Following is a recent Congressional Research Service report on the causes and effects of budget-induced government shutdowns.
It has been said that "conflict is endemic to budgeting." If conflict between Congress and the President impedes the timely enactment of annual appropriations acts or continuing resolutions, the possibility of a government shutdown arises.
During high-stakes negotiations over appropriations measures, a number of options present themselves to Congress and the President, including
* coming to agreement on regular appropriations acts before the beginning of a new fiscal year;
* using one or more interim continuing resolutions (CRs) to extend temporary funding until final decisions are made; or
* not agreeing on full-year or interim appropriations acts, resulting in a funding gap and a corresponding shutdown of federal activities.
If Congress and the President pursue the second or third options, they may agree on full-year appropriations after the beginning of the fiscal year by using regular appropriations acts (e.g., singly or in omnibus legislation) or a full-year CR. Congress and the President frequently agree on full-year or interim funding without coming to an impasse. On other occasions, however, Congress and the President may not come to an accommodation in time to prevent a funding gap.
This report discusses the causes of funding gaps and shutdowns of the federal government, processes that are associated with shutdowns, and how agency operations may be affected by shutdowns. The report concludes with a discussion of potential issues for Congress.
Causes of Federal Shutdowns
The federal fiscal year begins October 1. For agencies and programs that are funded through annual appropriations acts, Congress and the President must enact interim or full-year appropriations by this date if many governmental activities are to continue operating. If interim or full-year appropriations are not enacted into law, the time interval when agency appropriations are not enacted is referred to as a "funding gap." A funding gap also may occur any time a CR expires and another CR (or regular appropriations bill) is not enacted immediately thereafter. When a funding gap occurs, the federal government begins a "shutdown" of the affected activities, including the furlough of non-emergency personnel and curtailment of agency activities and services. Programs that are funded by laws other than annual appropriations acts (e.g., entitlements like Social Security) also may be affected by a funding gap, if program execution relies on activities that receive annually appropriated funding.
Funding gaps and government shutdowns have occurred in the past when Congress and the President did not enact regular appropriations bills by the beginning of the fiscal year. They also have occurred when Congress and the President did not come to an agreement on stop-gap funding through a CR. As noted in another CRS report, six fairly lengthy funding gaps occurred from FY1977 to FY1980, ranging from 8 to 17 full days. Subsequently, the durations of funding gaps shortened considerably. From FY1981 to FY1995, nine funding gaps occurred with durations of up to three full days. A significant exception to the trend occurred in FY1996, when President William Clinton and the 104th Congress engaged in extended negotiations over budget policy. Two funding gaps and corresponding shutdowns, amounting to 5 days and 21 days, ensued. There have been no funding gaps since FY1996.
The Constitution, statutory provisions, court opinions, and Department of Justice (DOJ) opinions provide the legal framework for how funding gaps and shutdowns have occurred in recent decades. Article I, Section 9 of the Constitution states that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." Federal employees and contractors cannot be paid, for example, if appropriations have not been enacted. It would still be possible under the Constitution, nevertheless, for the government to make contracts or other obligations if it lacked funds to pay for these commitments. The so-called Antideficiency Act prevents this, however. The act prohibits federal officials from obligating funds before an appropriations measure has been enacted, except as authorized by law. The act also prohibits acceptance of voluntary services and employment of personal services exceeding what has been authorized by law. Exceptions are made under the act to the latter prohibition for "emergencies involving the safety of human life or the protection of property." Therefore, the Antideficiency Act generally prohibits agencies from continued operation in the absence of appropriations. Failure to comply with the act may result in criminal sanctions, fines, and removal.
For years, many federal agencies continued to operate during a funding gap, while "minimizing all nonessential operations and obligations, believing that Congress did not intend that agencies close down" while waiting for the enactment of annual appropriations acts or continuing resolutions. In 1980 and 1981, however, Attorney General Benjamin R. Civiletti issued two opinions that more strictly interpreted the Antideficiency Act in the context of a funding gap, along with its exceptions. The opinions stated that, with some exceptions, the head of an agency could avoid violating the Antideficiency Act only by suspending the agency’s operations until the enactment of an appropriation. In the absence of appropriations, exceptions would be allowed only when there is "some reasonable and articulable connection between the function to be performed and the safety of human life or the protection of property."
In 1990, in response to the 1981 Civiletti opinion, Congress amended 31 U.S.C. § 1342 to clarify that "the term ’emergencies involving the safety of human life or the protection of property’ does 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." DOJ’s Office of Legal Counsel (OLC) issued a memorandum in 1995 that interpreted the effect of the amendment (hereafter, "1995 OLC opinion").The 1995 OLC opinion said one aspect of the 1981 Civiletti opinion’s description of emergency governmental functions should be modified in light of the amendment, but that the 1981 opinion otherwise "continues to be a sound analysis of the legal authorities respecting government operations" during a funding gap.
OMB and Agency Shutdown Processes
The Office of Management and Budget (OMB) provides agencies with annual instructions on how to prepare for and operate during a funding gap in Circular No. A-11. The circular cites the two Civiletti opinions and the 1995 OLC opinion as "background" and "guidance." The circular establishes two "policies" regarding the absence of appropriations: (1) a prohibition on incurring obligations unless the obligations are otherwise authorized by law and (2) permission to incur obligations "as necessary for orderly termination of an agency’s functions," but prohibition of any disbursement (i.e., payment).
The circular also directs agency heads to develop and maintain shutdown plans, which are to be submitted to OMB when initially prepared and also when revised. Agency heads are to use the DOJ opinions and the circular to "decide what activities are essential to operate their agencies during an appropriations hiatus." Among other things, a shutdown plan is required to include
* an estimate of the time to complete the shutdown, to the nearest half-day;
* the number of employees expected to be on-board (i.e., filled positions) before implementation of the plan;
* the total number of employees to be "retained" under the plan (i.e., not subject to furlough), broken out into two categories: (1) employees "engaged in military, law enforcement, or direct provision of health care activities" and (2) employees whose "compensation is financed by a resource other than annual appropriations"; and
* the total number of additional employees who will be retained, in order to protect life and property, who are not "exempt" from furlough because of the two previous criteria, above.
In general, the circular refers to employees who are to be furloughed as "released," and employees who will not be furloughed as "retained" or "exempt." OMB’s circular also instructs agencies to take personnel actions to release employees according to applicable law and Office of Personnel Management (OPM) regulations.
OMB documents and guidance from previous funding gaps and shutdowns may provide insights into current and future practices. OPM has recommended on a website that agencies use OMB guidelines to determine "excepted" positions (i.e., those not subject to furlough) and provided retyped copies of previous OMB bulletins and memoranda for reference. These and other OMB documents also have been reproduced in several legislative branch documents.
Effects of a Federal Government Shutdown
Effects on Federal Officials and Employees
Effects of a shutdown may occur in anticipation of a funding gap (e.g., planning), during a gap (furlough and curtailed operations), and afterwards (e.g., reducing backlogs of work). An immediate shutdown effect is the "shutdown furlough" of certain federal employees (i.e., placement in a temporary, nonduty, nonpay status). Several types of officials and employees are not subject to furlough. These include Members of Congress, the President, presidential appointees, certain legislative branch employees, and federal employees deemed "excepted." "Excepted" employees, who are required to work during a shutdown, are described as "employees who are excepted from a furlough by law because they are (1) performing emergency work involving the safety of human life or the protection of property, (2) involved in the orderly suspension of agency operations, or (3) performing other functions exempted from the furlough." 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 shutdowns historically have received their salaries retroactively.
As noted earlier, the two most recent shutdowns occurred in FY1996. The first, which lasted five full days between November 13-19, 1995, resulted in the furlough of an estimated 800,000 federal employees. It was caused by the expiration of a continuing resolution agreed to on September 30, 1995 (P.L. 104-31), and by President Clinton’s veto of a second continuing resolution and a debt limit extension bill. The second FY1996 partial shutdown of the federal government, and the longest in history, lasted 21 full days between December 15, 1995, and January 6, 1996. The shutdown was triggered by the expiration of a continuing funding resolution enacted on November 20, 1995 (P.L. 104-56), which funded the government through December 15, 1995. On January 2, 1996, the estimate of furloughed federal employees was 284,000. Another 475,000 excepted federal employees continued to work in nonpay status. There were several short-term continuing resolutions between January 6, 1996, and April 26, 1996, when the Omnibus Consolidated Rescissions and Appropriations Act of 1996 (P.L. 104-134) was enacted to fund any agencies or programs not yet funded through FY1996.
Examples of Excepted Activities and Personnel
Previous determinations of excepted activities and personnel would not necessarily hold for any future shutdown. However, past experience may inform future OMB and agency decisions. An OMB memorandum of November 17, 1981, from Director David A. Stockman to the heads of executive agencies, identified "examples of excepted activities." The memorandum, which still was in effect for the FY1996 shutdowns, explained
Beginning [on the first day of the appropriations hiatus], agencies may continue activities otherwise authorized by law, those that protect life and property and those necessary to begin phasedown of other activities. Primary examples of activities agencies may continue are those which may be found under applicable statutes to:
1. Provide for the national security, including the conduct of foreign relations essential to the national security or the safety of life and property.
2. Provide for benefit payments and the performance of contract obligations under no-year or multi-year or other funds remaining available for those purposes.
3. Conduct essential activities to the extent that they protect life and property, including:
a. Medical care of inpatients and emergency outpatient care;
b. Activities essential to ensure continued public health and safety, including safe use of food and drugs and safe use of hazardous materials;
c. The continuance of air traffic control and other transportation safety functions and the protection of transport property;
d. Border and coastal protection and surveillance;
e. Protection of Federal lands, buildings, waterways, equipment and other property owned by the United States;
f. Care of prisoners and other persons in the custody of the United States;
g. Law enforcement and criminal investigations;
h. Emergency and disaster assistance;
i. 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;
j. Activities that ensure production of power and maintenance of the power distribution system; and
k. Activities necessary to maintain protection of research property.
You should maintain the staff and support services necessary to continue these essential functions.
Effects on the Public
The effects of the two FY1996 shutdowns on government activities and the public received extensive attention. Although the effects on the public of any future shutdown would not necessarily reflect past experience, past events may be illustrative of effects that are possible. Several examples follow that were reported in congressional hearings, news media, and agency accounts.
* 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; hotline calls to NIH concerning diseases were not answered; and toxic waste clean-up work at 609 sites reportedly stopped and resulted in 2,400 Superfund workers being sent home.
* Law Enforcement and 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 reportedly was suspended; cancellation of the recruitment and testing of federal law-enforcement officials reportedly occurred, including the hiring of 400 border patrol agents; and delinquent child-support cases were delayed.
* Parks, Museums, and Monuments. Closure of 368 National Park Service sites (loss of 7 million visitors) reportedly occurred, with loss of tourism revenues to local communities; and closure of national museums and monuments (reportedly with an estimated loss of 2 million visitors) occurred.
* Visas and Passports. Approximately 20,000-30,000 applications by foreigners for visas reportedly went unprocessed each day; 200,000 U.S. applications for passports reportedly went unprocessed; and U.S. tourist industries and airlines reportedly sustained millions of dollars in losses.
* American Veterans. Multiple services were curtailed, ranging from health and welfare to finance and travel.
* Federal Contractors. Of $18 billion in Washington, DC, area contracts, $3.7 billion (over 20%) reportedly were affected adversely by the funding lapse; the National Institute of Standards and Technology (NIST) was unable to issue a new standard for lights and lamps that was scheduled to be effective January 1, 1996, possibly resulting in delayed product delivery and lost sales; and employees of federal contractors reportedly were furloughed without pay.
Effects on Mandatory Spending Programs
Programs that are funded by laws other than annual appropriations acts—for example, some entitlement programs—may, or may not, be affected by a funding gap. Specific circumstances appear to be significant. For example, although the funds needed to make payments to beneficiaries may be available automatically, pursuant to permanent appropriations, the payments may be processed by employees who are paid with funds provided in annual appropriations acts. In such situations, the question arises whether a mandatory program can continue to function during a funding gap, if appropriations were not enacted to pay salaries of administering employees. According to the 1981 Civiletti opinion, at least some of these employees would not be subject to furlough, because authority to continue administration of a program could be inferred from Congress’s direction that benefit payments continue to be made according to an entitlement formula. That is, obligating funds for the salaries of these personnel would be excepted from the Antideficiency Act’s restrictions during a funding gap. However, such a determination would depend upon the absence of contrary legislative history in specific circumstances.
Nevertheless, the experience of the Social Security Administration (SSA) during the FY1996 shutdowns illustrates what might happen over a period of time in these situations. The lack of funds for some employees’ salaries, for example, may impinge eventually on the processing and payment of new entitlement claims. SSA’s administrative history describes how 4,780 employees were allowed to be retained during the initial stages of the first shutdown. The majority of these employees were "in direct service positions to ensure the continuance of benefits to currently enrolled Social Security, SSI and Black Lung beneficiaries." Avoidance of furloughs was possible, because "appropriations were available to fund the program costs of paying benefits, [which] implied authority to incur obligations for the costs necessary to administer those benefits." SSA furloughed its remaining 61,415 employees. Before long, however, SSA and OMB reconsidered. SSA had not retained staff to, among other things, respond to "telephone calls from customers needing a Social Security card to work or who needed to change the address where their check should be mailed for the following month." SSA then advised OMB that the agency would need to retain 49,715 additional employees for direct service work, including the processing of new claims for Social Security benefits. Further adjustments were made during the considerably longer second shutdown, in response to increasing difficulties in administering the agency’s entitlement programs.
Potential Issues for Congress
Quality and Specificity of Agency Planning
In December 1995, Representative John L. Mica, chairman of the Subcommittee on Civil Service of the House Committee on Government Reform and Oversight, convened a hearing that focused on the first FY1996 shutdown and potential implications for the future. Among other things, then-Chairman Mica raised concerns about the shutdown’s planning and execution by agencies and OMB, saying "the execution of the shutdown was, in many instances, disorganized and illogical, at best, and oftentimes chaotic experience." As an example, he cited the "recall of more than 50,000 Social Security personnel [three days into the furlough], raising questions about whether they should have been furloughed in the first place." In addition, then-Ranking Member James P. Moran expressed interest in clarifying the distinction between exempt and nonexempt activities and employees. If similar issues were currently of concern, Congress might consider lawmaking and oversight options related to the quality and specificity of agency shutdown planning.
Availability of Agency Shutdown Plans
OMB’s Circular No. A-11 requires executive agencies to submit to OMB "plans for an orderly shutdown in the event of the absence of appropriations" when the plans are either first prepared or later revised. OMB has required the development and maintenance of these shutdown plans since 1980. It is not clear, however, the extent to which agency shutdown plans have been made publicly available or systematically shared with Congress and agency stakeholders for feedback. Scrutiny over agency shutdown plans may provide incentives for agencies to improve the quality of the plans, should it become necessary at some point for agencies to execute the plans, and may inform budget policy debates about the potential impacts of shutdowns. On the other hand, such inquiries may distract agency personnel from other duties and raise sensitive issues regarding what activities and employees should be considered exempt from Antideficiency Act restrictions.