Southern metros stand to lose the most from the government shutdown

The federal shutdown that started on October 1st is on course to be one of the longest in years and could have a significant impact in a handful of mostly southern metros where the federal government is a major employer.

Meanwhile, the main issue at the heart of the federal government shutdown, the expiration of federal subsidies for Affordable Care Act (ACA) Marketplace insurance, will also disproportionately affect southern states as more than half of the 22 million enrollees receiving these subsidies live in a handful of southern states and face substantially higher insurance premiums starting in January 2026 as we recently reported.

These states with large shares of enrollees reliant on these subsidies did not opt in to expanded Medicaid coverage in 2010 when the ACA was passed, nor in 2021 when coverage was expanded in the American Rescue Plan Act (ARPA). These “non-expansionary” states with high shares of subsidy recipients include Florida, Georgia, Texas, Mississippi, and South Carolina. Without these subsidies, many residents in these states will not be able to afford health insurance.

As for the furloughed workers, Washington employs one-eighth of all federal staff including a concentration of agencies in which furloughs make up a large share of all staff. The shutdown affects southern military towns disproportionately as nearly half the civilian employees within the Department of Defense have been furloughed.