When the dust settled after the debt limit deal in early June, many budget watchers heaved a sigh of relief for two reasons: (1) President Biden and Speaker of the House Kevin McCarthy (R-CA) managed to broker a deal that averted what would have been a cataclysmic default on the national debt, and (2) they locked in discretionary spending caps for the next two years, signaling the strong possibility of a regular and orderly appropriations cycle for the upcoming fiscal year (FY 2024).
It didn’t take long for the wheels to fall off the appropriations bus, however, and now—just 15 calendar days until the start of the new fiscal year—Speaker McCarthy is trying to corral sufficient support among his ultra-conservative House Republicans for a temporary continuing resolution that would keep the federal government open until the 2024 appropriations process is complete.
What is a continuing resolution?
A continuing resolution (CR) is a type of appropriations bill that provides temporary authority for a federal agency to incur obligations (i.e., spend money) after the start of the new fiscal year if full-year appropriations have not yet been enacted. The authority to spend expires on a specific date written into the legislation and it permits expenditures only at the level, rate, and policies enumerated in the most recently enacted full-year appropriations bill (in this case, H.R.2617, the Consolidated Appropriations Act for Fiscal Year 2023).
A CR may seem like a nifty tool, but it isn’t painless. The constraints imposed are problematic in any year, regardless of the political environment:
- Restrictive rate of spending. Agencies receive a uniform amount of budget authority to spend for each month under a CR (specifically, a pro-rata share of the last full year’s amount). For agencies that manage programs with “chunky” spending patterns—like the Department of Education’s distribution of Pell Grants at the beginning of every college semester—this restriction can hamstring operations. Moreover, if the economy has changed significantly since the last full-year appropriations bill was enacted (e.g., inflation, recession, etc.), a CR can impose significant budgetary constraints.
- No “new starts.” For agencies that typically engage in new projects, or change their funding priorities from year to year, the prohibition against new starts can significantly affect operations. The Congressional Research Service notes, “The Department of Defense frequently criticizes this constraint because it can, for example, delay the development of new weapons programs, stall new contracts, and prevent new hires.”
- Budget uncertainty. Without a full-year funding bill in place at the start of a fiscal year, an agency will have to manage its operations without a clear understanding of resources available to it for the upcoming year (will managers have more funding than last year? The same amount? Less?). For example, an agency like the Census Bureau would find a CR very challenging while trying to plan and conduct a decennial census.
- Administrative burden. A CR imposes tight restrictions on the obligation of funds. Moreover, there are federal penalties for overspending. Consequently, federal employees operating under a CR spend more time documenting their activities than under regular appropriations. This can lower productivity and hamper agency operations.
In short, federal agencies really dislike CRs. Despite this, CRs have been a critical tool in keeping the government open when Congress can’t get its job done on time—which has now become standard operating procedure: Congress has enacted at least one CR in all but three years since FY 1977 and some CRs have lasted six months or more.
It will be tough for Congress to pass a continuing resolution this year
The basic elements of a continuing resolution—its duration, funding rate, any anomalies (special exemptions), and any legislative provisions (text that alters the policies in the underlying full-year appropriations or adds new ones)—all must be negotiated. In a divided government like we have now (a Republican majority in the House, a Democratic majority in the Senate, and a Democratic president)—these negotiations take time and often require the threat of a deadline (Sept. 30, the end of the fiscal year) to complete. Moreover, a CR is vulnerable to filibuster in the Senate, so unless the Senate majority party has 60 seats, any CR moving through that chamber must have bipartisan support.
This year, however, there are additional extenuating circumstances that will make a CR particularly difficult to pass. First, the FY 2023 omnibus appropriations bill—which will be the basis for any continuing resolution—was written last year when Democrats held majorities in the House and Senate and President Biden occupied the White House. The spending levels and policies in that bill reflect Democratic priorities. Many House Republicans don’t want to carry that level of spending or those policies forward into FY 2024—even temporarily.
Second, the next CR probably will have to carry some level of emergency supplemental appropriations and program reauthorizations, adding to the list of items that need to be negotiated between the two political parties. The Federal Emergency Management Administration (FEMA) needs additional disaster aid to help victims of the wildfires in Hawaii, Hurricane Idalia in Florida, Tropical Storm Hilary in Southern California, and floods in New England. Ukraine needs additional humanitarian and military assistance. The Department of Homeland Security wants emergency funding to deal with immigrants crossing the southern border and to combat the fentanyl trade. The Federal Aviation Administration, various farm commodity programs (including the food stamp program known as Supplemental Nutrition Assistance Program, or SNAP), the National Flood Insurance Program (NFIP), and the President’s Emergency Plan for AIDS Relief (PEPFAR) all must be reauthorized before October 1. At some point, negotiations for a CR could collapse under their own weight.
What happens if Congress can’t pass a CR?
Given the current political standoff, it is possible Congress will be unable to pass a CR in time, or at all. If this happens, most federal agencies will lose their authority to spend money. Technically this is called a “funding gap” but elected officials and the media will refer to it as a government “shutdown.”
During a funding gap/shutdown, government agencies without FY 2024 discretionary appropriations in place must halt their operations, and the federal employees that support those programs are furloughed. However, there are some exceptions:
- Essential services. Certain functions and/or employees are deemed too essential to furlough. This category includes active-duty military and personnel involved with border protection, in-hospital medical care, air traffic control, federal law enforcement, power grid maintenance, and some legislative and judicial staff.
- Mandatory spending programs not subject to appropriations. Mandatory programs like Medicare and Social Security are largely untouched by a funding gap/shutdown because their funding is not subject to the discretionary appropriations process. However, some operations are affected. For example, Social Security benefit payments will be sent, but new benefit verification and card issuance will stop. Benefits managed by the food stamp program (SNAP) are vulnerable after 30 days.
- Programs funded by user fees. Some federal programs are funded by user fees the agency collects for their services. As such, they are largely unaffected by a funding gap/shutdown. For example, visa applications (for which applicants must pay a processing fee) would continue to be processed.
- Programs funded through advance appropriations. Some federal programs receive advance appropriations and would be unaffected by a funding gap/shutdown. For example, the FY 2023 omnibus appropriations bill included FY 2024 funding for Veterans Administration health services. If there was a funding lapse/shutdown, veterans could continue to receive medical care at VA health facilities.
One note: a funding gap/shutdown can be full or partial—it affects only those agencies for which full-year discretionary appropriations have not yet been enacted. For example, at the beginning of FY 2019, 5 of the 12 discretionary appropriations bills had already been enacted into law. When the new fiscal year started, several CRs were passed to keep the remaining agencies without full-year appropriations open, but negotiations eventually broke down over social spending and construction of a wall on the southern border. At that juncture, their agency discretionary appropriations lapsed, but only parts of the government were affected—those funded by the 7 unfinished appropriations bills.
Shutdown or CR?
Although the probability of a funding gap/shutdown is growing, the expected outcome still points to passage of a temporary continuing resolution (and perhaps more than one). Prior shutdowns often had a unifying message from the recalcitrant party—to stop implementation of the Affordable Care Act, to demand funding to construct a border wall, etc. This year, no such rallying cry exists. Various factions of House Republicans each want something different which makes it hard for Speaker McCarthy to spin the opposing party (Biden and Congressional Democrats) as the culprits.
Moreover, both party leaders in the Senate are signaling that they’re on the same page regarding the elements of a CR so the Senate should be able to pass one with a large bipartisan margin, leaving House Republicans looking disorganized and incapable of governing—which is not a good look entering the 2024 election year.