Tag Archives: shutdown

Why Do We Care That Congress Does Not Pass Appropriations Bills on Time?

The federal government’s fiscal year began on Oct. 1, 2017. As of the date of this post that was 101 days ago. There is still no budget for the full year, just a continuing resolution (CR) that expires on January 19.

So what is a CR? The Government Accountability Office (GAO) defines it as “An appropriation act that provides budget authority for federal agencies, specific activities, or both to continue in operation when Congress and the president have not completed action on the regular appropriation acts by the beginning of the fiscal year.” In recent years we could also define it as “business as usual.” Some folks look at that and say “no problem.” They think that government spends too much anyway, so slowing down government spending is a good thing.

That might make sense if operating the government on continuing resolutions and last-minute omnibus spending bills actually saved money for the taxpayers. Sadly, the opposite is true. Not having a funded budget on Oct. 1 means agencies have to do countless workarounds, many of which cost money. Here are just a few examples of the problems created by the lack of timely appropriations.

New projects are delayed. A CR is exactly what it sounds like – it allows existing programs/projects to continue, often without an increase for inflation and sometimes with a reduction. Unless specifically provided for in the CR, new starts are not allowed. It does not matter how critical the new project might be, or who wants it.

Talent management. Government needs to replace key people who leave. Sometimes having a CR means they have no assurance they will have the money necessary to fill every job. So – being good stewards of the taxpayers’ money and not wanting to violate the Antideficiency Act – government managers hold back a bit to make certain they do not over hire. Sounds good, but what happens when they get the money? Now they have to rush to get the jobs filled. We all know how quickly the federal hiring process produces new hires. So now we have agencies trying to fill jobs quickly using a bad hiring process, overloading the HR staff, and often not getting the jobs filled during the fiscal year. That leads to talent gaps and what appear to be surplus dollars.

Contracts. Agencies cannot award contracts for programs where they have no money (the Antideficiency Act again). That means new contracts are often delayed until after the CR is replaced by a real appropriation act. That can get messy, because it delays the work that agencies need to do and puts an enormous burden on the contracting office staff once the appropriation is actually passed. If an ongoing contract is up for renewal, an agency may have no choice but to issue an extension rather than picking up an option year or awarding a new contract. That creates even more work for the contracting office. The net result is that the government wastes resources. It also causes agency spending to be concentrated in a few months of the year, which, combined with the talent management problem, then leads to the end of year money problem.

End of year money. Every year we see complaints from politicians and in the press about the government’s end of year “spending binge.” People lament the fact that the government appears to not spend money until the last quarter, when it rushes to obligate all of the leftover dollars. Does that happen? Of course. Does it happen because agencies, their leaders and their contracting staff are idiots or incompetent? Of course not. It happens because the budget process is broken. It happens because, like in fiscal 2018, we get a almost a third of the way through the year with no annual appropriation in place. It happens because the process of getting that money from a top line appropriation down through the agency budget process to the program managers who actually manage the money can take even longer. In recent years it has not been unusual for program managers to not know what their actual budget will be until the fiscal year is half gone.

So the answer to the question in the title of this post is that we should all care, because it is certainly no way to run a business, or a government. We have 535 Senators and Representatives who are paid to do a job. Article 1, Section 8 of the U.S. Constitution says “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States….” Whether you think the government spends too much money, or spends too little, or doesn’t spend it in the right way, the bottom line is that federal agencies should begin every fiscal year with a clearly defined budget. Not having that budget defined on day one makes agencies less efficient and costs the taxpayers money.  Virtually no reasonable person, anywhere in the political spectrum, thinks the government should waste taxpayer money.

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Shutdown Redux: (Borrowed) Money to Burn

MoneyBurningEvery time I think of the potential for a shutdown, some famous words from President Ronald Reagan come to mind. “There you go again….”

A lot has been written about the 2013 shutdown. How it disrupted government services. How it wasted $24,000,000,000 dollars and taxpayers got nothing in return. How Federal employees were sent home to do nothing, not knowing if they would be paid. How in the end they got paid for doing nothing. How much stress employees, customers, and taxpayers endured. How contractors had to lay off staff during the shutdown (most of whom got no back pay).

I almost expect to see Rod Serling step into the picture and start explaining how nothing is what it seems in the Twilight Zone of Washington, DC. Sadly, there is no narrator and this is not a TV show. Shutdown planning has already started in every agency. Leaders are reviewing plans, updating the lists of exempt positions, and working with other agencies who may be affected if they shut down.

All of this planning costs money. There is a dollar cost and an opportunity cost. Time that is wasted on planning for another shutdown is never going to be recovered, yet no responsible agency can fail to plan for the consequences. They have the choice of being wasteful or irresponsible.

Pain for Everyone

Just like last time, government employees are not the only ones who can and will suffer in another shutdown. In fact, because government workers will most likely be paid for any time they do not work, they may be among the least harmed by a shutdown. Employees in the private sector are subject to far more losses. Here are a couple of examples:

Federal Contractors. Businesses have to earn revenue to pay employees. If they are told to stop work, the company’s revenue for that contract stops. Larger firms can absorb the impact for a few days, but not much longer. Small firms may not be able to absorb anything. If they lose the revenue, they have to immediately lay off employees. The government does not make the contractor whole after the shutdown and the employer does not make the employee whole. Everyone suffers and no one wins.

Businesses Other than Contractors. Walk into a restaurant near Federal offices or military installations and take look at the number of Federal employees who are there. Go to the dry cleaners, the convenience stores, and the coffee shops. They depend heavily on customers who work for the Federal government, either as employees or contractors. When they are not at work, those businesses send employees home. They get no revenue and their employees get no pay. No one makes any of them whole.

The economic impact of a shutdown is immense. It is even more than the dollars wasted on paying employees ($2.5 billion in the 2013 shutdown) who are not allowed to come to work, the revenue businesses lose, and the wages their employees will not get paid. Here are just a few more examples from the 2013 shutdown:

  • It halted permitting and environmental and other reviews, delaying job-creating transportation and energy projects. For example, the Bureau of Land Management (BLM) was unable to process about 200 Applications for Permit to Drill, delaying energy development on Federal lands in North Dako- ta, Wyoming, Utah, and other states.
  • It hindered trade by putting import and export licenses and applications on hold. For example, because the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau was unable to issue export certificates for beer, wine, and distilled spirits, more than two million liters of U.S. products were left sitting at ports unable to ship.
  • It disrupted private-sector lending to individuals and small businesses. During the shutdown, banks and other lenders could not access government income and Social Security Number verification services. Two weeks into the shutdown, the Internal Revenue Service (IRS) had an inventory of 1.2 million verification requests that could not be processed, potentially delaying approv- al of mortgages and other loans.
  • It halted Federal loans to small businesses, homeowners, and housing and healthcare facility developers. The Small Business Administration (SBA) was unable to process about 700 applications for $140 million in small business loans, and the Federal Housing Administration (FHA) was unable to process over 500 applications for loans to develop, rehabilitate, or refinance around 80,000 multifamily rental units.
  • It delayed the Alaskan crab fishing season, costing fisherman thousands of dollars in lost revenue. Because the National Oceanic and Atmospheric Administration (NOAA) was unable to apportion harvest levels, the start of the season was delayed for three to four days. The fishing industry estimates these delays cost fisherman thousands of dollars of lost revenue per day, since days lost at the beginning of the season cannot be made up later.
  • It disrupted tourism and travel by closing national parks and the Smithsonian. The National Park Service (NPS) estimates that the shutdown led to over $500 million in lost visitor spending nationwide, a significant economic hit to communities surrounding national parks and monuments.
  • It significantly impacted small businesses that contract with the Federal government. Compared with the same period last year, small business contracts with the Department of Defense (DOD) dropped by almost one-third during the shutdown, and spending dropped 40 percent.
  • It delayed aircraft purchases and deliveries by closing the Federal Aviation Administration (FAA)’s Aircraft Registry. The General Aviation Manufacturers Association estimates that this delayed 156 aircraft deliveries valued at $1.9 billion.
  • It temporarily closed six Head Start grantees, serving nearly 6,300 children. Head start grantees operating in Alabama, Connecticut, Florida, Georgia, Mississippi, and South Carolina closed for up to nine days before reopening with funds provided by philanthropists through the National Head Start Association or their state.

So – in addition to burning the government’s borrowed money, a shutdown will harm businesses large and small, take money out of the pockets of working men and women, reduce tax revenues, disrupt communities, and generally make a mess.