Shutdown of the Federal Government: Causes, Effects, and Process

Shutdown of the Federal Government:
Causes, Effects, and Process
Kevin R. Kosar
Analyst in American National Government
Government and Finance Division


SUMMARY

When federal agencies and programs lack appropriated funding, they must cease
operations, except in emergency situations. The failure of the President and Congress
to reach agreement on funding measures has caused government shutdowns, the longest
of which was from December 16, 1995, to January 6, 1996. Government shutdowns
have necessitated the furloughing of several hundred thousand federal employees and
affect all sectors of the economy. It is necessary either to enact temporary funding
legislation at the close of the fiscal year or to shut down the activities that are not funded
at that time. This report provides a brief overview of the causes and effects of federal
government shutdowns. Table 1 shows the dates for the 17 federal government funding
gaps beginning in FY1977. Most of these were not government-wide.


FY2005 and Recent Years
The fiscal year of the federal government ends September 30. Accordingly,
Congress must pass and the President must sign thirteen appropriations bills before
October 1 to continue funding of governmental activities.
1
Thus far, only the Defense
appropriation (P.L. 108-287) has been enacted.
2
The status of the remaining twelve
appropriations may be viewed at the “CRS Status of FY2005 Appropriations” Web page.
3
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1
Exceptions, such as essential governmental personnel, are enumerated in the sections on
“Effects of a Federal Government Shutdown” and “Essential Services and Personnel.” A
government shutdown may also occur should the federal government exceed its debt limit. See
CRS Report RS21519, Legislative Procedures for Adjusting the Public Debt Limit: A Brief
Overview, by Robert Keith.
2
P.L. 108-133, a supplemental appropriation for hurricane and disaster relief, was enacted Sept.
8, 2004.
3
[http://www.crs.gov/products/appropriations/appover.shtml].
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CRS-2
4
See CRS Report RL30343, Continuing Appropriations Acts: Brief Overview of Recent
Practices, by Sandy Streeter.
5
On the chronology of the appropriations process for FY2004, see CRS Report RL31799, Budget
FY2004: A Chronology and Resource Guide with Internet Access, by Justin Murray.
6
For information on funding gaps and proposals to establish automatic funding, see CRS Report
RS20348, Federal Funding Gaps: A Brief Overview, by Robert Keith; and CRS Report RL30339,
Preventing Federal Government Shutdowns: Proposals for an Automatic Continuing Resolution,
by Robert Keith.
7
U.S. Congress, House, Committee on Government Reform and Oversight, Subcommittee on
Civil Service, Government Shutdown I : What’s Essential?, hearings held December 6 and 14,
1995, 104
th
Congress, 1
st
sess. (Washington: GPO, 1997), p. 102. See full text of Deputy
Attorney General Walter Dellinger’s opinion, “Government Operations in the Event of a Lapse
in Appropriations,” August 16, 1995, appearing on pp. 100-108. (Hereafter referred to as
Government Shutdown: What’s Essential?)
Over the past ten years Congress and presidents have relied upon continuing
appropriations acts (also called continuing resolutions, or CRs) more frequently.
4
In
2003, three of the thirteen appropriations laws were enacted before the beginning of
FY2004. A government shutdown was averted through the passage of five continuing
resolutions. Three more appropriations became law during the autumn. The FY2004
appropriations process was completed January 23, 2004, when President George W. Bush
signed P.L. 108-7, an omnibus law that included the remaining seven appropriations.
5
Causes of Federal Shutdowns
Shutdowns of the federal government have occurred in the past due to failures to
pass regular appropriations bills by the October 1 deadline; lack of an agreement on stopgap funding for federal government operations through a continuing resolution;
6
and other
impasses, for example, in 1995, the lack of an agreement on lifting the federal debt
ceiling.
There have been Attorney General opinions holding that the Antideficiency Act (31
U.S.C. 1341, et seq.), as amended, prohibits the federal government from spending during
lapsed appropriations, entering into contracts or other obligations, and providing
government services and employees beyond those essential “to emergency situations,
where the failure to perform those functions would result in an imminent threat to the
safety of human life or the protection of property.”
7
Emergency situations under which
federal employees may work, without compensation, do not include ongoing, regular
functions of government, the suspension of which would not imminently threaten the
safety of human life or the protection of property (31 U.S.C. 1342).
Recent Shutdown Experiences
The most recent shutdowns occurred in FY1996. There were two during the early
part of the fiscal year. The first, November 14-19, 1995, resulted in the furlough of an
estimated 800,000 federal employees. It was caused by the expiration of a continuing
funding resolution (P.L. 104-31) agreed to on September 30, 1995, and by President
Clinton’s veto of a second continuing resolution and a debt limit extension bill.

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8
Fewer employees, agencies, and programs were affected because some funding bills were
enacted during the period between the two shutdowns.
The second FY1996 partial shutdown of the federal government, and the longest in
history, began on December 16, 1995, and ended on January 6, 1996, after the White
House and Congress agreed on a new resolution (P.L. 104-94) to fund the government
through January 26, 1996. On January 2, 1996, the estimate of furloughed federal
employees was 284,000.
8
Another 475,000 federal employees, rated “essential,”
continued to work in a non-pay status. The shutdown was triggered by the expiration of
a continuing funding resolution enacted on November 20 (P.L. 104-56), which funded the
government through December 15, 1995. There were several short-term continuing
resolutions between January 6, 1996, and April 26, 1996, when P.L. 104-134 was enacted
to fund any agencies or programs not yet funded through FY1996.
Effects of a Federal Government Shutdown
Effects on Federal Staffing. An immediate and critical shutdown effect is the
furloughing (placing in a temporary, non-duty, non-pay status) of federal employees.
Exempted from furloughs are presidential appointees, Members of Congress, uniformed
military personnel, and federal employees rated “essential.” “Essential” employees,
required to work during a shutdown, are those performing duties vital to national defense,
public health and safety, or other crucial operations. Shutdown furloughs are not
considered a break in service and are generally creditable for retaining benefits and
seniority. Also, federal employees who have been affected by the shutdown have received
their salaries retroactively.
Federal Employee Health Benefit Program (FEHBP) benefits continue for a year in
a non-pay status, and the government continues to be obligated for its share of the health
plan premium. Employees may continue to pay their share while on furlough, or they
may elect to have their premium costs accumulate and have them deducted from their pay
in a lump sum when they return to work.
Essential Services and Personnel
A 1980 Office of Management and Budget (OMB) memorandum defines “essential”
government services and “essential” employees as those:
! providing for the national security, including the conduct of foreign
relations essential to the national security or the safety of life and
property;
! providing for benefit payments and the performance of contract
obligations under no-year or multi-year or other funds remaining
available for those purposes;
! conducting essential activities to the extent that they protect life and
property, including:
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9
U.S. Executive Office of the President, Office of Management and Budget, Memorandum from
the Director of OMB to the Heads of Executive Departments and Agencies, “Agency Operations
in the Absence of Appropriations,” September 30, 1980, pp. 1-2.
— medical care of inpatients and emergency outpatient care;
— activities essential to ensure continued public health and safety,
including safe use of food, drugs, and hazardous materials;
— continuance of air traffic control and other transportation safety
functions and the protection of transport property;
— border and coastal protection and surveillance;
— protection of federal lands, buildings, waterways, equipment and other
property owned by the United States;
— care of prisoners and other persons in the custody of the United States;
— law enforcement and criminal investigations;
— emergency and disaster assistance;
— activities that ensure production of power and maintenance of the
power distribution system;
— activities essential to the preservation of the essential elements of the
money and banking system of the United States, including borrowing and
tax collection activities of the Treasury; and
— activities necessary to maintain protection of research property.
9
During the 1995-1996 shutdown experience, policymakers substantially followed these
definitions. Pursuant to that memorandum and White House directions to agencies
through OMB, agencies are required to determine which jobs fit these definitions and
enumerate them in agency shutdown plans. Those employees rated “essential,” although
guaranteed to be paid retroactively, did not receive compensation until funding for their
agencies was enacted.
Effects on the Public
The long shutdown that began in December 1995 affected many members of the
public. A few examples, taken from congressional hearings, press and agency accounts,
follow:
! Health. New patients were not accepted into clinical research at the
National Institutes of Health (NIH) Clinical Center; the Centers for
Disease Control and Prevention ceased disease surveillance (information
about the spread of diseases, such as AIDS and flu, were unavailable);
hotline calls to NIH concerning diseases were not answered; and toxic
waste clean-up work at 609 sites stopped, resulting in 2,400 “Superfund”
workers being sent home.
! Law Enforcement/Public Safety. Delays occurred in the processing of
alcohol, tobacco, firearms, and explosives applications by the Bureau of
Alcohol, Tobacco, and Firearms; work on more than 3,500 bankruptcy
cases was suspended; cancellation of the recruitment and testing of
federal law-enforcement officials occurred, including the hiring of 400
border patrol agents; and delinquent child-support cases were suspended.
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10
Peter Behr, “Contractors Face Mounting Costs from Government Shutdowns,” Washington
Post, January 23, 1996, p. C1.
11
Government Shutdown: What’s Essential?, pp. 80-183, documents these communications and
provides the full package of documentation from the experience of the Veterans Administration.
The hearing record also provides documentation on other agency experiences.
! Parks/Museums/Monuments. Closure of 368 National Park Service
sites (loss of 7 million visitors) occurred, with local communities near
national parks losing an estimated $14.2 million per day in tourism
revenues; and closure of national museums and monuments (estimated
loss of 2 million visitors) occurred.
! Visas/Passports. 20,000-30,000 applications by foreigners for visas
went unprocessed each day; 200,000 U.S. applications for passports went
unprocessed; and U.S. tourist industries and airlines sustained millions
of dollars in losses.
! American Indian/Other Native Americans. All 13,500 Department of
Interior Bureau of Indian Affairs (BIA) employees were furloughed;
general assistance payments for basic needs to 53,000 BIA benefit
recipients were delayed; and estimated 25,000 American Indians did not
receive timely payment of oil and gas royalties.
! American Veterans. Major curtailment in services, ranging from health
and welfare to finance and travel was experienced.
! Federal Contractors. Of $18 billion in Washington area contracts, $3.7
billion (over 20%) were managed by agencies affected by the funding
lapse;
10
the National Institute of Standards, was unable to issue a new
standard for lights and lamps, scheduled to be effective January 1, 1996;
and employees of federal contractors were furloughed without pay.
Shutdown Process
The Office of Management and Budget (OMB) is responsible for issuing instructions
to agencies on implementing a federal shutdown, including the furloughing of “nonessential” federal employees. Throughout a shutdown period, agencies are apprised of
the latest developments in resolving the budgetary impasse. The Office of Personnel
Management (OPM) provides guidance and technical assistance to the agencies regarding
personnel management issues, especially pay and benefits administration, during a federal
furlough. Hearings held by the House Committee on Government Reform and Oversight
in December 1995 detailed the process followed by OMB and other agencies. The
process appears to have begun during the previous August with the OMB Director
receiving an Attorney General’s opinion on the potential shutdown, OMB and OPM
communicating with the agencies, and the agencies developing contingency plans.
11
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Source: CRS Report RL30339, Preventing Federal Government Shutdowns:
Proposals for an Automatic Continuing Resolution, by Robert Keith.
a. Gap commenced at midnight of the date indicated.
b. Gap terminated during the date indicated because of enactment of regular
appropriations or further continuing appropriations measures.