Government Shutdowns: What You Need to Know

09/28/2021 3:03 PM | ACRAsphere Blog Team

With the end of the fiscal year looming on Sept. 30, there is the possibility that federal agencies will need to cease operations if Congress and the White House fail to pass spending bills to keep them open.

Once a rare occurrence, government shutdowns have sadly become more common in recent years as partisan fighting prevents policymakers from taking the steps needed to keep the government’s light on.

What does a shutdown mean for companies that work with the government, and for the public in general. Below is some basic information about what a shutdown could mean.

What is a government shutdown?

A shutdown occurs when Congress and the President fail to pass legislation to provide funding for federal agency operations. The federal government operates on an October 1-to-September 30 fiscal year. Each year, Congress must pass, and the President must sign, appropriations bills that fund government agencies and programs. If an agency does not have its funding signed into law by October 1, Congress can pass a “continuing resolution” that extends the prior year’s funding levels for set time period until it passes a full-year appropriations bill. If the president does not sign either a continuing resolution bill or a full-year appropriation, the affected agency or agencies must “shut down,” stopping operations except for essential services.

Do all agencies and programs have to shut down?

Not necessarily. Typically, Congress passes 12 separate appropriations bills funding different parts of the government. If Congress and the President approved one or more of those appropriations bills, the agencies covered by those bills would be able to continue running even if other agencies need to shut down. In addition, the funding of certain so-called mandatory spending programs like Social Security and Medicare is not contingent upon Congress providing annual appropriations; those programs will continue to be funded. However, the staffers who administer these programs may not be able to work so delays in benefits, such as Social Security checks, are possible.

How long will a shutdown last?

Shutdowns last until Congress and the President agree on either a full-year spending bill or another continuing resolution. The most recent shutdown, in late 2018 and early 2019, lasted more than a month. Other shutdowns have been much shorter; in fact, if a shutdown lasts only a day or so, its impacts will be negligible.

Do all federal employees have to stop working if there’s a shutdown?

When there is a shutdown, agencies designate “essential” personnel to continue working. The definitions of what is essential vary by agency, but personnel like air traffic controllers, Secret Service agents, and military personnel will most certainly continue working. Essential employees work without pay, but have been granted back pay following previous shutdowns. Non-essential personnel are placed on unpaid furlough, meaning they must cease all work activities, including answering emails and phone calls.

I have a contract with a federal agency. What do I do?

If you have a current contract with the federal government, you should speak to your point of contact in the government as soon as possible. Typically, agencies will provide some guidance for contracting officers as a shutdown looms. Even if there is a shutdown, if your contract is already in place, you might not have to cease operations because the money for the contract would already have been committed. However, it is possible that your contracting officer will be furloughed, and payments could be delayed. Contractors should carefully maintain records of all contacts with agencies, outstanding invoices, costs incurred due to the shutdown, and other data about activities both before and during a shutdown that will help agencies understand what work has been done.

Will my company get paid for the work we do during a shutdown?

In general, contract expenses incurred prior to a shutdown will be paid, but there may be delays in the processing of these expenses due to a shutdown. However, contractors are generally not entitled to reimbursement for performance of unfunded work during a shutdown. In previous shutdowns, Congress did approve back pay for both furloughed and essential federal employees but not for contractors. Some businesses contracting with the government were forced to furlough employees working under contract, and it fell to those businesses to determine whether to provide back pay or paid leave for those workers. That is why it is vital to keep good records of work done both prior to and during a shutdown.

Will I be furloughed by my company if its funding for federal projects is stopped or delayed?

That depends on your company and the kind of contract it holds. If you are furloughed, you may be eligible for unemployment compensation. Unemployment compensation requirements and rules vary by state; for more information, contact your state’s unemployment office.

Will federal grants be affected by a shutdown?

It depends on the agency. In some cases, grant activities may continue, but your points of contact with the federal government may be furloughed and payments may be delayed. If your federal grant is in conjunction with a state or local government, those entities may decide to cover the gaps in federal funding caused by a shutdown, although there is no guarantee they will be reimbursed by the federal government. As with contracts, it is important to speak with your point of contact at the awarding agency as soon as possible.

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