Show Me the Money: What is a Government Shutdown and How Does It Affect You?

By National Urban League
Published06 AM EST, Thu Jan 2, 2025
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WASHINGTON, D.C.— At the end of every fiscal year (FY), which for the Federal government is October 1—September 30, we hear news reports about a possible government shutdown and the hope for a continuing resolution (CR) to buy negotiators more time.  Often this process drags out multiple times until a final spending bill is passed for the remainder of the fiscal year to fund the discretionary part of the Federal government’s budget.  Currently, we are in this cycle again facing two deadlines of March 1st (for agencies funded by 4 subcommittees) and March 8th (for agencies funded by the remaining 8 subcommittees) before we have yet another possible shutdown.

As background, the Federal government cannot spend money unless there is a law saying it can (according to Article 1, Section 9, Clause 7 of the U.S. Constitution “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law…”)—in the case of discretionary funding, that law is an appropriations bill (often called an Omnibus—because it is several bills rolled into one to meet a joint deadline).  Therefore, when the current year appropriations bill or CR, as the case may be, expires the government largely shuts down.  A law called the Antideficiency Act spells out that agencies cannot enter into obligations unless appropriations are provided; however, it includes exceptions for certain activities such as duties that involve the safety of human life or the protection of property.  That is why, during a shutdown, agency activities are so limited—they must meet strict, very limiting standards, or be in violation of the law.

Given these standards, many Federal employees throughout the country are placed on furlough status (i.e. not working) during a shutdown.  Before 2019, they were not required to receive retroactive pay for the time they were furloughed, although it was common practice for that pay to be provided when the government reopened.  After the extended shutdown in 2019 that was changed so that furloughed employees are automatically paid once government operations resume (as are those that were required to work, since no one receives pay during the period of a shutdown, no matter how long it is).

There are other types of funding that are not affected by a shutdown because they are funded by different laws, such as mandatory spending (Social Security, Medicare, Medicaid, for example), activities funded by permanent user fees, or activities funded by advance appropriations.   Some of those may still be affected even if funding is available because they may be administered by employees who are paid with appropriated funds.

Aside from the obvious effect on Federal employees, how does it affect the public?  A government shutdown disproportionately affects:

  • Low-income and underserved preschool children who depend on Head Start’s education, health, nutrition, and parental involvement services;
  • Business owners and aspiring entrepreneurs who receive loan assistance from the Small Business Administration;
  • Infrastructure projects that provide employment, stimulate local economies, and rectify historical and structural inequities; and
  • Low-income and underserved communities and workers exposed to hazardous waste and industrial pollution from Superfund sites who depend on the Environmental Protection Agency to provide protection, inspection, and cleanup oversight…to name a few.

Aside from the immediate effects to our communities, shutdowns unnecessarily cost the American taxpayer by forcing agencies to undergo the shutdown process and the process to start the government up again, we well as forgoing normal agency operations during the period of the shutdown.  The economic effects are widespread, the Congressional Budget Office (CBO) estimated that the 2018-2019 five-week partial government shutdown reduced economic output by $11 billion in the following two quarters (including $3 billion that the economy never regained).

Given what is at stake, the National Urban League closely tracks what is happening in D.C. regarding funding battles so we can advocate for the best outcomes for our communities.  Stay tuned!