Government Shutdowns: What You Need to Know

At issue in Washington is a disagreement between House conservatives and Speaker Kevin McCarthy, who reached a spending deal with President Joe Biden earlier this year. Conservatives want lower spending levels, and if there’s no agreement on either a longer-term or short-term budget by midnight Saturday, Sept. 30, the government will partially shut down Sunday, Oct. 1.

With the new fiscal year just around the corner, we want to fill you in on what’s happening with the government’s spending plans. The fiscal year 2024 (FY 2024) kicks off on October 1, 2023, but here’s the kicker – Congress hasn’t passed any of the 12 appropriations bills needed to set the spending levels for various government programs. Don’t hit the panic button just yet, we’re here to help you understand what all this means and how it might affect you.

What’s a Government Shutdown?

A government shutdown happens when Congress doesn’t pass the necessary budget legislation for the upcoming fiscal year. It affects many federal agencies and programs that rely on annual funding appropriations. During a shutdown, non-essential activities in these agencies come to a halt until new funding legislation is passed and signed into law. Don’t worry; essential services and mandatory spending programs keep running smoothly.

How Does a Shutdown Impact Services?

Each federal agency comes up with its own shutdown plan, guided by the Office of Management and Budget (OMB). Non-essential activities are paused, and employees may be furloughed. Essential services, especially those related to public safety, continue to operate. During past shutdowns, vital services like border protection, medical care, air traffic control, law enforcement, and power grid maintenance have continued without interruption. Still, there are some disruptions in services, which we’ll discuss shortly.

The Impact on You

Here’s where it gets personal – a shutdown can affect you in various ways. For instance, during a full shutdown, services like Social Security and Medicare continue, but benefit verification and card issuance may stop. Environmental and food inspections might be delayed, impacting safety. National parks might be partially closed, affecting your vacation plans. Air travel can become challenging due to staffing issues at airports. Health and Human Services programs, like NIH, could halt new patient admissions and grant processing. Plus, the IRS may experience delays, impacting tax refunds. So, you might feel the effects indirectly.

Is the Government Ready for a Shutdown?

The Office of Management and Budget (OMB) keeps a list of contingency plans for federal agencies in case of a shutdown. Most plans have been updated recently, but some haven’t been touched since the last full shutdown in early 2018.

Federal Employees and Shutdowns

During a shutdown, federal employees bear the brunt of it. In a full shutdown, like those in 2013 and early 2018, many non-postal federal employees may be furloughed without pay. However, thanks to legislation passed in January 2019, they are guaranteed back pay once the government reopens. So, there’s a silver lining.

Why Do Mandatory Programs Continue?

Mandatory spending programs, authorized for multiple years or permanently, continue during a shutdown. However, some services related to these programs might be affected if there’s a discretionary funding component. For example, Social Security checks continue, but services like new enrollments or changing addresses might slow down during shutdowns.

How Many Shutdowns Have There Been?

Since the modern budget process began in 1976, there have been 20 “funding gaps” or government shutdowns. The most notable ones were in 1995-1996, 2013, and the longest-lasting one in December 2018-January 2019. Before 1980, the government didn’t shut down but continued normal operations through six funding gaps.

Do Shutdowns Save Money?

It might seem counterintuitive, but shutdowns usually cost money. Setting up contingency plans, not collecting user fees, and disruptions to federal contractors add to the expenses. Moreover, furloughed employees receive back pay. Shutdowns also harm the economy, costing taxpayers billions and negatively impacting private-sector investments.

How to Avoid a Shutdown

Congress has two main options to dodge a shutdown – pass appropriations bills or a continuing resolution (CR). Passing all 12 appropriations bills is ideal, but they can also bundle them into larger legislation. Right now, Congress is considering a CR to extend funding temporarily.

What’s a Continuing Resolution?

A continuing resolution (CR) is like a Band-Aid to keep the government running when appropriations bills are pending. It typically maintains funding at the prior year’s levels. CRs differ from regular appropriations bills in that they often don’t make specific decisions on spending accounts but continue previous funding. They aim to keep the government open while lawmakers iron out budget details.

How Often Does Congress Pass CRs?

CRs are common when Congress can’t agree on appropriations before deadlines. Multiple CRs may be necessary to fund the government for an entire fiscal year, and they are often used during presidential transition years.

Disadvantages of Using CRs

CRs have their downsides. They maintain previous funding levels, overlooking changing needs or program values. This approach wastes time spent evaluating each agency’s budget. CRs can disrupt agency activities and make planning difficult.

Current Funding Status

As of early September, Congress hasn’t passed any appropriations bills for FY 2024. The House has passed one of the 12 bills, while the Senate has approved all 12 at the committee level. Disagreements over funding levels are the primary hurdle. A CR is being considered to provide more time for appropriations.

Shutdown vs. Default

A shutdown temporarily suspends government services and employee pay. In contrast, a default happens when the government exceeds the statutory debt limit, risking payments to creditors, government spending, mandatory payments, and more. While a shutdown is disruptive, a default could be catastrophic.

Shutdown vs. Sequestration

A shutdown results from a lack of funding, temporarily closing non-essential government operations. Sequestration, on the other hand, involves broad spending reductions to address excessive spending. Sequestration has been used to enforce spending caps.

Summary

Understanding government shutdowns is important for all citizens. Not only disruptive, they often cost more than they save. Hopefully, Congress will work on avoiding future shutdowns. It is essential to differentiate shutdowns from defaults and sequestrations and stay informed as the fiscal year progresses.