It’s Shutdown Time Again

It seems we’ve stood and talked like this before…  The federal government approaches the beginning of the next fiscal year, and the shutdown crisis starts as if by clockwork.  But this time, something is different.  This time, the Congress has passed no appropriations bills at all.  Usually, at least the Pentagon and the Congress itself have been funded.

It brings back such memories.  In 1995 and 1996, the Congress (led by then-Senator Bob Dole (R-KN) and then-Representative Newt Gingrich (R-GA)) could not agree on appropriations (and a lot of other things) with then-President Bill Clinton (D).  The Congress did manage to pass the easy bills that year.  They funded themselves.  They funded the Pentagon.  They funded the Departments of Agriculture and Energy, and their transportation and water projects.  They also funded the Treasury (convenient, because by the time the drama had ended, the Treasury had had an enormous amount of work to do).  But the rest of the government – the Departments of Commerce, Justice, State, Interior, Labor, Health and Human Services, Housing and Urban Development, and Veterans Affairs, and the District of Columbia – went into the fiscal year without appropriations.

All of those agencies were shut down for five business days in November, and then again for 21 business days from December into January – this second episode, considering weekends and holidays, lasting for more than a calendar month.

The standout practical lessons from that time are pertinent today.  For one thing, there is statute and legal opinion regarding what an agency can and cannot do when unfunded.  You have heard about “essential” personnel.  The law does not use that term in this connection.  Rather, it states that employees may not report for work (no volunteers, no good Samaritans, no workaholics) unless their work is pertinent to “emergencies involving the safety of human life or protection of property,” in which case they are “excepted” from the general ban.  These excepted employees are perhaps the major category who would report for work even in the absence of appropriations.

Of course, that specification is far from clear cut.  Each agency is required to file a contingency plan ahead of time with the Office of Management and Budget.  Back in 1995, OMB took this very seriously; it did not want any claim by the Congress that the Administration was shading the rules in either direction.  Ironically, OMB’s “Mr. Shutdown” (yes, we sang the song) was the then-OMB Deputy Director for Management, John Koskinen – who subsequently became the Administration’s point man on the Year 2000 computer problem, still later the temporary turnaround CEO of Freddie Mac after the financial crisis, and now has been nominated to head the embattled Internal Revenue Service.  I will be surprised if the current Administration is not equally motivated to avoid controversy should the government shut down next week.

But the precise implementation of “the safety of human life or protection of property” will be subjective.  Based on past patterns, as one example, physicians who treat patients at the National Institutes of Health will be excepted, but physician researchers will not.  Who is who?  It will not always be crystal clear.  And not surprisingly, this will be the first time the Department of Defense will need to navigate the “life and property” test.

Furthermore, this test is a journey, not a destination.  I was reminded by an old friend just this morning of the application of that test to the personnel at the National Zoo.  Among the property whose safety must be protected are the animals, so the people who feed the animals are excepted.  But the people who feed the animals only get the food from the lockers and place it in the pens.  After about a week of shutdown, the lockers were empty.  OMB had to revise its exceptions to include the Zoo personnel who obtain the food and get it to the lockers.  Similar situations surely will replicate themselves throughout the federal agencies.

And federal employees who are not excepted are not necessarily unimportant.  No one will be home to answer taxpayer inquiries at the IRS.  Federally funded highway grant applications will be out of gas.  The national parks and museums are mere recreation, but international tourists who are turned away will be unlikely to tell their countrymen to visit.  Think of it as “exporting good will.”

And when it comes to uncertainty, federal contractors will take the prize.  There is no established standard for the “life and property” designation for private entities working on federal contracts.  And furthermore, if services are provided when the contracting federal agency (which this year, again, would include all agencies) is shut down, the contractor will have no guarantee of being paid even after funding is restored and the government reopens.  In past shutdowns, many contractors have had to lay off their own private-sector workers.

Shutdowns entail a lot of outright waste.  Preparing to shut down is wasteful; it involves considerable ultimately unproductive work to secure facilities and systems.  Further unproductive work goes into restoring operations later.  In past shutdowns, Congress has decided to pay furloughed workers for their time off the job, which of course was not caused by their fault.  Even excepted workers’ pay is delayed until funding is restored, which is not good for morale.  And this time, that pay delay will extend to active-duty uniformed servicemen and women, which never has happened before.

One reported objective of this battle is to “de-fund Obamacare.”  I am practicing law without a license here, but the Congressional Research Service (CRS), in response to the inquiry of Senator (also Doctor) Tom Coburn (R-OK), seems to suggest that this would not be the effect.  Entitlement (or “mandatory”) benefits are paid not through annual appropriations bills, but rather under permanent law.  Therefore, those benefits must be paid, come heck or high water, and so federal employees (even those technically funded by appropriations) who deliver those benefits are “excepted” on the ground that there is a “necessary implication” of the permanent law that they must perform their function.  (So, for example, Social Security Administration employees who deliver benefits go to work in a shutdown, even though others who issue new and replacement Social Security cards and update earnings records would be told to stay home.)  Therefore, work to support some ACA functions that are financed by mandatory funding will be excepted.

A second category of ACA functions have been financed under multi-year appropriations, rather than annual appropriations.  Multi-year appropriations might be available for a specified number of years greater than one, or until they are exhausted.  Those activities can be undertaken until the money runs out, even without new annual appropriations.

Finally, the current-fiscal-year (fiscal year 2013) continuing resolution (CR) gives the Secretary of Health and Human Services some amount of transfer authority.  The Secretary can use that authority to make additional funds available for implementation of the ACA.

The broad interpretation is that implementation of the ACA can go on even through a fairly lengthy shutdown.  The CRS analysis makes clear that there is no tested case law to speak of, even though the Congress and the President have chased each other around this shutdown tree far too often in recent years.  Therefore, if someone brought suit against an Administration’s handling of a shutdown in the future, the outcome would not be predictable with certainty.  However, it might be hard to imagine the courts leaping eagerly into a President’s decisions in such extraordinary and trying circumstances.

While this battle rages, important collateral damage is ignored.  The federal government continues to operate on continuing resolutions rather than full appropriations bills, so long as the regular process is put on hold to clear the field for other battles.  The last time all appropriations bills were signed into law on time was in September of 1994, for fiscal year 1995.  Since that one brief shining fiscal year and as of the end of this month, at least some federal agencies will have been funded by continuing resolutions rather than final appropriations bills for about 58 of the last 96 months – including three years during which a series of CRs eventually covered the entire year.

This veritable takeover of temporary rather than permanent funding entails considerable costs.  Funding at some formulaic percentage of the previous year’s level virtually prohibits planning, revising priorities, investing in quantum-leap technology, and improving processes; for those who complain that the federal government pursues obsolete problems through obsolete programs, this is one important reason why.  Oversight suffers; the appropriations process is the most important vehicle for congressional oversight, and when the Congress does not write appropriations bills, oversight does not happen.  (Some would add that another reason for deficient oversight is how much more time Members of Congress spend today on the telephone asking for campaign contributions.)  Thus, the government surely would perform better, and the American people would be happier with government, if we could get off of this continuing-resolution merry-go-round, with its many intermittent shutdown threats, and resume managing government by the old rules.

The shutdown prospects change by the minute.  It is possible that the focus of the ACA battle will shift to the debt limit – although that would only raise the stakes for the economy.  Or the Congress could pass a very-short-term CR and create two separate mud-slinging contests over both the CR and the debt limit.  The only safe bet right now is that this dispute will not end gracefully.  No surprise, after where we already have been.

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