The dutiful servant: City finance director ponders a federal default
Published: July 19th, 2011
In an interview late Tuesday (July 19) with CapitolBeatOK, the finance director for Oklahoma City, Laura Johnson, is a public servant who has had to ponder the fiscal chasm that could emerge if recent national news reports of a “deal” in Washington, D.C. prove incorrect.
In response to a reporter’s questions, Johnson described the seemingly unthinkable scenario of a federal default on its financial obligations, and how that could effect the local government in Oklahoma’s capital city.
She reflected that in the event the U.S. government debt ceiling is not raised, the impact on a community like Oklahoma City would depend “on what the federal government would pay.”
She gave some specifics, “It has been indicated to us that the airport bonds, the payments on leases for the FAA (Federal Aviation Administation), are the kind of spending that Moody’s is already anticipating the federal government would not pay in the early stages of a default.”
At first, “Overall, the effect on Oklahoma City would not be as dramatic as for some cities. We are not as dependent on federal income streams for operations. We do know there are seven police positions and 29 fire positions that are dependent on federal funds. Those funds have already been allocated, however.
“The question is would there be someone up there to mail us the check. The sequence would be default first, then a shutdown.”
Johnson continued, “If it’s just a matter of timing of when bills are paid, we might suffer through. A default is in the end an unthinkable thing, but we’ve had to think it through. We’d be derelict in our duties if we didn’t think these things through and try to prepare.
“There are many other potential impacts that would soon follow an initial default. A lot of our people in Oklahoma City are federal employees, so if they were not getting paid then they would not be spending or making many purchases, and of course the sales tax is our primary source of operating revenues.
“In the end, a lot would depend on the priority the federal government would put on its own spending in the aftermath of a default. We are thinking through the scenarios, while taking a wait and see approach.”