US Government Shuts Down; What Federal Agencies and Programs Are Most Affected?

As the fiscal year came an end at midnight on September 30, the House and Senate were unable to reach an agreement to fund the federal government and avoid a government shutdown. As a result, the White House Office of Management and Budget (OMB) has issued the order to implement the shutdown of the federal government. Although essential functions such as public safety and benefit payments will continue, the shutdown impacts all agencies funded through the annual appropriations process. As a result, nearly 800,000 federal workers will be furloughed, and many services provided by the federal government will be halted during the length of the shutdown. As long as the Republicans in the House of Representatives remain committed to defunding or delaying the Affordable Care Act and President Obama and Senate Democrats refuse to negotiate on the Affordable Care Act as part of a resolution to continue to fund the federal government, there is no clear path for ending the government shutdown.

The White House Office of Management and Budget requires each agency to maintain a plan for operations in the absence of appropriations. This includes requiring agencies to determine which of their employees are deemed essential and therefore exempted from the shutdown. Below is an outline of the impact of this government shutdown on the major federal agencies:

Department of Agriculture. Food Safety Inspection Service (FSIS) inspectors would remain on the job, although FSIS support functions, such as administrative appeals and labeling, could be impacted. Conservation Reserve Program and the Wetlands Reserve Program would stop enrollment. Supplemental Nutrition Assistance Program (SNAP) benefits will continue through October. There is also a $2 billion fund available to reimburse states for SNAP administrative costs. Child Nutrition programs such as school lunch and breakfast will also continue through October. There is a contingency fund but it might not cover all of October. There will be no new funding for the Women, Infants and Children Supplemental Feeding Programs and the Commodity Assistance Programs.

Consumer Product Safety Commission. Only 22 employees out of 540 have been exempted from the shutdown. Those exempted employees will continue to focus on analysis of defective products, coordinate recalls, and monitor imports.

Department of Commerce. The Department, which employs over 46,000 workers, will furlough more than 40,000 people. Most research activities at the National Institute of Standards and Technology and the National Oceanic and Atmospheric Administration will be suspended and all U.S Census Bureau activities will be stopped.

Department of Defense. Roughly half of the civilian workforce for the military will be furloughed which includes over 400,000 people. However, Congress passed a bill before the shutdown occurred that guarantees all active duty military remain on the job and receive paychecks. The measure would also ensure continued pay for civilian employees of the Defense Department and Pentagon contractors whom Defense Secretary Chuck Hagel determines “are providing support to members of the Armed Forces.” It remains unclear how Secretary Hagel might apply that authority — whether he would spare only a few civilians and contractors from furloughs, or large numbers of them.

Department of Energy. Out of a workforce of more than 13,800, roughly 8,500 workers will be furloughed. Most non-furloughed employees will be focused on facility protection and the nation’s nuclear program.  Nearly all other programs, such as the Vehicle Technologies Program and the Advanced Energy Research Projects – Energy, will cease during a shutdown.

Department of Health and Human Services. Approximately 37,000 of the agency’s 78,000 employees will be furloughed. State Medicaid programs should not be disrupted since the federal match is distributed prospectively on a quarterly basis. Centers for Medicare and Medicaid Services (CMS) administrative functions, like processing state waiver, applications would be halted. Implementation of the Affordable Care Act should largely proceed because mandatory funding was included in the Act itself. States would not receive quarterly payments for the Temporary Assistance for Needy Families Block Grant, but would be able to use carryover funds from FY 2013. There would be no new funds for Head Start and no quarterly fund distributions for the Social Services Block Grant, Child Welfare, Child Care and Refugee programs, except that some essential activities under the Unaccompanied Alien Children program would continue.

Department of Homeland Security. Out of over 230,000 workers, just over 31,000 employees will be furloughed. However, the following functions will be affected: all non-disaster grants programs administered by FEMA and other DHS components will be halted; citizens and U.S. businesses will not be able to access E-Verify; FEMA will cease providing high-quality data that is used for public planning, which ultimately is used to make insurance determinations for homeowners; the issuance or renewals of seaman documentation and licensing; and fisheries enforcement patrols and routine maintenance to aids to navigation will be limited or curtailed.

Department of Housing and Urban Development. Only 349—roughly four percent—of HUD’s 8,700 workers are exempted. Federal Housing Administration (FHA) will be able to endorse single-family loans and FHA staff would be available to underwrite and approve loans. HUD would continue to disburse payments to cities, counties and states for CDBG, HOME funds and other block grant funds in cases that have been appropriated and authorized under a prior grant agreement. Disaster Recovery Assistance Programs would be funded through multi-year appropriations. Essential housing and emergency services for homeless persons would continue. Additional payments to Public Housing Authorities (PHAs) would stop. It is projected that most of the country’s 3,300 PHAs have the necessary funds to continue providing rental assistance for the remainder of the month. However, depending on the length of the shutdown, some PHAs may not be able to maintain normal operations. Nearly all of the Fair Housing agency housing activities would cease.

Department of the Interior. A total of 7,707 personnel would be exempted from furlough in order to protect life and property: the majority being law enforcement, wildland fire, emergency response and security, animal caretakers, maintenance and other personnel that would be focused on the custodial care of lands and facilities and protection of life and property. All areas of the National Park and National Wildlife Refuge Systems would be closed and public access would be restricted.

Department of Labor. Over eighty percent, or 13,350 people will be furloughed at the Department of Labor. Some of the largest divisions at the department that will remain in business are Worker Compensation Programs, which keeps most staff during a shutdown. Mine Safety and the Inspector General's offices are both at half strength. The rest would be mostly furloughed, including OSHA and the Bureau of Labor Statistics (unemployment numbers). Unemployment Insurance operations will function except for administrative costs reimbursements. Also, Workforce Investment Act adults, dislocated workers and youth grants that have already been obligated can continue to be drawn down. Any of those to be issued after October 1 would not be available for draw down until the government reopened. Technical assistance would be limited.

Department of Transportation. The FAA will remain almost fully functional, with all air traffic controllers reporting to work. However, almost 18,500 out of 55,500 of the department’s employees will be furloughed. Federal highway programs will not affected because they are funded through the Highway Trust Fund. Most of the Federal Transit Administration (FTA) will be furloughed, which will affect new grant applications. However, the FTA has exempted individuals working on Hurricane Sandy recovery efforts from the furloughs. The National Highway Traffic Safety Administration (NHTSA) will halt defect investigations and public notification of new auto recalls.

Environmental Protection Agency. About ninety-three percent, or 15,000 of the EPA’s employees will be furloughed, with only a small number of laboratory staff and emergency responders staying on the job. EPA programs that involve state and local partners, such as the Leaking Underground Storage Tank (LUST) and Superfund programs would continue.

Internal Revenue Service. Over 85,000 IRS employees will be furloughed, which is over ninety percent of its workforce.  All audit functions, examination of returns and processing of non-electronic tax returns that do not include remittances, non-automated collections, legal counsel, taxpayer services such as responding to taxpayer questions (call sites), information systems functions (except as necessary to prevent loss of data in process), all planning, research, and training and development activities will be ceased.

National Labor Relations Board. Only eleven out of 16,011 employees have been deemed “excepted” at the NLRB. All case handling and outreach will be stopped and the information office will be closed.

U.S Patent and Trademark Office. Currently, USPTO assumes that it could fully operate for a few weeks with its available funds and will not be impacted unless the shutdown lasts for several weeks.

If this shutdown of federal services continues for an extended period of time, it could have a profound effect upon a broad array of regulatory, compliance and oversight activities. Accordingly, we will continue to monitor the situation and keep you apprised of the most significant areas of impact. For further information, please contact the author of this alert, Andrew Buczek, at 202-906-8655, or your Dykema relationship attorney.