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

Order Code 98-844 GOV

Updated September 20, 2004

CRS Report for Congress

Received through the CRS Web

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

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].

Congressional Research Service ˜ The Library of Congress

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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.

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, 104th Congress, 1st 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?)

CRS-3

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:

8

!

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:

Fewer employees, agencies, and programs were affected because some funding bills were

enacted during the period between the two shutdowns.

CRS-4

— 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:

9

!

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.

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.

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!

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

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.

CRS-6

Table 1. Appropriations Funding Gaps: FY1977-FY2000

Fiscal

Year

Date Gap Commenced a

Full Day(s)

of Gaps

1977

Thursday 09-30-76

10

Monday 10-11-76

1978

Friday 09-30-77

12

Thursday 10-13-77

Monday 10-31-77

8

Wednesday 11-09-77

Wednesday 11-30-77

8

Friday 12-09-77

1979

Saturday 09-30-78

17

Wednesday 10-18-78

1980

Sunday 09-30-79

11

Friday 10-12-79

1982

Friday 11-20-81

2

Monday 11-23-81

1983

Thursday 9-30-82

1

Saturday 10-2-82

Friday 12-17-82

3

Tuesday 12-21-82

1984

Thursday 11-10-83

3

Monday 11-14-83

1985

Sunday 9-30-84

2

Wednesday 10-3-84

Wednesday 10-3-84

1

Friday 10-5-84

1987

Thursday 10-16-86

1

Saturday 10-18-86

1988

Friday 12-18-87

1

Sunday 12-20-87

1991

Friday 10-5-90

3

Tuesday 10-9-90

1996

Monday 11-13-95

5

Sunday 11-19-95

Friday 12-15-95

21

Saturday 1-6-96

Date Gap Terminated b

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.