As a new fiscal year is set to begin on October 1, 2023, Congress continues to grapple with funding the federal government through the appropriations process. The appropriations process oversees the funding of “discretionary spending”. For discretionary spending, the authorizing law that sets up the program or agency does not determine the federal spending level. Almost all defense spending along with operating budgets of civilian agencies’ medical care for veterans, grant programs for education and scientific research and some low-income assistance programs (such as housing) are discretionary spending. There are 12 appropriations bills.
The House and Senate Appropriations Committees determine funding levels. However, this year, the agreement which allowed the US to avoid a default also set aggregate funding levels for discretionary spending. To complicate matters, in the House some bills have been drafted to be below the specified funding levels and in the Senate some bills have included “supplemental spending” in addition to the specified funding level.
The House and Senate are expected to move some appropriations bills by mid-September. Hopefully, there will be an agreement to fund those functions of the government. However, should that not occur, or should Congress fund parts of the government and not others by September 30, Congress has two options: a short term continuing resolution or a shutting down of the government functions not yet funded.
Continuing resolutions (CRs) have been a significant element of the recent annual appropriations process. Congress has enacted one or more CRs in all but three of the 47 fiscal years since FY1977. There have been 14 CRs between FY1998 and FY2023.
CRs provide for:
- the funding of certain activities, which are typically specified with reference to the prior fiscal year’s appropriations acts;
- budget authority for a specified duration of time that may be as short as one day or as long as the remainder of the fiscal year; and
- funding based on an overall funding rate rather than specified amounts.
CRs typically have not provided funding for new activities not funded in the previous fiscal year, but at times have included legislative provisions which create, amend, or extend other laws.
To further complicate matters, in discussion related to appropriations this year, the administration has sent two new requests to Congress: (1) $4 billion for disaster aid and (2) a 28-page list of “anomalies” – specific funding for activities at specific levels.
Should a CR not be agreed to by Congress and the fiscal year has ended, federal government agencies and programs lack budget authority (meaning there has been no appropriations made) and cannot obligate funds. Under the Antideficiency Act (31 U.S.C. §§1341 et seq.), agencies and programs must cease operations, except in certain circumstances when continued activities are authorized by law. When there is a funding gap that affects many federal entities, the situation is often referred to as a government shutdown.
In the past, there have occasionally been funding gaps that led to government shutdowns, one of which lasted 21 days, from December 16, 1995, to January 6, 1996. A shutdown occurred at the beginning of FY2014 (October 1, 2013) and lasted for a total of 16 days. Subsequently, two comparatively brief shutdowns occurred during FY2018, in January and February 2018, respectively. The longest shutdown occurred in FY2019 – beginning at the end of the day on December 21, 2018, and lasting 35 days. The relevant laws that govern shutdowns have remained relatively consistent in recent decades. However, agencies and officials may exercise some discretion in how they interpret the laws, and circumstances that confront them may differ over time. Consequently, it is difficult to predict what might happen in the event of a future shutdown. Still, information about past events may offer some insight into possible outcomes and help inform future deliberations.
What would not shut down in a government shutdown?
Mandatory spending programs – Medicare, Medicaid and Social Security continue.
Essential services – many of which are related to public safety would continue, including border protection, air traffic control, law enforcement and power grid maintenance. Some legislative and judicial staff are also protected. Activities that are funded by permanent user fees are not subject to appropriations and would continue.
Examples of how a government shutdown might affect Americans
- Social Security and Medicare: Checks continue to be sent out. However, benefit verifications as well as card issuance would cease. While unlikely to happen again, during the 1995-1996 shutdown, more than 10,000 Medicare applicants were temporarily turned away each day of the shutdown.
- Environmental and Food Inspection: During the 2013 shutdown, the Environmental Protection Agency (EPA) halted site inspections for 1,200 different sites that included hazardous waste, drinking water, and chemical facilities. In addition the Food and Drug Administration (FDA) delayed almost 900 inspections. During the 2018-2019 shutdown, the FDA restored some food inspections a few weeks into the funding lapse for products that were considered high-risk.
- National Parks: In 2013, the National Park Service (NPS) turned away millions of visitors from more than 400 parks, national monuments, and other sites. NPS estimated that the shutdown led to the loss of $500 million in visitor spending nationwide. Many parks remained open during the 2018-2019 shutdown, though no visitor services were provided, and damage and trash build-up were reported at many sites.
- Air Travel: During the 2018-2019 shutdown, air travel was strained as a result of air traffic controllers and Transportation Security Administration (TSA) agents working without pay.
- Health and Human Services: The National Institutes of Health (NIH) would be prevented from admitting new patients or processing grant applications. In 2013, states were forced to front the money for formula grant programs such as Temporary Assistance for Needy Families (TANF).
- Internal Revenue Service (IRS): As a result of funds provided in the Inflation Reduction Act, normal IRS operations would continue, and all IRS employees would be exempt from furlough. In 2013, a backlog of 1.2 million income and Social Security number verification requests delayed mortgage and other loan approvals, as well as billions of dollars in tax refunds.
- Supplemental Nutrition Assistance Program (SNAP): Though funding for the SNAP program is mandatory, the ability to send out “food stamp” benefits could be affected by a shutdown, since continuing resolutions have generally only authorized the Agriculture Department (USDA) to send out benefits for 30 days after a shutdown begins. During the 2018-2019 shutdown, the USDA paid February SNAP benefits early on January 20, just before the 30-day window ended, but it would have been unable to pay March benefits had the shutdown continued. In addition, during any shutdown, stores are not able to renew their Electronic Benefit Transfer (EBT) card licenses, so those whose licenses expire would not be able to accept SNAP benefits during a shutdown.
Estimates vary widely, but evidence suggests that shutdowns tend to cost – not save – money because (1) putting contingency plans in place has a real cost; (2) many user fees and other charges are not collected during a shutdown, and federal contractors sometimes include premiums in their bids to account for uncertainty in being paid; and (3) federal employees are now guaranteed back pay (which means federal employees forced to be idle during the shutdown receive back pay and benefits for hours not worked).
Shutdowns also cost the economy. The Congressional Budget Office (CBO) estimates that the 2018-19 shutdown reduced the Gross Domestic Product (GDP) by a total of $11 billion, including $3 billion that could not be recovered. CBO also notes that longer shutdowns negatively affect private sector investment and hiring decisions as businesses cannot obtain federal permits, certifications, or loans. A Senate report found that the three government shutdowns in 2013, 2018 and 2019 cost taxpayers nearly $4 billion.