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Economy
Tentacles of federal government shutdown spread across Georgia economy
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Tentacles of federal government shutdown spread across Georgia economy

Tentacles of federal government shutdown spread across Georgia economy
Walter Bland, whose company does contract work for the federal government in the Chattahoochee National Recreation Area and other federal sites that are on hold because of the shutdown, leads his crew while working in Deepdene Park on Thursday, Jan. 17, 2019, in Atlanta. Curtis Compton/ccompton@ajc.com

Tentacles of federal government shutdown spread across Georgia economy

A cotton farmer in Cuthbert is waiting on federally backed loans and crop forecasts for planting season. A broker of small-business loans near Cartersville has halted construction of his home after much of his revenue evaporated. A researcher in Atlanta specializing in moon dust has a NASA contract on hold.

As the partial federal government shutdown approaches one month, the economic fallout is hitting the pocketbooks of more Georgians than the 16,000 federal workers furloughed in this state or working without pay.

On Saturday, President Donald Trump proposed a compromise with Democrats to reopen the government. He wants to trade temporary protections against deportation for hundreds of thousands of young immigrants for money to build his wall. House Speaker Nancy Pelosi described Trump’s proposal as a “nonstarter” moments before the announcement, signaling a swift end to the dispute appeared unlikely.

With roughly one quarter of the government without funding, some small businesses that rely on federal backing for loans are pausing plans. Other companies are waiting on patents and approvals for new products, including beer. Employers can’t confirm the immigration status of potential new hires because E-Verify, the U.S. government’s electronic verification system, is down. Backed-up security lines have snarled Hartsfield-Jackson, causing travelers to miss flights in the country’s busiest airport and raising fears about what could happen when Atlanta hosts the Super Bowl on Feb. 3.

The shutdown isn’t nearly as far reaching as the one that crippled the entire federal government for 16 days in 2013. But the ripple effects of the current impasse, already the longest on record, are undeniable. And while not dramatic, they expand over time, said Michael Wald, former senior economist at the Bureau of Labor Statistics. “The first day to seven days, the impact is minimal, then it progresses geometrically,” he said.

Kevin Hassett, chairman of the White House Council of Economic Advisers, said Tuesday the shutdown would slice the country’s economic growth by 0.13 percentage points for every week it lasts. That’s twice the impact he had predicted earlier.

Overall, Georgia stands to lose $489 million for every month the government is partially shut down, making it the eighth-hardest-hit state, according to an analysis by The Ascent, a financial company. Federal workers represent an estimated 3 percent of the state’s workforce.

Small businesses, farms hit

Doug Hood, who lives on 15 acres near Cartersville, says he’s lost between half and three quarters of his income during the shutdown. He brokers bank loans backed by the Small Business Administration, a lifeline for many startups. On the day the shutdown began Dec. 22, three loans he had brokered were put on hold. He says they ranged from $500,000 to $2.6 million for a manufacturing company, a real estate firm and an assisted living center. The manufacturer hasn’t bought the machine it planned, also postponing plans to hire 10 more workers.

“In the meantime, I can’t close loans. I can’t buy another cow,” said Hood, who also has a small farm. “We are building our own house and that’s been put on hold because we don’t have the money to do the plumbing.”

The Atlanta Journal-Constitution interviewed Hood and others before Trump’s latest proposal Saturday aimed at ending the funding impasse.

The SBA says it guaranteed 1,876 loans in Georgia totaling $1.4 billion in fiscal 2017. Most of the growth was in the hospitality, retail, healthcare, professional services, agriculture and manufacturing sectors.

Atlanta entrepreneur Jenny Bass, owner of Essve Tech in Alpharetta, says she was days away from buying another manufacturing company with an SBA-backed loan for several million dollars when the shutdown arrived.

“It is extremely frustrating. I have spent money on attorneys, accountants and real estate surveys and now it’s just stuck. The longer it drags on, the higher the risk that the deal won’t close.”

Georgia’s vast farm country has been particularly hard hit by the shutdown after an already tough 2018.

The U.S. Department of Agriculture is one of nine Cabinet-level departments that has been shuttered. That has leftmany farmers unable to collect on earlier claims or file new ones for disaster assistance for crop losses or damage caused by October’s Hurricane Michael. The same goes for tariff relief from the trade war with China. Farmers also can’t apply for federally backed operating loans to get started on planting for 2019 or assistance loans to help them with expenses.

Dania Devane has been caught in the squabble. The Cuthbert resident dodged one disaster when she harvested her crop of peanuts before Michael stormed into southwest Georgia. But Chinese tariffs have hit her soybean and corn sales, and recent heavy rains damaged and kept her from harvesting some of her cotton, still hanging from bolls and degrading with every day of exposure to intransigent weather.

Devane would typically go to the local Agriculture Department’s Farm Service Agency to start loan processes and get crop forecasts for next year, but the shutdown foiled those plans.

“A lot of the smaller farmers are not going to be able to get a loan for this year,” she said. “And we don’t know what to do.”

The Trump administration on Wednesday announced some FSA offices would reopen for three days to perform “certain limited services” for farmers and ranchers, mostly cleaning up paperwork from last year. There was no immediate word on when they would start new loans or process disaster assistance.

The White House also has tried to lessen the impact of the shutdown in recent days by calling back thousands of other federal workers earlier deemed non-essential. That includes more than half of the Internal Revenue Service’s furloughed employees who are needed to process tax returns and will work without pay for now.

Federal contractors go without, transportation slows

A sprawling ecosystem of federal contractors for shuttered agencies are getting pinched. Roughly a quarter of Rock Spring Restoration’s scheduled work is with the federal government and those contracts are now on hold. That includes projects in the Chattahoochee National Recreation Area and other forests, where the small company gets rid of invasive species, shores up eroding streambanks and hills and replants areas with native Georgia plants.Walter Bland, Rock Spring Restoration’s owner, says there’s enough other work in the pipeline at the moment but that the shutdown could become a bigger problem if it drags on.

“This is just a really good example of how our political system is failing,” said Bland as his six-man crew cut trees Thursday at Deepdene Park alongside Ponce de Leon Avenue in Atlanta.

The shutdown has reached space policy analyst Laura Seward Forczyk, the founder of the Atlanta-based Georgia Space Alliance and consulting firm Astralytical. Her company’s private-sector contracts have included studies on atmospheric satellites and how dirt from the surface of Mars or the moon could be used for rocket propellant. A project with NASA, however, is up in the air.

“The deadline was supposed to be March. Now it’s who knows when,” said Forczyk. “My NASA civil servant partners aren’t allowed to work on anything while they’re furloughed.”

The economy is moving more slowly - literally - amid transportation bottlenecks.

One of the most visible impacts is at Hartsfield-Jackson, where TSA agents, forced to work unpaid during the funding lapse, are calling in sick in growing numbers, triggering long security lines. Delta Air Lines’s planned debut of the Airbus A220 later this month will likely be delayed due to the shutdown. Chief Executive Ed Bastian warned Tuesday the shutdown had cost the Atlanta-based company $25 million in revenue in January as fewer government contractors and employees traveled.

The Georgia Department of Transportation has delayed $92 million worth of contracts for two dozen highway projects, including several bridge maintenance projects in metro Atlanta. More funding could be halted at a February board meeting should the impasse continue, according to a department spokeswoman.

Moody’s Investors Service has warned the creditworthiness of U.S. transit systems could deteriorate if the funding lapse continues, “leading to weaker financial positions, deferred capital projects and higher annual debt service costs.”

MARTA services in Atlanta will continue to operate normally during the shutdown, a spokeswoman said, but ongoing transit projects are a different story. MARTA pays for such projects with local funding and then requests federal reimbursement, which can’t happen with Transportation shuttered. That could force the transit system to choose eventually between using reserves or selling bonds — or delaying projects.

In Savannah, officials say it’s business as usual at the port. But Chatham Area Transit is grappling with a funding lapse while rehabbing the four ferries that dart between downtown and Hutchinson Island. Curtis Koleber, CEO of Chatham Area Transit, said it was about to make its final payment on the first boat to its vendor using federal grant money. That’s when the Transportation Department’s online portal went dark because of the shutdown. The local transit authority had to draw down its own funds to cover the costs.

Some Georgia companies could get a lift. Atlanta-based Kabbage, which gives cash advances to small businesses, has seen “very robust” growth in January, said Rob Rosenblatt, head of lending. He says it’s hard to tell how much of the new business is related to the shutdown, but he suspects some traffic from companies that would have gone to the SBA for loans.

Still, Kabbage would prefer to grow its business “the old-fashioned way,” Rosenblatt said. “We’d rather not gain our business and be the beneficiary of a government shutdown. I don’t think that’s good for anybody.”

Staff writer Jennifer Brett contributed to this report.

--------------------------------------------

Federal agencies without funding:

• Department of Agriculture, including Farm Service Agencies and the Supplemental Nutrition Assistance Program

• Department of Commerce

• Department of Homeland Security, including the Transportation Security Administration, Customs and Border Protection and Federal Emergency Management Agency

• Department of Housing and Urban Development

• Department of Interior, including the National Park Service

• Department of Justice, including the Federal Bureau of Investigation

• Department of State

• Department of Transportation

• Department of Treasury, including the Internal Revenue Service

• Environmental Protection Agency

• Federal courts

• NASA

• National Science Foundation

Federal agencies with funding:

• Department of Defense, including military bases

• Department of Education

• Department of Energy

• Department of Health and Human Services, including the Centers for Disease Control and Prevention

• Department of Labor

• Department of Veterans Affairs

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