A University of Hawaii economist said Tuesday a prolonged federal government shutdown could have serious local consequences.
“What matters is how long this lasts. That’s the bottom line. If you get a shutdown that lasts a week, then we really will barely notice any impacts, at all,” said Carl Bonham, executive director of the University of Hawaii Economic Research Organization, or UHERO, during an online press conference.
Congress rushed headlong into crisis mode Tuesday with a potential government shutdown days away, as House Speaker Kevin McCarthy, a California Republican, faced an insurgency from hard-right Republicans eager to slash spending even if it meant halting pay for the military and curtailing federal services for millions of Americans.
Trying to stave off an Oct. 1 federal closure, the Senate pushed ahead with a bipartisan stopgap measure to keep offices funded temporarily, through Nov. 17, hoping to buy time for Congress to finish its work.
The Senate advanced the bill late Tuesday on an overwhelmingly bipartisan vote, 77-19, though it still needs to go through a final vote. Then it would go to the House, where it would face a difficult path to passage as numerous continuing resolution measures have met their demise in recent days.
The Senate bill would fund the government at current levels and includes an extension of Federal Aviation Administration provisions expiring Saturday. It also includes about $6 billion in supplemental funding for Ukraine and $6 billion in U.S. disaster assistance that has been in jeopardy.
“FEMA’s disaster relief fund, at the end of August, they had a balance of about $4 billion, about 10% of their entire budget. And they expected to have only about $500 million at the end of September, when the fiscal year ends,” Bonham said. “So if we get a shutdown and FEMA has not been funded, then the disaster relief fund could run out of money, which then impacts the recovery on Maui.”
“If you look at the number of federal civilian employees in the state and military personnel combined, it’s close to 80,000 people,” Bonham continued. “And they have a combined income that comes to about $180 million (to) $190 million a week. That’s all kinds of income and includes health care benefits and so on. And they won’t get paid. The majority of federal civilian and military personnel will not be paid during a government shutdown.”
Military spending is No. 2 to tourism in its significance to the state’s economy. The military spent $7.9 billion in Hawaii during the 2021 fiscal year, comprising 8.3% of the islands’ gross domestic product.
Federal workers deemed essential “will still work but won’t be paid,” Bonham said, adding that those deemed nonessential “will be furloughed and not paid.”
“The economic effects of this are already happening,” he added. “Because if you’re one of these workers … then you start cutting back on your spending now. You start conserving right now.
“They’ll be made whole eventually. But if this were to go on a month or two, then you’ve got problems with people putting food on the table and making their mortgage payments and making their rent payments.”
Bonham said local banks will provide “some forbearance” when it comes to mortgages for unpaid federal workers, but that’s not likely to continue over a long-term shutdown. He added a protracted shutdown also could affect those dependent upon collecting federal government benefits.
According to the U.S. Census Bureau, in 2022, Hawaii County had 32,815 residents collecting Social Security benefits. And according to the state Department of Human Services, as of August 2023, there were 21,703 households (with) 39,979 individuals receiving Supplemental Nutrition Assistance Program benefits — formerly known as food stamps — on Hawaii Island, about one-fifth of the county’s population.
“Every dollar in SNAP benefits spent helps generate an estimated $1.50 in economic activity,” state DHS spokeswoman Amanda Stevens said in an email.
“Earlier this month, (the U.S. Department of Agriculture) announced a change to their accounting process so that they will obligate SNAP benefits when the states send their issuance files to the EBT vendor, instead of when benefits are loaded on to the card. Due to this change, benefits will be protected in October even if Congress cannot come to a resolution on spending bills,” Stevens said.
Jacqui Hoover, executive director and COO of the nonprofit Hawaii Island Economic Development Board, said a shutdown could be detrimental to the Big Island economy.
“Our county is the most impoverished in the state of Hawaii,” Hoover said. “We have so many people on fixed incomes that are dependent on government payments and government services that once that gets impacted, it impacts everything else like dominoes. We saw a little bit of it during COVID and during the (Kilauea) eruption in 2018, where people are no longer working. We’re seeing that on Maui, where people are no longer going to the food trucks and other ancillary services. Pretty soon, the restaurants are having to lay people off, and it affects other businesses we need to keep up our economy.
“It’s a domino effect.”
The Associated Press contributed to this story.
Email John Burnett at jburnett@hawaiitribune-herald.com.
