Personal Finance: What happens if the government shuts down?

It’s mid-January. Do you know where your government is? Barring another last-minute stopgap measure from Congress, part of it will go AWOL as of midnight Friday. Sadly, this eleventh-hour budget brinksmanship has become the rule rather than the exception. So if it comes to a shutdown, how will the average American be affected?

It can be argued that the fundamental responsibility of Congress is to approve the level of expenditure by the federal government, and raise the revenue to support that expenditure. Furthermore, the procedure for doing so is clearly delineated in exquisite detail. So it is particularly frustrating that the well-defined process rarely plays out, leading to emergency extensions and, on occasion, an actual shutdown.

Here is how the process is supposed to work.

After the President submits his own proposals, Congress is charged with passing a blueprint for overall spending called a budget resolution. This document establishes the total top line spending limit for the fiscal year ahead.

Next, the pie is divided among the 12 standing appropriations committees in the House and Senate, who each formulate detailed distribution authority of their allocated portion at the line item level. The product of each committee’s work is called an appropriations bill. Differences in House and Senate versions are ironed out, and the 12 bills move to a final vote, resulting in the approval and authorization of the government’s spending for the upcoming year.

The procedure is coherent and methodical. And it almost never happens.

The last time Congress actually passed all 12 appropriations bills on time and accomplished its assigned duty was 1996, 22 fiscal years past. The new normal eschews the established procedure in favor of hurried temporary authorizations, known as continuing resolutions (CR) that kick the can beyond the end of the fiscal year. Almost inevitably, the unpassed appropriations bills are bundled up into a big, sloppy salmagundi of spending known as an omnibus bill that allows the government to slog through until the cycle begins again.

Congress has already agreed to three continuing resolutions this fiscal year, and 112 CRs since 1998.

But when an agreement on spending proves elusive, the Government must suspend expenditures beyond appropriations already approved. A partial shutdown ensues, requiring that all non-essential services be curtailed until a new authorization is adopted. This is the situation facing the Congress and the president as the Friday deadline looms.

Certain services are deemed by the president to be essential and therefore continue to operate on credit advanced against next year’s appropriations. National defense, air traffic control, law enforcement and health care generally qualify. The postal service is unaffected as it has a separate revenue source.

Non-essential services have typically included national parks, museums, and monuments. Many permitting and licensing activities are curtailed, like passport and visa applications. Some important parts of the safety net are likewise affected, including applications for assistance programs for the poor, intake into the VA, critical activities at the Centers for Disease Control, and approval of new drugs by the FDA. Social Security recipients will get their checks, but new retirees won’t be able to sign up. In all, roughly 40 percent of Federal employees were furloughed for 16 days during the last shutdown in 2013.

Affected workers are technically on leave without pay, but in every one of the previous 18 shutdowns since 1976, full pay was restored retroactively by Congress.

Most likely, lawmakers will ram through another temporary CR before the Friday deadline, delaying the showdown into February. If not, federal prisons will not empty their cells, but don’t make any plans to visit the Smithsonian this weekend.

Christopher A. Hopkins, CFA, is a vice president and portfolio manager for Barnett & Co. in Chattanooga.