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City officials are warning a prolonged closure could strain D.C.’s economy already weakened by federal job cuts.
WASHINGTON — The federal government shutdown that began Oct. 1 threatens to cost the District millions of dollars in lost revenue, according to city financial officials who are looking to past shutdowns to gauge the potential economic damage.
The last extended shutdown — a record 35 days from Dec. 22, 2018, to Jan. 25, 2019 — cost D.C. an estimated $47.4 million in lost revenue, according to a February 2019 report from the DC chief financial officer. That five-week closure slashed the city’s fiscal year 2019 local fund estimate to $7.8 billion, $41.4 million lower than projected just two months earlier.
The impact hit multiple sectors of the District’s economy. Hotels and restaurants suffered the most severe losses, with sales tax collections dropping more than $30 million in January 2019 alone as federal workers cut back on spending. Income tax revenue declined due to lost wages, while property, income and sales taxes all fell short of projections.
The 2019 CFO report noted the shutdown reduced local fund revenue growth to just 0.3% for fiscal year 2019, a sharp decline from the 3.7% growth rate in fiscal year 2018.
“The recent record-length federal government shutdown reduced FY 2019 revenue by an estimated $47.4 million, or about one-half of one percent, and was a reminder that despite the diversification of the District’s economy over the last several years, the federal government is still an important driver of employment and economic activity in the District,” then-CFO Jeffrey DeWitt wrote.
Current Economic Strain
The current shutdown comes as D.C.’s economy faces significant challenges from ongoing federal workforce reductions. According to the CFO’s September 2025 revenue estimate, the District has lost nearly 11,000 jobs between January and August 2025, with federal employment accounting for 8,700 of those losses.
The September report warns that additional job cuts are expected to accelerate in early fiscal year 2026 as a significant number of federal employees who accepted deferred resignation offers leave the workforce. The CFO projects a reduction of slightly over 20% in the District’s federal payrolls by 2029.
“Another risk is the prospect of a prolonged federal government shutdown, which could place significant strain on the economy,” CFO Glen Lee wrote in the September report. “Previous federal government shutdowns disrupted the District’s economy and had a range of impacts on revenue.”
The September revenue estimate also projects the District’s economy will enter a moderate recession in fiscal year 2026, with gross domestic product expected to contract by 3.5% before beginning a gradual recovery in fiscal year 2027. The unemployment rate is forecast to reach 6.8% in both fiscal years 2026 and 2027, up from 5.7% in fiscal year 2025.
Vulnerable Revenue Streams
City officials note the District’s revenue base has become increasingly volatile since the pandemic, with greater reliance on corporate franchise taxes and capital gains earnings rather than more stable sources like property, withholding and sales taxes.
Real property tax collections have declined due to lower commercial property values resulting from reduced demand for office space as remote work has expanded. The average office vacancy rate in the central business district reached 18.5% in the second quarter of 2025.
As the most government-dependent economy in the United States, D.C. benefits from a stabilizing federal presence but also faces unique vulnerabilities when federal operations are disrupted. The 2019 shutdown report emphasized this tension, noting federal cutbacks remained “a drag on the local and regional economies.”
While it’s too early to determine the precise financial impact of the current shutdown, the 2018-2019 precedent suggests a prolonged closure could exact a significant toll on the District’s already strained economy.
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