WASHINGTON Oct 9 The current federal budget
shutdown is constraining the budget and spending plans of
Washington, D.C., Standard & Poor's Ratings Service said on
Wednesday as it cut its score on the U.S. capital's
S&P's cut in the score to "strong" from "very strong" is
unlikely to have a large impact on the district's debt rating
but is a sign that a prolonged shutdown could have negative
A city without a state, the District of Columbia must
receive federal approval for its budget, which normally happens
when the U.S. Congress passes the national budget. Last week,
though, Congress deadlocked and shut down federal operations,
leaving D.C. spending plans in limbo.
"Given the current federal budget impasse and lack of
approval to begin its current-year appropriations under a
federal continuing resolution, we believe the district's
revenues and expenditures are subject to inherent
unpredictability that constrains its ability to control and
administer its spending responsibilities," said Standard &
Poor's credit analyst Le T. Quach, in a statement as the agency
cut the score for the city to "strong" from "very strong."
The rating agency added that the city's funding relationship
with the federal government does not provide the district "with
ample time to plan and adjust."
The current gridlock among legislators, coupled with
uncertainty about how long the shutdown will last, places the
district in "a state of dependence on the federal budget
process," it said.
Within days of the shutdown starting last week, D.C.
announced it could no longer pay the hospitals, doctors and
organizations in its Medicaid healthcare program for the poor.
Earlier this week, it added that it would not issue tax refunds
until the shutdown ends.
With its budget locked up, the city is relying on emergency
reserves to fund operations. In a letter to President Barack
Obama and congressional leaders on Wednesday, Washington Mayor
Vincent Gray said the district's contingency funds would soon be
On Wednesday, he joined the district's member of the House
of Representatives, Eleanor Holmes Norton, and House Oversight
Committee Chairman Darrell Issa at an event highlighting the
consequences of the federal shutdown, saying the city is
suffering "dire effects."
Last week, another of the top three credit raters, Fitch
Ratings, said the shutdown has no negative credit implications
for the district.
Still, it said, "federal employment provides an important
share of district tax revenues and the lack of a federal budget
limits the district's ability to provide basic services."
Looking more broadly at the Washington metropolitan area,
Moody's Investors Service said the shutdown could hurt the
income tax revenue of Maryland counties and the sales taxes of
cities in Virginia. It added, though, that most "D.C. metro area
local governments have strong credit fundamentals that will help
them withstand a prolonged government shutdown."