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Shadow of Sequestration Looms Over Prince William

Despite a number of positive developments in the county's real estate and jobs outlook, there's "rainclouds on the horizon," a county official said Tuesday.

Prince William's economic situation has improved since the worst days of the recession—but the county's dependence on employment from the federal government and contractors may pose challenges in the years ahead. 

Wages are up. Unemployment is down. Home values are rising, and Prince William housing is perhaps the most affordable in the region. But with sequestration and other changes from the federal government on the horizon, will the county have to make painful choices in the years ahead?

That's what the Board of County Supervisors discussed Tuesday as Steven Solomon, director of finance, gave a presentation on Prince William's financial outlook, and potential "rainclouds on the horizon" in years ahead. 

Sequestration: What Happens in Prince William?

If sequestration cuts proceed as planned, in January 2013, the federal government will automatically cut $1.2 trillion in spending over a 10-year period: half from the defense budget and the other half from domestic programs. 

"Everyone is saying this can't possibly happen," said county executive Melissa Peacor. "If it does happen, there will be significant impacts. And I don't think I can sit here today and tell you what that means for your budget, for your tax policy, whatever. I think it's going to have a chilling impact. Obviously if a large part of how we survive—a large part of our economic base goes away—200,000 jobs in Virginia, it's going to have an impact on what you all can do as a Board."

Most experts do not expect that legislators will act to prevent sequestration before the November elections. The county does not have a detailed plan in place if the cuts do go through. 

"We may very well have to come back to you in November and say: the world as we know it has changed," Peacor said. 

"I think it's not a good path forward to put our head in the sand, and not plan for the worst, that we need to," rejoined Woodbridge supervisor Frank Principi. "My guess is that we can take steps now, like getting better informed."

"Prince William employees could lose their jobs. I'd like to know what departments, how many, and play out that scenario, plan for it, so that when it does happen—which we think it will—that we're ready for it," he said. 

Peacor replied that the federal government has not told localities precisely what will be cut, so it is impossible to fully plan at this point. 

Sequestration could have an impact as early as November, when contractors expect to receive 60-day notices that their services will be cut, Solomon said.  

The cuts could also impact services and programs in the area. Unlike some other jurisdictions, such as Fairfax County, Prince William has a policy not to fund programs that are cut by the federal or state government—unless there is a mandate to do so. 

Besides the sequestration issue, the federal government faces the prospect of hitting the debt ceiling again. The Bush-era tax cuts and 2 percent payroll tax cuts expire on Dec. 31. Solomon noted that the credit-rating agencies Moody's and Standard & Poor's have both threatened to downgrade the United States' credit rating if the federal government does not deal with sequestration and debt issues. Because Prince William's economy is so tied to federal spending, the county's ratings would likely also be affected, Solomon said. 

Corey Stewart's 'Warning Shot'

"I think we need to assume that we're going to be in some pretty tough times," said Chairman Corey Stewart, who is running for lieutenant governor. "One of the things we have been doing is picking up the slack for this very lackadaisical General Assembly, which has been cutting programs, which has passed $1 billion dollars worth of state programs on to localities like Prince William County. We can't bear that burden any longer. I think we have to take a real good look at this budget this year and just start cutting out these state programs they created and that they expect us to fund."

"This is a warning shot out there to the General Assembly: we are not going to be carrying your water any longer," Stewart said.

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