July | August 2017


 

 

 

 

 

 

The Impact of a Federal Government Shutdown
on States

By Leslie Haymon, CSG policy analyst
Appropriations for the federal government expire at midnight on Sept. 30, 2017. If Congress fails to reach an agreement on a continuing resolution or appropriations package, the federal government will shut down. A lapse in appropriations can have significant consequences for states that receive, on average, about 30 percent of revenue from federal dollars. State governments should be prepared for the potential shutdown and the impacts it may have on programs and reimbursements across their jurisdiction.
“States rely on the return of our constituents' federal tax dollars to pay for the vital programs that protect our people,” said Rep. Bob Godfrey, deputy speaker pro tempore of the Connecticut House of Representatives and co-chair of CSG’s Intergovernmental Affairs Committee. “Just like families and businesses, financial certainty is crucial for states looking to keep stable our own fiscal planning for the coming year. As we learned in Connecticut this year, budget crises have a severe and lasting impact on our constituents. It causes unnecessary and avoidable hardship for the vulnerable, especially kids, seniors, the sick, the hungry, the homeless and people living paycheck to paycheck.”
The Federal Funds Information for States, or FFIS, has compiled this primer on the shutdown process and the potential impact on states. FFIS aids states in managing their federal funds by evaluating the impact of federal legislative or budgetary actions on states.
Q. What is a federal government shutdown?
The Antideficiency Act prohibits the federal government from spending or incurring debt in advance or in excess of an appropriation. If short-term or full-year appropriations are not enacted, federal agencies and programs that rely on them to operate will shut down.
To avoid a shutdown, Congress has two options: pass a full-year appropriations bill, or pass a continuing resolution (CR). Congress often uses CRs to provide “bridge” funding while debating appropriations bills.
Q. What developments are leading to a possible shutdown this year?
Several issues make a shutdown possible.
Q. How do federal agencies prepare for a shutdown?
The Office of Management and Budget (OMB) is responsible for ensuring that agency contingency plans are in place in the event of a government shutdown. OMB Circular A-11 describes the details of those plans, and what types of actions an agency may conduct during a lapse in appropriations. Agency contingency plans must be updated at least every two years and are available at: https://www.whitehouse.gov/omb/information-for-agencies/Agency-Contingency-Plans. Most of the plans posted date to September 2015.
Q.  How long do federal shutdowns usually last?
If Congress does not pass an appropriations bill or a CR, a federal government shutdown begins at midnight after the last day for which appropriations have been enacted (September 30 in this case). The shutdown continues until the president signs a spending bill passed by Congress. The following table lists recent shutdown dates and durations.


Q. How does a shutdown affect federal grant programs?
Q. Are there exceptions to the above?
Yes. In general:
Funding for the Children’s Health Insurance Program, Community Health Centers (mandatory portion), and the Maternal, Infant, and Early Childhood Home Visiting program is set to expire at the end of FY 2017. If Congress does not extend funding beyond September 30, no new funding would be available.
Q. Can states use prior-year funding in the absence of a current appropriation?
States may be able to use funds that were appropriated in prior years if the budget authority does not expire and such funds are available. For instance, many education and health and human services programs can use FY 2017 funding through September 30, 2018. Funding for Department of Justice grants remains available until expended and may continue if sufficient carryover funds remain. Some programs, such as the Special Supplemental Food Program for Women, Infants, and Children (WIC), allow states to carry over only a small percentage of funds, so funding would be exhausted during an extended shutdown.
Q. If a program continues receiving funding through a shutdown, what else could cause an interruption?
The ability to draw down federal funds during a shutdown varies by agency, office, and program. In general, automated payment systems are operational during a shutdown to ensure delivery of grant payments for programs or funding not affected by it. However, there could be delays if a drawdown request is flagged because of internal controls, or requires federal staff to take a specific action for the drawdown to occur.
Q. If states continue to operate affected programs during a shutdown, will they get reimbursed once the shutdown ends?
States are not guaranteed to receive reimbursement for discretionary programs. However, during the FY 2014 shutdown, the CR that ended it retroactively covered the lapse in appropriations and included specific language to ensure states were reimbursed for costs they incurred to carry out federal programs during the shutdown. For mandatory programs included in appropriations bills, states are entitled to reimbursement once an appropriations bill is enacted. 
Q. Where can I find additional information?
If a shutdown appears likely, FFIS will release detailed program-specific information. FFIS materials from the last shutdown, including FFIS publications, federal guidance, and reports assessing the impact and cost of the shutdown, are available at: www.ffis.org/shutdown_guidance.
Copyright © 2017 FFIS Federal Funds Information for States. All rights reserved.