Preparing for a Shutdown of the Federal Government

December 21, 2018

Good Morning! In this morning’s eBlog, we report on what a potential federal government shutdown might augur for the nation’s state and local leaders.

Any hope to avoid a closure of the federal government or at least delay it until February fell apart last night in the wake of the House adding an amendment to increase the federal deficit and national debt by $5 billion—a proposal unacceptable to the U.S. Senate. That means that with the expiration tonight of the second FY2019 continuing resolution, which funds the portion of federal spending not covered by full-year spending bills enacted earlier this year—expires at midnight, triggering a likely federal government shutdown, an option not available to city and county leaders, but which will have implications and costs with regard to their ability to operate federal grant programs in the absence of current funding. The wonderful Federal Funds Information for the States has provided a useful guide for state and local elected leaders with regard to some of the potential ramifications, with most discretionary grant programs covered by the Continuing Resolution adversely impacted, because no new funding would be available after midnight tonight. Key programs impacted would include: Clean Water, Drinking Water, Emergency Food and Shelter Grants, Homeland Security, Urban Area Security Initiative, Public Transit Security Assistance, Firefighter Assistance Grants, CDBG, Housing for the Elderly, virtually all Justice Department grants to state and local governments, as well as virtually all major air, highway, and public transportation programs.

Funding for most so-called mandatory or entitlement programs not subject to annual appropriations will not be affected; with, however, two key exceptions: Temporary Assistance for Needy Families (TANF) and the matching share of the Child Care and Development Fund.

As we have previously noted, some programs critical to human health and safety will not close, including CDBG, HOME, FEMA Emergency Disaster payments, and the National Instant Criminal Background Check System.

The following questions may help local and state leaders determine how individual programs affecting your governments and programs affecting your constituents might be affected: 1) Is it a mandatory program that bypasses the Congressional appropriations process? If so, funding for such programs is automatically available; however, programs could be affected by reduced federal staffing.

Examples of mandatory programs for which funding would automatically be available include:

• Boating Safety

• Federal Aid in Wildlife Restoration and Sport Fish Restoration

• Mineral Leasing

The major exception is funding for Temporary Assistance for Needy Families (TANF) and the mandatory/matching portion of the Child Care and Development Fund (CCDF). While these programs are funded outside of appropriations bills, they were extended with the most recent Continuing Resolution, but expire tonight at midnight. As a result, no new funding would be available without another extension, although states may use prior-year or non-federal funds. These are the only Department of Health and Human Services [HHS] programs that would be affected by a shutdown, because the Labor-HHS-Education appropriations bill has full-year funding.

Is the program affecting your state/county/city. public school district a mandatory program funded in appropriations acts? Typically, these programs do not have access to new funding during a federal shutdown, but most programs in this category have already received full year funding. Many mandatory nutrition programs are funded in appropriations bills, but the Department of Agriculture’s (USDA) contingency plan indicates that these programs would continue during a funding lapse using existing budget authority, specifically citing the Supplemental Nutrition Assistance Program (SNAP), Child Nutrition programs, and the Senior Farmers Market program, as well as the discretionary-funded Special Supplemental Nutrition Program for Women, Infants and Children (WIC).

As a general rule, a program funded by sources other than annual appropriations acts may continue to operate programs—including making payments—if those programs have funding sources outside of annual appropriations. In addition to mandatory programs, programs which are funded by contract authority, such as the federal Highway Trust Fund, would continue during a lapse in appropriations; but, funding for federal transit programs will be suspended, because appropriations will not be available to finance the salaries of staff responsible for payments.

The shutdown is not supposed to adversely affect programs which affect human safety or the protection of property, including:

  • essential housing and emergency services for homeless persons and persons with AIDS (homeless assistance grants, supportive housing for veterans, and Housing for Persons with AIDS; CDBG; HOME Investment Partnerships, and Lead Hazard Control and Healthy Homes, in certain cases;
  • Abandoned Mine Lands Emergency Program, the National Instant Criminal Background Check System, and FEMA disaster payments.

State and local leaders will need to assess whether a program has prior-year federal funds available: if that is the case, federal regulations may allow the use of unspent funds for obligations incurred in the current federal fiscal year; many discretionary programs fall into this category: for example:

  • Most Department of Justice grants may continue as long as sufficient funds remain.
  • Funding for Department of Homeland Security grants are available for multiple years. Moreover, most grants are not awarded until well into the fiscal year, and some—such as the Homeland Security Grant Program—have project periods which begin late in the fiscal year.
  • Many Environmental Protection Agency programs have periods of performance which are set when funds are awarded, and some allow for extensions.

Cities, counties, and states may spend down grant funds during a shutdown to meet matching or maintenance of effort (MOE) requirements, unless Congress specifies otherwise.

Snag Risk? There is a potential snag: if the federal government is not operating, many critical staff will not be present to process grants, or otherwise provide assistance, process checks/payments, approve actions, etc. While many federal agencies specifically indicate in their contingency plans that payments of non-lapsed funds would continue to be processed, the Environmental Protection Agency staff would not be available to make payments, so only grant recipients utilizing the Automated Standard Application Payment (ASAP) system will be able to make draw-downs. The Department of Homeland Security reports that agencies may continue to disburse funds from non-lapsed funding sources; however, the Department also specifies that it will stop all financial system operations, including payment processing, except from exempt activities. will be operational during a shutdown, including the contact center. If an application deadline falls during the shutdown, agencies could issue an extension.


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