Many small business’ provide services to local, state, and federal government agencies. You have always believed the business is as good as gold, but that may not be the case this year.
Because of state budget shortfalls, there are 19 states that have not passed a FY2010 budget. What happens if the state owes you money?
All 50 states but one require a balanced budget each year. Currently there are 19 states that start their fiscal year on July 1 and haven’t settled on a budget.
State governments are cutting back significantly this year and their legislatures aren’t making enough hard choices. Many programs will be cut for FY2010.
What should your company do if you rely on the state for contract revenue and your state hasn’t passed a budget?
First find out everything you can about the states you do business in.
You will want to know:
- What is the state’s fiscal year.
- Has the legislature passed its budget for FY2010?
- Does the legislature have a process to continue funding contracts after the end of the budget year under an interim spending rule?
- Will the state require your company to continue serving the contract during the period when the state legislature is completing its budget process?
Some states will require state employees and contractors to continue working even though they won’t get paid until the budget is passed.
Other states have laws that allow them to pass interim spending bills that fund the necessary services to keep the basic operations going. These typically include public safety, human services, and medical services.
Talk to your state contracting officer before June 30 to find out what will happen in your state’s case. It could very well be that the contracting officer won’t be in the office on July 1, because procurement isn’t always considered an essential service.
Hopefully the 19 states trying to finalize budgets will work over the weekend and will reach a budget agreement by Tuesday at midnight.
Companies that serve state government contracts are always worried about payroll. If your company is in that position and the states for which you rely on for revenues are not getting their budgets passed, contact a factoring company as soon as possible who will do spot factoring for your company. Spot factoring is very short-term financing that will get you past the budget crisis, at least for this year. The spot factor will help you make payroll and keep your expenses paid while you are waiting for the state to resume normal operations.
Sam Thacker is a partner in Austin Texas based Business Finance Solutions.
You may contact Sam directly at: email@example.com
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EXTRA: If you have questions for Sam regarding business financing, the credit market, and similar issues, please send an e-mail. Your questions will be recorded and Sam will answer the best ones in his Ask the Expert podcast show.