October 4, 2013
At this time, it remains unclear how the conflict in Washington over funding the federal government will be resolved and how long the shutdown will last. While Congress stands at an impasse on budget negotiations, states are busy digesting federal agency shutdown guidance while developing and executing their own contingency plans for programs that are fully or partially funded by federal dollars.
The effects of the shutdown vary by grant program depending on whether that program’s spending authority is mandatory or discretionary, the timing of appropriations for the program, and other variables in the federal budget process. Discretionary programs that do not receive advanced, multi-year or no-year (available without fiscal year limitation) appropriations are likely to be most affected by the shutdown. One example of a program in this category is the Special Supplemental Food Program for Women, Infants and Children (WIC). Mandatory programs that are not dependent on annual appropriations, as well as mandatory and discretionary programs that received advanced funding in fiscal 2013 appropriations, may see little or no impact during the shutdown.
For mandatory programs that are authorized but do not have appropriations in place, these programs may not see new funding during the shutdown, but states will be entitled by law to reimbursement once the lapse in appropriations ends, as Federal Funds Information for States explains in a recent brief. Additionally, several mandatory programs have expired authorizations, such as Temporary Assistance for Needy Families (TANF) and the Supplemental Nutrition Assistance Program (SNAP). Some federal agencies have issued guidance to states on of carryover balances, contingency funds, and other sources to cover funding gaps during the shutdown, but these options vary by program and by . Regarding TANF and the Child Care Development Fund (CCDF), states have also been advised in guidance that they will be able to count spending from state funds during the shutdown towards state matching and maintenance-of-effort requirements once these programs are extended.
Continued uncertainty at the federal level poses planning, budgeting, and cash flow challenges for states. In cases where it is not guaranteed that states will be reimbursed by the federal government for expenses incurred during the shutdown, states are having to make difficult choices about whether to continue or suspend program activities, and whether to furlough federally-funded employees. In addition, the shutdown’s economic impacts, particularly in areas with a high federal presence, could have significant fiscal implications for states. For example, the shutdown can result in lost tourist revenues from national park closures and lower sales tax collections as furloughed employees reduce consumption. Ultimately, the extent of the shutdown’s impact on states and the economy will depend on how long the shutdown continues.
For more updates and resources on the federal shutdown and its impacts on states, visit NASBO’s Federal Shutdown Information page.