A- A+

What Happens When the Government Shuts Down?

Government Shutdown

September 29, 2023

The federal fiscal year begins on Oct. 1, and each year, Congress must pass and the president must sign a series of 12 spending bills to fund the federal government for the upcoming fiscal year. If this process is delayed — and it commonly is — Congress may pass a short-term funding solution, known as a continuing resolution (CR), while federal budget negotiations continue. Failure to pass any funding measures results in a government shutdown, but what does this really mean?

Federal Employees

The individuals who experience the most direct effects of a government shutdown are federal employees and active-duty U.S. military service members. During a government shutdown, all non-essential federal work stops. Services outside of those necessary for “the safety of human life or the protection of property” cease. Non-essential federal employees are put on furlough, while employees in essential federal sectors continue to work. Each federal agency has a contingency plan that determines which workers are essential and non-essential. For all employees, however, paychecks are not issued until the shutdown ends, at which time they are retroactively paid. Prior to the Government Employee Fair Treatment Act of 2019, backpay for furloughed employees was not guaranteed. Recent legislation assures payment for all federal employees, but the timing is contingent upon the duration of the shutdown.

Unlike government employees, lawmakers continue to receive pay. Article II, Section I of the Constitution guarantees pay for the president, and members of Congress receive compensation under Article I, Section 6.

Federal Programs and Services

Mandatory programs with permanent appropriations separate from the annual budget process — such as the U.S. Postal Service, Social Security and Medicare — continue to operate with no or minor service changes. Funding for other federal programs and services is re-appropriated each year, so the effects of a government shutdown are much greater. Because approximately 900 programs rely on annual appropriations bills to operate, the potential effects of a government shutdown are wide-ranging.

For instance, food assistance programs such as the Supplemental Nutrition Assistance Program (SNAP) and the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) have contingency funds to sustain operations, but it is unclear for how long. Internal Revenue Service (IRS) agents continue to work, but only if their duties directly protect the government. This does not include responsibilities such as conducting casework or assisting with taxpayer disputes. While federal-level criminal court cases proceed, civil and immigration cases are often delayed or cancelled, and very few new cases are heard.

In the event of a shutdown, the U.S. Small Business Administration (SBA) stops processing loan applications, and the United States Department of Agriculture pauses loans to farmers. Environmental Protection Agency (EPA) inspections of drinking water and hazardous waste sites halt. The U.S. Food and Drug Administration (FDA) carries out only high-risk food safety inspections, and the Occupational Safety and Health Administration (OSHA) is limited in its ability to conduct workplace safety inspections. National parks remain open, but maintenance functions — such as visitor services, trash collection, road clearing and restroom cleaning — stop.

Most federal employees essential to domestic and international travel continue to work without immediate pay. Relatively few TSA agents and FAA employees cease working, and travelers will likely not experience delays in passport or consular services because most operation costs are covered by fees. If the shutdown persists, however, these funds may run out, resulting in delays.

The Broader Effects

A relatively short government shutdown is disruptive but has contained economic effects. In contrast, estimates indicate a prolonged shutdown could reduce economic growth by 0.15 - 0.2 percentage points per week. If the government does shut down, the only solution is for Congress to reach an agreement on the federal budget. The House and Senate must pass appropriations bills that the president signs into law, at which point government operations resume.

Additional Resources

The Partnership's Public Policy team engages with local, state and federal officials to create public policy that generates economic growth, business prosperity and talent development in Greater Des Moines (DSM). The Partnership is a nonpartisan organization.

Stephanie Kiel

Stephanie Kiel is the Public Policy Intern for the Greater Des Moines Partnership and a student at Drake University studying Politics; Economics and Law, Politics & Society.