Howard County is conducting a review of its finances and County Executive Ken Ulman, president of the Maryland Association of Counties, is urging other jurisdictions to do the same in light of the federal debt crisis.
"As a deal eludes President (Barack) Obama and Congress, the impact of the debt crisis on local governments is coming into focus, and it could be bad," Ulman said in a statement. "The responsible thing for counties to do is review their books and prepare for the worst."
The federal government is facing a default if Congress can not come up with a deal to trim the nation's debt or raise its borrowing authority by Aug. 2, the day federal treasury officials say they will have to breach the current $14.3 trillion debt ceiling.
Bond rating agencies Moody's Investors Service and Standard & Poor's have warned that the federal government's AAA bond rating is under review for a possible downgrade, which would increase the cost of borrowing.
Now, the agencies have also warned they could review bond ratings for AAA-rated local governments. Howard County government has retained its AAA bond rating from all three rating agencies for the past 14 years.
Another potential impact of the debt crisis is that if Congress can't reach a deal, the federal government will not have the money it needs to run many of its agencies, which employ thousands of Marylanders.
"This stalemate poses real risks to residents of Howard County and Maryland who are employed by the federal government or who rely on Social Security and other benefits for survival," Ulman said in the statement.
Without its resident federal employees being paid, the county could face a loss of income tax revenue, its second largest revenue source next to property taxes.
Ulman has directed the Maryland Association of Counties to hold a conference call Monday, July 18 for all of the state's local finance officials to discuss the situation and possible strategies.