If the government fails to pass a continuing resolution by midnight tonight (September 30th), the federal government must shut down. In a shutdown, elements of the federal government that need to be funded by Congress each year in order to operate must close. Some government functions continue during a shutdown, such as active duty military, programs written into permanent law, postal service and air traffic control.
Rep. Adam Schiff (D-Burbank): “Congressional Republicans have once again created a crisis that has put America’s fiscal health in serious jeopardy – this time over their fervor to defund or delay Obamacare. A shutdown would be a self-inflicted wound on an economy still struggling to recover. If Congress can’t take measures to affirmatively create jobs and support the recovery, it should at least get out of the way. We must cease these political games over the nation’s budget and the endless rounds of legislative brinksmanship. It’s time to end this destructive exercise that puts our nation’s economy, credit rating, and hard-working families in needless jeopardy.”
A shutdown – even a partial one – would have wide-ranging effects on California’s economy and a number of essential government functions that Southern Californians rely on. The following memo outlines just some of these negative impacts.
Economic Impacts of a Shutdown
Shutdown Would Slow Economic Growth –According to respected Moody’s Analytics, a partial shutdown would cut the economy’s annual growth rate in the fourth quarter by 0.2 percentage points, to 2.5%, even if it ended in three or four days. As a result of half of civilian government workers not being able to go to work, their lost pay would represent about half of the short-term economic impact. [USA Today 9/27]
- The 1995-1996 government shutdowns, a five-day hiatus in November 1995, followed by a 28-day gap in December and January 1996, did interrupt the strong expansion that was then developing. The economy grew at an annual pace of 3.5% in the third quarter of 1995, but dropped to 2.9% in late 1995 and 2.6% in the first quarter of 1996. Once the shutdown ended, growth rebounded to 7.2% in the second quarter of 1996, and the economy grew at a 4% clip in the second half of the year. [USA Today 9/27]
Shutdown Will Cost Taxpayers Money –According to the Office of Management and Budget, the two shutdowns in 1995 and 1996 cost taxpayers $1.4 billion combined. Adjust for inflation and the cost estimate comes to $2 billion in today’s dollars.[NBC News 9/27] Some estimates have a shutdown costing $150 million a day. [Fiscal Times 9/24]
California Tourism: Parks, Museums & Monuments
Shutdown would lead to furloughs and loss of economic activity. California has a large number of public spaces that are managed by the National Park Service and their employees – there are 26 in California statewide, including Joshua Tree National Park and Mojave National Preserve, and a number of other federal lands and recreation areas, including the Santa Monica Mountains National Recreation Area and Angeles National Forest. In 2012, there were over 35 million visitors to California national parks generating $1,192,000,000 in economic benefits. With visits by tourists disrupted, the economic impact of a shutdown could cost California millions of dollars in tourism.
- Parks and Public Spaces will likely close under a shutdown. Guidance similar to the 2011 Contingency Plan from the Department of Interior would close all parks and federal sites to the public. As well, a majority of staff would be furloughed. 2011 guidance recommended furloughing 16,800 employees, and retaining 3,200, nationally. [CRS, 9/24/2013]
Emergency Responders, Disaster Recovery and Safety
FEMA Employees could be furloughed. Employees funded by annual appropriations must be furloughed during a funding lapse in such appropriations, with an exception for those employees needed to carry out functions that are necessary for the protection of life and property. Some FEMA employees are funded by annual appropriations. [FEMA, 9/23/13]
Shutdown Would Prevent Vehicle Safety Tests. The National Highway Traffic Safety Administration (NHTSA) conducts testing on vehicles to ensure they are safe on the road. Many of these tests find defected parts which lead to recalls. If the government shuts down, this testing will stop, potentially putting California drivers and passengers at greater risk. [CRS, 9/24/2013]
Benefits and Federal Agencies
New Social Security Beneficiaries Might Not Receive Payments – A government shutdown could prevent new Social Security beneficiaries from receiving social security payments. As Social Security offices furlough employees or reduce hours, new claims might not be processed. In 2011, the most recent year of data available, there were 347,798 new Social Security beneficiaries in California. [CRS, 9/24/13]
Housing Vouchers – The Department of Housing and Urban Development will not be able to provide local housing authorities with additional money for housing vouchers. The nation’s 3,300 public housing authorities will not receive payments, although most of these agencies, however, have funds to provide rental assistance through October. [Washington Post, 9/30] In Glendale, for example, processing of housing voucher payments to Glendale Housing Authority’s approximate1,500 housing vouchers may be delayed, a number already significantly reduced due to sequestration.
Issuance of Federal Housing Administration-backed mortgages in California could cease during a shutdown. The Federal Housing Administration (FHA) is self-financed, but authority to insure new home loans is authorized annually in appropriations acts. Therefore, in a shutdown, the FHA could be unable to insure new home loans. [CRS, 9/24/2013]
Shutdown could interrupt medical research – The National Institutes of Health (NIH) would not be able to take on any new patients, or begin any new clinical trials, thereby impeding progress on life-saving, cutting-edge medical research. [ABC, 9/21/13] Local institutions, such as Children’s Hospital Los Angeles, receive a particularly large amount NIH funding for programs and research. Children’s Hospital’s Graduate Medical Program would also theoretically be effected if the shutdown lasted a long time, and payments could be delayed
Shutdown could delay approval of applications for Small Business Loans — The Small Business Administration provides government-guaranteed loans to small businesses. These services could be suspended in a shutdown and depending on how long the last shutdown lasted, applications could get backlogged, meaning the impact could be felt even after the government reopens. [ABC, 9/21/13]
- In 2011, the Los Angeles SBA District Office helped to provide loans and financial assistance to 2,477 businesses, amounting to $1.58 billion. While exact numbers are not known, new business applications would be backlogged and would hurt current loans administered throughout Los Angeles.
California Workers and Economic Development
California Workers Impacted by Outsourcing Would Not Receive Assistance – A government shutdown would prevent the Department of Labor from issuing any new Trade Adjustment Assistance (TAA) determinations. TAA is given to employees who have lost their job as a result of their job being moved to another country. [Department of Labor memo, 4/7/2011]
California economic development, housing, and city restoration projects would cease in a shutdown – All programs under the Department of Housing & Urban Development (HUD) are expected to be impacted by a government shutdown. Program examples include:
- Brownfields Economic Development Initiative (BEDI)
- Community Development Block Grants (CDBG)
- Tribal Colleges and Universities (TCUs) Program
- Economic Development Initiative (“Competitive EDI”) Grants
- Rural Housing Stability Assistance Program
- Surplus Property for Use to Assist the Homeless (Title V)
- Federal Housing Administration (FHA)
- Mortgage Insurance for Disaster Victims (Section 203(h))
- Supportive Housing for the Elderly (Section 202) & Persons with Disabilities (Section 811)
- Los Angeles River Ecosystem Restoration Study
Veterans, Military Service Members and Military Base Employees
Military personnel must work without pay. This could have a devastating impact on military families, depending on the length of the shutdown. According to Rep. C.W. Young, R-Fla., Chairman of the House defense appropriations subcommittee, “All military personnel will continue to serve and accrue pay, but will not actually be paid until appropriations are available.” [Military Times, 9/23/13]
Veterans could be denied education and vocational rehabilitation benefits. Under a shutdown plan drafted in 2011, the Veterans Administration will not be able to process new beneficiaries and administration of Education and Vocational Rehabilitation benefits. Also, Veterans Benefits Administration regional offices will have limited availability and no decisions on claims appeals or motions will be issued by the Board of Veterans appeals. [Dept. of Veterans Affairs, Contingency Plan, 4/8/11]
Multiple other Veterans’ services could be curtailed. According to the Washington Post, the last time the government shut down in 1995, “multiple services were curtailed, ranging from health and welfare to finance and travel.”[Washington Post, 9/24/13] Furthermore, during the last threat of a shutdown, it was expected that Veterans Benefits Administration customer support services could be suspended. [OMB Public Memo, 2011]
California Guardsmen/women would not be paid. A number of California National Guard employees would be furloughed until the government is funded. Additionally, depending on how long the shutdown lasts, the Guard could have to cancel training and other duties, which could affect another thousands of Soldiers and Airmen. Any shutdown would also negatively impact the families of Soldiers, Airmen, and civilian employees. There would be additional issues concerning contracting and purchasing, dependent on the length of a shutdown. [OMB Public Memo, 2011]