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Q&A: Everything You Should Know About Government Shutdowns

Nov 19, 2019 | Other Spending| Budget Process

The fiscal year began on Oct. 1, 2019, and Congress has enacted none of 12 appropriations bills setting discretionary spending levels. Lawmakers have until midnight on November 21, 2019, to enact legislation to fund the programs covered by the appropriations process, or the government will shut down. The continuing resolution currently being debated would extend that deadline to December 20. While the shutdown that began in late 2018 and extended into early 2019 affected departments and agencies covered by the seven appropriations bills that Congress had not yet enacted, a shutdown in FY 2020 would affect all federal activities covered by discretionary appropriations. 

What is a government shutdown?

Many federal government agencies and programs rely on annual funding appropriations made by Congress. Every year, Congress must pass and the President must sign budget legislation for the next fiscal year (FY), consisting of 12 appropriations bills, one for each Appropriations subcommittee. When the federal government’s fiscal year began October 1, Congress had enacted none of the 12 appropriations bills for FY 2020 that make up the discretionary spending budget. In a “shutdown,” federal agencies must discontinue all non-essential discretionary functions until new funding legislation is passed and signed into law. Essential services continue to function, as do mandatory spending programs.

What services are affected in a shutdown and how?

Each federal agency develops its own shutdown plan, following guidance released in previous shutdowns and coordinated by the Office of Management and Budget (OMB). The plan identifies which government activities may not continue until appropriations are restored, requiring furloughs and the halting of many agency activities. However, “essential services” – many of which are related to public safety – continue to operate, with payments covering any obligations incurred only when appropriations are enacted. In prior shutdowns, border protection, in-hospital medical care, air traffic control, law enforcement, and power grid maintenance have been among the services classified as essential, while some legislative and judicial staff have also been largely protected. Mandatory spending not subject to annual appropriations, such as for Social Security, Medicare, and Medicaid, also continues. Other examples of activities that continue are those funded by permanent user fees not subject to appropriations, such as immigration services funded by visa fees.

Although many programs are exempt, the public is still likely to feel the impact of a shutdown in a number of ways. For example, in a full shutdown:

  • Social Security and Medicare: Checks are sent out, but benefit verification as well as the issuance of cards would cease. While unlikely to happen again, in 1996 more than 10,000 Medicare applicants were temporarily turned away every day of the shutdown.
  • Environmental and Food Inspection: In 2013, the Environmental Protection Agency halted site inspections to 1,200 different sites that included hazardous waste, drinking water, and chemical facilities, and the Food and Drug Administration delayed almost 900 inspections. During the 2018-2019 shutdown, the FDA restored some food inspections a few weeks into the funding lapse for those products that were considered high-risk.
  • National Parks: During the 2013 shutdown, the National Park Service turned away millions of visitors to more than 400 parks, national monuments, and other sites. The National Park Service estimated that the shutdown led to more than half a billion dollars in lost 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 nationwide.
  • 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. Travelers faced longer lines as some TSA agents did not report to work and security checkpoints were closed, while the absence of 10 air traffic controllers temporarily stopped travel at LaGuardia Airport and caused delays at several major airports.  
  • Health and Human Services: The National Institutes of Health 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 (cash welfare).
  • Internal Revenue Service (IRS): In the event of a shutdown, the IRS, which verifies income and Social Security numbers, would again not be able to perform this service. In 2013, a backlog of 1.2 million such requests potentially delayed mortgage and other loan approvals. Billions of dollars of tax refunds were also delayed in the 2013 shutdown. At least 26,000 furloughed IRS employees were recalled to work during the 2018-2019 shutdown in preparation for tax season, but 14,000 did not show up to work without pay.
  • Supplemental Nutrition Assistance Program (SNAP): Though the program is mandatory, the ability to send out “food stamp” benefits can be affected by the shutdown, since the continuing resolution only authorizes the Department of Agriculture (USDA) to send out benefits for 30 days after a shutdown begins. 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 accept SNAP benefits during the shutdown.

Is the government preparing for a shutdown?

OMB maintains a list of the various contingency plans federal agencies will follow during a shutdown. Most have been updated within the past year, but some have not been updated since a previous shutdown threat in late 2015.

How would federal employees be affected?

A full shutdown would be more extensive than the partial shutdown that started in December 2018, when Congress had passed 5 of 12 appropriations bills. A full shutdown would likely be similar to recent ones in 2013 and early 2018, when approximately 850,000 of 2.1 million non-postal federal employees were furloughed. In 2013, most of the 350,000 civilian employees of the Department of Defense were summoned back to work within a week. Furloughed employees are not allowed to work and do not receive paychecks but are guaranteed back pay due to legislation passed in January 2019. Contractors have historically not received back pay.

At the beginning of the partial late 2018-early 2019 shutdown, an estimated 380,000 employees were furloughed, a smaller number than usual as large federal employers such as the VA and the Department of Defense were already funded. Another 420,000 employees reported to work but did not receive pay until the shutdown ended. As the 2018-2019 shutdown continued, departments and agencies, such as the IRS and State Department, recalled an increasing number of employees.

How and why do mandatory programs continue during a shutdown?

Whereas discretionary spending must be appropriated every year, mandatory spending is authorized either for multi-year periods or permanently. Thus, mandatory spending generally continues during a shutdown. However, some services associated with mandatory programs may be diminished if there is a discretionary component to their funding. For instance, during the 1996 shutdowns and the 2013 shutdown, Social Security checks continued to go out. However, staff who handled new enrollments and other services, such as changing addresses or handling requests for a new Social Security card, were initially furloughed in 1996. In 2013, certain activities were discontinued, including verifying benefits and providing new and replacement cards, but processing of benefit applications or address changes continued. During the 2018-2019 shutdown, the Department of Agriculture had to rely on a special authority included in the previous CR to allow them to continue to make payments for SNAP benefits.

How many times has the government shut down?

Since Congress introduced the modern budget process in 1976, there have been 20 “funding gaps,” including the 2018-2019 shutdown and the one in January 2018, when funds were not appropriated for at least one day. (An hours-long lapse in appropriations in February 2018, though sometimes characterized as a shutdown, did not result in federal employee furloughs.) However, before 1980, the government did not shut down but rather continued normal operations through six funding gaps. Since 1981, 10 funding gaps of three days or less have occurred, mostly over a weekend when government operations were only minimally affected.

There have now been four “true” shutdowns where operations were affected for more than one business day. The first two happened in the winter of 1995-1996, when President Bill Clinton and the Republican Congress were unable to agree on spending levels and shut down the government twice, for a total of 26 days. The third was in 2013 when the House and Senate standoff on funding the Affordable Care Act resulted in a 16-day shutdown. The fourth shutdown, starting in December 2018 and continuing into January 2019, centered on a dispute over border wall funding and and was the longest-lasting shutdown at 35 days.

Does a government shutdown save money?

While estimates vary widely, evidence suggests that shutdowns tend to cost, not save, money. For one, putting contingency plans in place has a real cost. In addition, many user fees and other charges are not collected during a shutdown. Contractors sometimes include premiums in their bids to account for uncertainty in being paid. And although many federal employees are forced to be idle during a shutdown, they have historically received and are now guaranteed back pay, negating much of those potential savings. OMB official estimates of the 2013 government shutdown found that $2.5 billion in pay and benefits was paid to furloughed employees for hours not worked during the shutdown, as well as roughly $10 million in penalty interest payments and lost fee collections.

Shutdowns also have a cost to the economy. CBO estimated that the 2018-2019 shutdown reduced Gross Domestic Product by a total of $11 billion, including $3 billion that will not be recovered. On top of that effect, CBO notes that longer shutdowns negatively affect private-sector investment and hiring decisions as businesses cannot obtain federal permits and certifications or cannot access federal loans.

How can Congress avoid a shutdown?

There are essentially two ways to avoid a government shutdown – by passing appropriations or a continuing resolution (see below question on “What is a Continuing Resolution?”). Theoretically, the House and Senate Appropriations committees are supposed to pass 12 different appropriations bills, broken up by subject area and based on funding levels allocated in a budget resolution. Often, these bills are combined into a larger “omnibus” or “minibus” set of appropriations.

To avoid a shutdown, Congress would need to pass all 12 appropriations bills through both chambers and get them signed by the President by November 21, the deadline specified by the current CR. This could be done by enacting each bill individually or by packaging them together through an omnibus or minibus. Congress is currently considering a continuing resolution which would extend current funding levels and the deadline to December 20. For more about the status of specific appropriations bills, see Appropriations Watch: FY 2020.

What is a Continuing Resolution (CR)?

A continuing resolution temporarily funds the government in the absence of full appropriations bills, often by continuing funding levels from the prior year. Traditionally, CRs have been used to give lawmakers a short period of time to complete their work on remaining appropriations bills while keeping the government operating. CRs sometimes apply to only a few categories of spending, but they can also be used to fund all discretionary functions and can be used for an entire year.

CRs differ from normal appropriations bills in that they often “continue” the funding allocations from previous bills at the prior year’s rate or through a formula based on the prior year’s rate. Even when overall funding levels have differed, lawmakers have often simply scaled up all accounts by a percent change in spending rather than making individual decisions on spending accounts. However, CRs often do include certain “anomalies,” where specific items are increased or decreased to work around some problems that would occur from continuing the previous year’s policies, or “policy riders,” specifying certain statements of policy. Colloquially, a “clean CR” does not contain policy riders or politically-motivated changes to funding levels.

How often does Congress pass CRs?

Congress frequently passes CRs when it is unable to agree on appropriations before a deadline, and occasionally multiple CRs are necessary to fund the government for an entire fiscal year. They have also sometimes been relied on during presidential transition years. In FY 2001, for instance, a series of intense congressional negotiations leading up to the 2000 elections led to a series of 10 one-day CRs. In total, Congress funded the first three months of that fiscal year with 21 continuing resolutions.

Not surprisingly, CRs have been quite prevalent recently and were used to fund the government entirely in FY 2011, when eight CRs were passed, and in FY 2013, when two CRs were passed. In FYs 2012, 2014, 2015, 2016, CRs were used to fund the government for roughly a quarter of the year each. FY 2017 funding negotiations necessitated three CRs before passage of an omnibus appropriations bill in May, and FY 2018 negotiations required five CRs before passage of an omnibus in March. In FY 2019, a CR was been used for seven of the 12 appropriations bills for more than one-third of the year, while the remaining five appropriations bills were funded before the fiscal year began. The most recent year when a full-year appropriations bill passed before the fiscal year began and no CRs were necessary was FY 1997.

What are the disadvantages of using CRs?

Continuing resolutions have several negative implications for the budget’s overall efficiency. CRs usually continue funding at the past year’s level without any regard for changing policy needs or the value of each program within an agency. Using a continuing resolution wastes hundreds of hours of careful consideration and program evaluation incorporated into each agency’s budget submission. For instance, the president’s budget annually proposes a list of eliminations and reductions of programs that are duplicative or ineffective; a continuing resolution will continue to fund these unwanted programs. Finally, the use of continuing resolutions disrupts activities within agencies, makes it difficult to plan or start future projects, and costs staff time to revise work plans every time the budget changes.

How is Congress addressing funding?

Although Congress has not yet enacted any appropriations bills, the House has passed 10 out of 12 appropriations bills. The Senate has passed 4 of 12 bills as a package in late October, and an earlier package of 4 appropriations bills stalled in the Senate in September. The House and Senate would have to agree on and pass the same versions of the bills before they are presented to the President for his signature. Congress is currently considering a continuing resolution that would extend funding, largely at current levels, from November 21 to December 20 to allow more time to complete appropriations.  For more about the status of specific appropriations bills, see Appropriations Watch: FY 2020.

How does a shutdown differ from a default?

In a shutdown, the government temporarily stops paying employees and contractors who perform government services, whereas in a default the list of parties not paid is much broader. In a default, the government exceeds the statutory debt limit and is unable to pay some of its creditors (or other obligations). Without enough money to pay its bills, any of its payments are at risk—including all government spending, mandatory payments, interest on our debts, and payments to U.S. bondholders. While a government shutdown would be disruptive, a government default could be disastrous. (See our Q&A: Everything You Should Know About the Debt Ceiling for more on a default.)

How does a shutdown differ from “sequestration” or “sequester”?

A government shutdown closes down non-essential government operations due to lack of funding, whereas sequester or sequestration is shorthand for the reductions in discretionary spending caps in place that constrain the total amount of funding for annually-appropriated programs.

The first example of sequestration was included in the Gramm–Rudman–Hollings Balanced Budget and Emergency Deficit Control Act of 1985. The current version of sequestration is a product of the Budget Control Act (BCA) that resolved the 2011 debt ceiling negotiations. The BCA called on a Joint Select Committee on Deficit Reduction (the “Super Committee”) to identify at least $1.5 trillion in deficit reduction over 10 years, and it set in motion the sequester if it did not identify at least $1.2 trillion. The failure of the Super Committee triggered sequestration, causing discretionary spending caps to be automatically lowered for both defense and non-defense. Congress has never allowed the full sequester to take effect, passing partial sequester relief in 2013 and 2015 and more than fully reversing the sequester in 2018 and 2019. If appropriations bills violate the increased spending caps, then across-the-board cuts will be triggered.

For more information, see the following: