Simply Understanding A Government Shutdown

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What Is A Government Shutdown?

A government shutdown is when non-essential discretionary federal programs close. It occurs when Congress fails to appropriate funds. In the normal budget process, Congress appropriates funds by September 30 for the following fiscal year. When that doesn't happen, it enacts a continuing funding resolution. If Congress can't agree on the resolution, it forces a shutdown.

When this type of scenario occurs, US law dictates that the government begin a “shutdown” of the affected activities and give a temporary leave of absence to non-essential employees of these agencies. However, essential employees must continue to work without pay until the government reopens. These include medical professionals in veteran hospitals and transportation security administration officers who oversee airport security.

It can last as long as it takes. Congressional leaders from both parties have to reach an agreement to fund the government.

What Happens During A Shutdown?

The discretionary budget funds most federal departments. But those that provide essential services are not shut down. Essential services are those that include defense, national safety, and security. Many of these agencies are set up so they can operate for weeks without a funding bill. However, the Defense Department warned it wouldn't pay military personnel during a shutdown.

Nonessential federal workers are furloughed, which means they are sent home and docked pay. (They can later be paid retroactively for this time off.) These jobs can include such things as working at national parks or monuments, processing passport and visa applications and maintaining government websites.

Border Protection and Immigration, air traffic controls, and the Transportation Security Administration remain open. The Justice Department remains open, but gun permits are not be issued during a shutdown. The Postal Service has a separate source of funds, so mail continues to be delivered.

Here are the major departments that shut down:

Commerce, except National Oceanic and Atmospheric Administration.
Education.
Energy. Functions that oversee the safety of the nation's nuclear arsenal, dams, and transmission lines remain open.
Environmental Protection Agency.
Food and Drug Administration.
Health and Human Services.
Housing and Urban Development.
Interior, including National Parks.
Internal Revenue Service, except those processing tax returns.
Labor, including Bureau of Labor Statistics.
NASA.
National Institute of Health.
Smithsonian.

Social Security, Medicare, and Medicaid payments are part of the mandatory budget. That budget also includes the Troubled Asset Relief Program and the Affordable Care Act. These programs are never shut down because their funding is automatic. They were created by separate Acts of Congress.

How Can A Shutdown Be Prevented Or Avoided?

There are essentially two ways to avoid a government shutdown – by passing appropriations or a Continuing Resolution (CR). 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.

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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.

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.

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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.