The overall economic impact of this summer’s state government shutdown was minimal, but it had other negative consequences, a state official said.
Minnesota Management & Budget Commissioner Jim Schowalter said the partial cessation of government services, which began July 1 and lasted for 20 days, damaged the state’s reputation more than its pocketbook.
“At this point, when we look at the jobs numbers, when we look at the GDP numbers, we are not seeing a huge ripple effect on the state’s economy,” he said, adding that the impact on the state’s budget outlook appears to be negligible as well.
Schowalter said the shutdown impact was “blunted” by court-ordered spending. A Ramsey County judge ordered “essential” state services to remain open during the shutdown, effectively guaranteeing that 80 percent of state spending would continue to flow uninterrupted to schools, hospitals, nursing homes and many other state-funded programs.
The findings are detailed in a new report.
In spite of this, the state still lost some $49.7 million in revenues and incurred more than $10 million in preparation and recovery costs, according to MMB. But Schowalter said those figures were more than offset by the roughly $65 million it saved from temporarily laying off 19,000 state workers. State employees bore the brunt of the shutdown’s impact, he said.
While the total cost appears to be marginal, Schowalter cautioned that the failure of Gov. Mark Dayton and the Republican-controlled Legislature to agree on a new two-year biennial budget was not without consequences.
“I think the budgetary impact isn’t the cautionary tale,” Schowalter said, adding that the state’s credibility in the financial markets, its ability to recruit and retain quality state employees, and its ability to provide uninterrupted services were all damaged.
“They don’t have direct budget costs right now, but they’re things that we’re going to be dealing with for years to come,” he said.