The $85 billion in budget cuts officially began March 1, but owners like Russell started feeling the impact last summer. Government employees cut contracts in advance, anticipating that they'd lose funding. Among those badly hurt were businesses that provide training and consulting services that aren't considered essential. Like Russell, they've had to lay off workers as their revenue plunged.
There is some hope. Small business owners may get a boost from so-called 'use-it-or-lose-it' federal spending as the end of the government's fiscal year — Sept. 30 — approaches. Some report that they are hearing from agency contacts that they haven't spoken to in months.
But end-of-the-year spending won't reverse the pain that contractors like Russell and Bob and Bonnie James have felt. The budget cuts have hurt them professionally and personally and have forced them to make tough decisions.
A DEVASTATING BLOW
Business Management Associates helps employers, including government agencies, come up with more efficient ways to get work done and assists with human resources issues. Under one contract, the company created a staff recruitment plan for the Department of Homeland Security. The Alexandria, Va., firm also provided support as the plan was carried out.
Russell started feeling the effects of the federal budget cuts in July of last year, months before they were actually in place. At the time she had seven federal contracts. The Department of Homeland Security cut back the number of hours that her employees were working on one contract by two-thirds. Then the contract was shortened by four months.
Russell was caught by surprise. She had to lay off five staffers because she didn't have another contract to replace the lost revenue.
"Because of everything going on, there was nothing else to move them to," she says.
Another contract was cut in January, and a third in May. Russell's bank was concerned about the loss in revenue and the fact that Russell had borrowed from her line of credit to meet expenses. Bank officers wanted to know when she'd be able to replace the business she lost.
"I said, 'what do you think I've been doing? I've been submitting bids all year, but the government hasn't been sending much money,'" she says.
The bank asks her each month how things stand, and requires her to fill out extra documents about her company's finances.
"They're leaning on my neck. It's hard to breathe," she says.
March, when the budget cuts officially hit, was the low point for Russell. "When you take two steps forward and one step back, it's hard to pick yourself up and keep moving," she says.
But her mother helped her come out of her funk.