makes that prospect muddy.
More problematic, though, is how LANL’s scientists are expected to continue doing research for peer-reviewed publications during a potential shutdown. Many who need access to the lab for their projects won’t get to do so if the federal government stays closed.
But the impact of a LANL shutdown could hurt another sector much harder—the businesses that contract with the lab. A small business supplying computers to LANL might stop receiving the money in the middle of a contract should the shutdown continue.
“An interruption in cash flow can put them out of business or make them decide not to renew a contract,” Simon Brackley, president and CEO of the Santa Fe Chamber of Commerce, says of lab subcontractors. “They’re much more vulnerable in that way.”
Even without the shutdown, subcontractors have had difficulty obtaining work from LANL since budget cuts and sequestration hit the lab during the past 18 months. In that time, roughly 1,000 subcontracting jobs were lost (LANL indirectly employs more than 9,000 people, according to a 2011 BBER report). A temporary shutdown will only exacerbate that point.
Already, subcontractors working on environmental remediation have seen their work halted, according to Liddie Martinez, secretary treasurer of the LANL Major Subcontractors Consortium. If the shutdown continues, all but one of the 32 private companies that subcontract more than $5 million with the lab will see their work come to a standstill. Yet they’ll be in a tight spot since they still have to pay the costs associated with their contacts.
That could leave small lab contractors in a tough position.
“We don’t have the option of having a furlough,” Martinez says. “You either reduce staff hours or lay them off.”