What a Partial Government Shutdown Means for City Leaders

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The White House and Congress have failed to reach an agreement on the seven remaining Fiscal Year (FY) 2019 appropriations spending bills. Effective midnight, Friday, December 21st, there is a partial federal government shutdown in effect.

Earlier this week, the National League of Cities (NLC) called on federal leaders to do their jobs and find a bipartisan solution to avoid a shutdown and keep every federal agency open.

“Cities expect our leaders in Washington to meet their most basic obligation and keep the federal government open,” said NLC President Karen Freeman-Wilson, mayor of Gary, Indiana. “A federal shutdown would impact programs that grow local economies and build more resilient communities. Instead of wasting $6.5 billion a week on a shutdown, let’s put that money to good use — by investing in America’s cities.”

This would be a “partial” shutdown because Congress met the deadline to approve five of the twelve total appropriations bills.  In addition to all “mandatory” spending programs, federal discretionary grant programs administered through the following agencies will not be impacted by the partial shutdown:

  • U.S. Department of Labor
  • U.S. Department of Health and Human Services
  • U.S. Department of Education
  • U.S. Department of Veterans Affairs
  • U.S. Department of Defense
  • U.S. Department of Energy

For city leaders, this means residents can expect uninterrupted operations and payments from Social Security, Medicare and Medicaid. VA Hospitals and other service providers for veterans should remain open. Before and after school programs funded by the Department of Education’s 21st Century Community Learning Center grants should not be interrupted.

Unfortunately for city leaders, the federal agencies that will be shutting down to various degrees are those that administer most federal grants allocated directly to municipal governments, including:

  • U.S. Department of Commerce
  • U.S. Department of Justice (DOJ)
  • U.S. Department of Interior
  • U.S. Environmental Protection Agency
  • U.S. Department of Agriculture (USDA)
  • U.S. Department of Homeland Security
  • U.S. Department of Transportation (DOT)
  • U.S. Department of Housing and Urban Development (HUD)
  • U.S. Economic Development Administration (EDA)
  • U.S. Small Business Administration (SBA)

According to this detailed Q&A from the Committee for a Responsible Federal Budget, when a funding lapse results in the shutdown of a federal agency, the government must discontinue all non-essential discretionary functions until new funding legislation is passed and signed into law.  And according to this White House Shutdown FAQ, all normally, routine, ongoing operational and administrative activities relating to contract or grant administration (including payment processing) cannot continue when there is a lapse in funding. Moreover, federal agency employees who are paid with annual appropriations and who perform an activity associated with contract or grant administration (including oversight, inspection, payment or accounting) should generally not continue work during a lapse in appropriations.

In other words, federal discretionary grants that are administered to local governments from unfunded federal agencies, including HUD’s CDBG and HOME grants, DOJ’s COPS grants, DOT’s TIGER grants, EDA’s economic development grants, SBA’s small business loans, and USDA’s rural loans and grants, will be unavailable for reimbursement to local governments, and agency staff will generally be unavailable to answer questions or offer technical assistance throughout the duration of the partial government shutdown. Any local employees funded by federal grants may also be required to stop work.

The White House Office of Management and Budget maintains a list of each agency’s plans here. Additional contingency information may be posted on individual agency websites as well.

A short shutdown of a week or less will have little to no impact on cities (although it will cost the federal government plenty to furlough employees, mothball offices, and reopen even a short time later). The effects of a longer shutdown would multiply quickly, including inaccessible federal funding, project delays and potential layoffs. As federal funding for services dry up, residents usually expect local governments to step in with supplemental funding. Eventually it will fall on cities and states to bear the cost of the shutdown on the broader economy, which will result in less tax revenue for all levels of government.

The federal law that prohibits agencies from incurring obligations in advance of appropriations, the Antideficiency Act, also requires an “orderly shutdown” when there has been a lapse in appropriations. Of course, actual government shutdowns are anything but orderly, and there will be exceptions and inconsistencies across the board, known and unknown.

Among the known exceptions and inconsistencies, if there is a partial government shutdown:

  • Air traffic controllers and many Transportation Security Agency employees will be required to work without pay;
  • FBI, DEA agents and correction officers will be required to work without pay;
  • Mail will be delivered as the Postal Service does not rely on discretionary appropriations;
  • National parks and museums may be opened or closed.
  • The EPA has announced it will maintain operations next week even if President Donald Trump and Congress fail to agree on a stop-gap spending bill by Friday’s deadline.
  • And Members of Congress will still get paid.

About the Author: Michael-Wallace-small.jpgMichael Wallace is the Program Director for Community and Economic Development at the National League of Cities. Follow him on Twitter @MikeWallaceII.