Q&A: Possible Debt-Ceiling Repercussions? County Layoffs, Delays

If the U.S. Congress doesn't raise the debt ceiling by Tuesday, layoffs and increased property taxes might be among the results in St. Louis County, Chief Operating Officer Garry Earls said.

In light of the Tuesday deadline for Congress to raise the federal debt ceiling, Clayton-Richmond Heights Patch spoke with St. Louis County's chief operating officer, Garry Earls, about what might happen if lawmakers cannot find common ground on the matter.

If the debt ceiling isn't raised, what could happen to county employees who are funded with federal grants?

We have 176 employees in St. Louis County who are paid using federal grants. Some of those work in the employment office, the crime lab and the community development office. Money has already been appropriated, but if the federal government isn't paying its bills, we won't be able to provide those services. There would have to be layoffs.

What would happen with roadway projects that receive federal funding?

We've got $40 million worth of roadway projects, including sidewalk construction and construction of a major road in West County. Those projects are underway. In order to get federal funding, we have to spend the money and then get federal reimbursement. We don't know which bills the federal government will pay and which ones they won't.

We may very well have to stop federal projects so that we don't go any further if we don't think we can be paid the money that is promised.

We will have to look at everything in individually.

What would happen to other St. Louis County employees?

If the government were to default, when we're ready to make a sale of $23 million of tax-anticipation notes, there will be no market for those bonds. The money from those bond sales pays for county operating expenses, which are paying for the salaries of our employees. If there's no market for those bonds, that's a cash-flow problem for us. We won't have the cash flow to keep our workforce on board. We'd have to find some source of money, some cash account.

How could St. Louis County taxpayers be affected if the debt ceiling isn't raised?

Usually we would pay 6/10ths of a percent interest on a loan to cover expenditures. It's a very low-risk loan. But if the interest rate were to cost 10 percent, that's $2.3 million (of the $23 million bond shortfall). That an expense we didn't figure on, and the citizens would have to pay. It would probably show up as an increase in property taxes of about 1 penny per property owner in the county, over the course of a year.

When people argue over taxes in Washington, they may very well be raising our taxes in St. Louis. There is no plan to raise taxes here, but we would have to figure out how to raise that tax gap. From a budgetary point of view, we don't have a financial problem. What we have is a cash-flow problem.

Are there other comments you'd like to make?

I would like for those folks in Washington to take into consideration that when they are fighting over a few percentages, it has implications in the real world.

James Baer July 29, 2011 at 01:09 AM
This great, timely coverage made it all the way to the home page of the Huffington Post. Way to go Nate Birt!
James Baer July 29, 2011 at 01:10 AM
This great timely coverage made it all the way to the home page of the Huffington Post. Way to go Nate Birt!
William Clements July 29, 2011 at 01:35 AM
Saw it on HuffingtonPost. Great article, Nate.


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