How a Federal Government Shutdown Reaches an Ordinary Household

What Stops During a Government Shutdown - And Why It Isn't Everything

The federal government provides many services, but a shutdown does not pause them all: the key distinction is between discretionary and mandatory funding.

Federal agencies run two types of programs: discretionary and mandatory. Discretionary functions must be funded through annual appropriations, and those are the first targets of a shutdown. But mandatory spending, like Social Security, generally continues during a lapse. Understanding that split lets households predict which services pause and which keep running. Most of all, it keeps this from being a complete federal pause.

What a Shutdown Actually Stops

A shutdown mainly stops those activities funded by annual discretionary appropriations. In a shutdown, agencies must discontinue non-essential discretionary functions until new funding is provided by Congress and signed into law.

Even though these programs stop when a lapse starts, it does not mean those offices are permanently closed. The shutdown triggers an orderly halt, not a termination of federal benefits or services. Agencies can continue running the activities that are funded by multi-year or mandatory money, or by fees.

The Office of Management and Budget (OMB) requires all departments to develop detailed shutdown plans spelling out which functions are excepted, and which are furloughed, in the event of a funding lapse. A shutdown does not mean all programs and services are stopped, but it does force some to pause.

Who Works, Who Waits, and Who Gets Paid Later

Most federal workers are continuing their duties during a lapse, but not all. A "furloughed" employee is sent home and told not to work, while an "excepted" employee continues working. But both furloughed and excepted workers should be paid retroactively for the period after a new federal budget is passed and signed.

In the case of any special personnel needed specifically for the winding down of certain programs, or other important pieces of the shutdown process, the term "subject to furlough" is used. Those employees are expected to work during the shutdown, and like other federal workers, have the right to back pay after a lapse ends.

Contractors, on the other hand, do not share the same protection. Private companies that provide services to the government are not covered by the federal back-pay guarantee, and they may not receive retroactive pay. Some contractors may still be permitted to keep working at their own expense or with other funding, but that is not a right given by law.

Why Contractors Are the Sharpest Exception

The Government Employee Fair Treatment Act just applies to federal employees, not those working for the companies that provide services to federal agencies. Federal contractors are not government workers, and do not have the same guarantees or protections. Their pay is not listed as an "award" in federal law, and their paychecks are tied to their employment agreements and contract terms.

In other words, federal workers are guaranteed to be paid later, but contractors are not given the same rights, especially when it comes to automatic back pay after a funding lapse. When federal agencies are short of money, those contracts are not always reestablished or prioritized, leaving some contractors out of pocket or with concerns about when they will be paid.

What Agencies Are Required to Do Before a Lapse

Under OMB’s Circular No. A-11, executive agencies must submit plans for an orderly shutdown in the event of a lapse in appropriations. Each agency is required to exhibit a detailed plan for this in advance of any threatened lapse, including how all employees, regardless of job category, will be treated. Employees in "shutdown status" are split into two categories: "excepted" and "furloughed", with excepted workers granted work during a crisis and furloughed workers sent home without their typical compensation for the length of the lapse.

Some agencies break employees into smaller subcategories as well, including "furloughed" and "exempt". The former is generally used to describe employees who are sent home, often for the duration of a lapse, while the latter is generally used to describe workers exempted from being sent home, who may be needed to ensure the agency can meet a critical mission need before shutting down altogether.

OMB's requirement for agency shutdown plans is not a new one: the guidance has been in place since 1980, and the Circular has shaped agency predictability since the Reagan administration. They are required to shut down orderly, not abruptly, using the time to conclude their mission-critical work before shutting down fully. Congress's move to fund pandemic response meant one lapse did not have to close all three phases of the shutdown process.

How a Shutdown Reaches An Ordinary Household

If you are an ordinary citizen, you may be wondering what all of this means for you. The short answer is: it depends. If you are receiving a government voucher or check, you should be safe, assuming the program is one Congress considers a compulsory outlay, and it is funded under "mandatory" spending.

If you are waiting for a government-issued service, such as a passport renewal or driver’s license renewal, or tax return or social security check, you should know the lapse affects those areas. Most importantly, discretionary spending, funding needed to pay congressional staffs, has been put on hold, which means that it will take longer to process government documents, such as passports, and longer for those services to begin again.

If you are a beneficiary, such as a recipient of government insurance or loans, your benefits are safe. Furloughed workers may see their loans go delinquent during the lapse, but those loans must remain open during the lapse in any case, according to OMB guidance. They must, therefore, be considered essential during the lapse, unless the loan is said to be categorized as "nondiscretionary" in a government document. Similarly, mandatory programs like social security checks and seniors’ healthcare plans are still on track to be funded, despite no new authorization funds coming in, because of their mandatory nature.

Finally, the average household should know that their food should not be affected, as food assistance programs such as SNAP benefits and WIC benefits are operating under mandatory funding, at least in the near term. However, those programs may wind down if enrollees cannot provide the documentation needed for their certification, as many states now mandate, regardless of funding.

What Can Keep Running Inside a Closed Department

"Government shutdown" is a dramatic title, but the word doesn't need to inspire fear. The key to reassuring yourself is to realize that a government shutdown does not affect all of the government, only a portion of it, at least initially.

There are whole parts of every agency that remain open, due to their reliance on mandatory funding from years prior, and this helps to keep exactly the functions you might otherwise deem essential going. Veterans' healthcare, for example, continues in full during a lapse, as do other mandatory programs.

The Household Test

The key to knowing how a shutdown affects your household is to understand the funding categories at play. A government program funded by annual discretionary appropriations, such as a federal passport center, is most at risk, and may shut down. But important mandatory programs, like food stamps or veterans' benefits, are protected. It can be helpful, though, to clarify what counts in which category, and why.

The specific elements of a service, or the exact treatment of a program in a shutdown, depends on the agency. Agencies have plans, established under OMB guidance, detailing which aspects of their work are covered and which are not. Each agency is asked to map out its services in advance, before a funding lapse, and classify them as allowed under the shutdown or not allowed. They are required to create plans covering each of the three stages of the shutdown, giving each a phase name from I, II, or III.

For example, in Stage 1, most federal services continue. The IRS still accepts tax returns, and those processed before the lapse does, or those that are submitted electronically, will still be processed. If you want to open a federal bank account, or seek verification of your employment for a non-governmental organization, you can still do so, electronic or paper. Visa applicants can still pay their fees, and passport statements can still be made, online and in person.

Stage II sees a much more drastic shift, with all but the critical operations terminated. On the IRS end, hand-delivered and paper filings are stopped, but electronic ones can still be submitted. Visa and passport centers close for operations, and back-office work on earlier applications continues, though no new applications are accepted, even electronically.

Stage III is the clearest illustration of a government shutdown. All central offices close, and passport centers globally screen visa applicants, though some may be flagged as non-compliant with requirements. Electronic filings on taxes are still accepted, but without the same priority as they might have in a world without a lapse. It's important to remember that a federal government is always prepared for worst-case scenarios, and so, often, people are surprised to learn that much of their government continues serving them, regardless of a lack of permission.

As of now, government funding is running out and the budget isn't yet authorized. If it lapses, agencies will have to decide how to shut down, and how to keep certain essential operations running with the money available, at least until Congress, and the president, agree on a budget that will get appropriations back to them.