‘They’re not spending any money.’ Rural counties feel pain as federal workers go unpaid

Not long ago, Tony Crowley did a pretty good business serving meals from his restaurant to employees of the federal prison in McCreary County, which is about a mile and a half away.

But with prison employees not getting paid because of the partial federal government shutdown, many are trying to cut costs and businesses are feeling the effect.

Crowley said his business from the prison is down by more than half.

“They’re not spending any money,” he said of the employees. “It puts a damper on things.”

The shutdown has hurt federal workers across the country, giving rise to stories of people having to visit food pantries, take part-time jobs even as they work an unpaid job, and ask family and friends for help.

The pain extends to businesses and local governments as well, however, especially in rural counties where federal employees make up a significant chunk of the workforce.

Federal prisons in McCreary, Clay and Martin counties are among the largest local employers, for instance. There also are federal prisons in Lexington and Ashland.

The prison in McCreary County has about 400 employees, making it the second-largest employer in the county after the school system, local officials said.

When those salaries dry up, it’s not hard to see the impact.

Federal employees aren’t buying as many soft drinks, snacks, tobacco products and deli items at Mo’s Speedco, which is near the prison, said manager Glenna Freeman.

“They’re having to pinch pennies,” Freeman said.

Several employees at the prison, called USP McCreary, said they couldn’t comment publicly on how they are managing without a paycheck.

But Richard Williams, president of the union representing workers at the prison, Local 614 of the Council of Local Prisons, said one employee told him he planned to use his credit card to pay bills until he hit his limit, then figure out something.

Others are dipping into savings or 401(k) accounts, taking part-time jobs and asking lenders to let them delay payments. Many are worried about getting behind on utilities, Williams said.

There are a number of cases in which the husband and wife both work at the prison, and in many other households, the prison as the sole source of income, Williams said.

“So there’s nothing coming in,” he said.

Across the street from Mo’s, the Dairy Cheer Shell Express isn’t seeing as much spending by federal workers either, said Susan Eldridge, who works at the store five days a week.

Two U.S. Forest Service workers used to stop in regularly, but Eldridge said she hadn’t seen them in two weeks.

Federal workers who do come in are buying less, cutting out more expensive tobacco products and making a bag of chips last a couple of days instead of one, she said.

“They have cut back a lot,” Eldridge said.

The prison has a significant impact on the economy not just because of the number of jobs, but because it pays relatively well in a place without a lot of other good-paying jobs.

Sam Kitchen, a former vice-president of the employee union at the facility, said the starting annual salary for a typical correctional officer at the facility would be $41,187 under the federal pay-grade system.

Kitchen transferred to a Chicago facility in 2016, but if he still worked in McCreary County, his salary with 25 years’ experience would be $62,612, he said.

By comparison, the per capita income in the county in 2017 was $11,492, according to the U.S. Census.

In one ranking of economic measures published by the Appalachian Regional Commission, McCreary County came in at 3,110 out of 3,113 counties in the country, meaning only three counties in the nation were more economically distressed.

Many prison employees live in other counties, but the prison payroll still has “a huge trickle-down effect” in McCreary County, Kitchen said.

The federal budget impasse also endangers revenue to the county because it has an occupational tax, adopted to take advantage of the new source of revenue after the federal government built the prison.

The county raised the tax last year to 1.5 percent.

The county gets about $15,000 every two weeks from the tax on federal employees who have volunteered to have it withheld from their checks, as opposed to paying it directly, said Stephanie Tucker, the tax administrator.

Judge-Executive Jimmie W. Greene II said the county uses occupational-tax revenue for a variety of services, including the ambulance and 911 programs and to pay for transporting jail inmates to another county because it doesn’t have a jail.

The county could get by for a little while without that money, but if the shutdown lingers on, officials eventually would have to look at getting an operating loan or cutting back, said Greene, a Republican.

“It wouldn’t be long before it catches up with us,” Greene said. “Praying it doesn’t come to that.”

Clay County Judge-Executive Johnny Johnson said the county won’t have trouble dealing with the loss of occupational-tax payments from federal employees in the short run.

“If they went two-three months, yes, it would hurt,” he said. “Now, if they stay off a year, it’ll hurt real bad.”

In McCreary County, the prison is the single largest customer of the county water system, but has notified the system it can’t pay its bill, said manager Stephen Whitaker.

The water system has financial reserves and can deal with the drop in revenue in the near term, but it would be a problem if the shutdown goes on six months or more, Whitaker said.

“It’s just something we gotta get through,” he said.

The water system will allow federal employees who aren’t getting paid to pay a reduced rate for service and catch up their bills later, Whitaker said.

The prison in Martin County, called USP Big Sandy, pays the Prestonsburg City Utility Commission $70,000 a month for water, said Eddie Campbell, superintendent of the commission.

The prison normally would have paid around Jan. 10, but notified the commission it couldn’t, Campbell said.

“It does hurt our cash flow,” he said.

Prison shutdown
Express Mart in Manchester is giving away breakfast to workers at the nearby federal prison who aren’t getting paid. Bill Estep

In Clay County, Cheryl Marcum, owner of the Express Mart on U.S. 421 near the prison, said the shutdown has dampened sales.

She’s also seen a downturn in a business she has selling cosmetics.

“It has a major effect when they don’t get paid,” Marcum said. “I’d say it’s hit the whole county.”

The store recently started giving prison employees a free breakfast sandwich and coffee to help out. The hope is that that will free up money for prison employees to use on other things, said Marcum, whose son-in-law works at the facility.

“If you give with a giving heart, the Lord will provide,” she said.

Donald Trump crushed Hillary Clinton in all three Kentucky counties where federal prisons are an outsized piece of the economy, carrying McCreary County by a margin of 5,012 to 664; Clay County 5,861 to 752; and Martin County 3,503 to 363, according to state records.

That means the politics of the shutdown fight over funding for a border wall between the U.S. and Mexico aren’t hard to read.

National polls show many people place more blame Trump for the shutdown than on House Speaker Nancy Pelosi, his Democrat nemesis, but many people in rural Kentucky have a different view.

“Somebody ought to choke that Nancy woman,” said Freeman, the store manager in McCreary County.