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October 04
FY2014 Funding Standoff Continues: Debt Ceiling Looms

With talks between the President and congressional leadership having failed to bring the two sides closer to an agreement on how to end the federal government shutdown, it appears as though the shutdown will continue for several weeks. As a result, it is increasingly likely that the current debate on funding the government will be rolled into the debate on the debt ceiling, which will  be reached October 17. With that on the horizon, talk of a “grand bargain” on entitlements, taxes and lifting sequestration’s arbitrary cuts has resurfaced.

A grand bargain could include measures that would pose serious threats to counties, including the following:

  • ​tax reform that change​s the tax treatment of municipal bonds, making it more expensive for counties to fund critical infrastructure
  • entitlement reform that cuts Medicaid, shifting health care costs to counties
  • ongoing domestic discretionary austerity measures that undermine the ability of counties to serve their citizens
  • deep cuts to, or elimination of, the Social Services block grant, which many counties use for adult and child protective services

The House and Senate continue to be deadlocked over FY2014 funding. The House is not considering a “clean” continuing resolution (CR) (one that does not defund or delay the Affordable Care Act) and has pivoted to a new tactic: taking up small targeted temporary funding bills for popular federal programs. The House approved bills for funding the National Parks, the Smithsonian Institution and several museums (H.J. Res 70), veterans’ benefits (H.J. Res. 72) and the District of Columbia (H.J. Res.71) on October 2, and for the National Institutes of Health (H.J. Res.73) and National Guard and Reserves pay (H.R. 3230​) on October 3. President Obama has threatened to veto legislation that does not fund the entire government and the Sena​te is expected to reject the House measures. 

As the debate over the FY2014 appropriations process unfolds, NACo continues to monitor the potential impact on counties. Essential services, especially those related to public safety, will continue to be carried out, as will mandatory spending programs like Social Security and Medicare. Most discretionary programs that do not provide essential services, however, will not continue to operate unless there are carryover funds available.

Counties are being affected by the government shutdown, as many programs that are important to counties will not operate until the shutdown​ ends. Here are some details on some of these programs:

U.S. Department of Agriculture (USDA)

  • ​Food Safety Inspection Service (FSIS) inspectors remain on the job, although FSIS support functions, such as administrative appeals and labeling, could be affected
  • Conservation Reserve Program and the Wetlands Reserve Program stop enrollment
  • Foreign Agricultural Service's Foreign Market Development Program and the Market Access Program could stop
  • Supplemental Nutrition Assistance Program (SNAP) benefits continue through October. There is also a $2 billion fund available to reimburse states for SNAP administrative costs
  • Child Nutrition programs such as school lunch and breakfast also continue through October. There is a contingency fund but it may not cover all of October
  • There will be no new funding for the Women, Infants and Children Supplemental Feeding Programs and the Commodity Assistance Programs.
  • Rural Utilities Service are completely shut down, with no staff excepted
  • During the shutdown, no additional loans or grants will be available except for emergency purposes
  • The Rural Energy for America program will stop operating

U.S. Department of Education

  • ​School districts that receive funding for disadvantaged students under Title I and II of the Elementary and Secondary Education Act (ESEA) and the Individuals with Disabilities Education Act (IDEA) are not affected because the school year is funded from FY2013
  • The Career and Technical Education Grant funding will also continue because the program is funded from FY2013
  • Pell Grant and Direct Student Loans obligations and payments will continue

U.S. Environmental Protection Agency (EPA)

  • ​Approximately 95 percent of EPA’s 16,205 employees are furloughed
  • EPA programs that involve state and local partners, such as the Leaking Underground Storage Tank (LUST) and Superfund programs will continue
  • Active EPA grant activities may continue, however, activity must stop if the grantee needs EPA approval or involvement. EPA maintains over 7,300 grants and agreements
  • Programs, such as Superfund, are exempt from shutdown if it would pose an “imminent threat to human life.” The EPA uses the following example: if discontinuation of an “acid mine drainage treatment plan” would create drinking water contamination, the project is considered exempt and thus continues to operate.
  • EPA’s emergency response program, which supplements state and local first responders, may also be exempt and thus continue to operate, if an environmental emergency occurs

U.S. Department of Health and Human Services (HHS)

  • ​State Medicaid programs should not be disrupted since the federal match is distributed prospectively on a quarterly basis. Centers for Medicare and Medicaid Services (CMS) administrative functions, like processing state waiver applications are halted
  • Implementation of the Affordable Care Act should largely proceed because mandatory funding was included in the Act itself
  • States will not receive quarterly payments for the Temporary Assistance for Needy Families Block Grant, but would be able to use carryover funds from FY2013
  • Foster Care IV-E and Child Support operations will continue
  • There are no new funds for Head Start and no quarterly fund distributions for the Social Services Block Grant, Child Welfare, Child Care and Refugee programs, except that some essential activities under the Unaccompanied Alien Children program will continue
  • The Administration for Community Living will not have new funds for the senior nutrition programs

U.S. Department of Homeland Security (DHS)

  • ​Emergency operations under the Federal Emergency Management Administration (FEMA) will continue
  • Non-Emergency FEMA disaster grants will not have new funding
  • State and Local grants will not have new funding
  • Border enforcement will continue

U.S. Department of Housing and Urban Development (HUD)

  • ​Federal Housing Administration (FHA) is able to endorse single-family loans and FHA staff are available to underwrite and approve loans
  • HUD will continue to disburse payments to cities, counties and states for CDBG, HOME funds and other block grant funds in cases that have been appropriated and authorized under a grant agreement
  • Disaster Recovery Assistance Programs will be funded through multi-year appropriations
  • Essential housing and emergency services for homeless persons will continue
  • There is no processing of Sustainable Communities grants
  • Additional payments to Public Housing Authorities (PHAs) are halted. It is projected that most of the country’s 3,300 PHAs have the necessary funds to continue providing rental assistance for the remainder of October. However, depending on the length of the shutdown, some PHAs may not be able to maintain normal operations
  • PHAs would not have to halt issuing vouchers during a shutdown. However, HUD is unable to provide additional funds
  • Nearly all of the Fair Housing agency housing activities will cease

U.S. Department of the Interior (DOI)

  • All areas of the National Park and National Wildlife Refuge Systems are closed and public is restricted
  • The Bureau of Land Management has terminated all nonemergency activities on the public lands. Processing oil and gas drilling permits, onshore mineral leasing sales and authorizations, right-of-way and other use permits and other use non-emergency activities is suspended
  • All concession facilities and commercial visitor services are closed as of October 3
  • Only those activities needed to respond to emergency situations are being conducted by the Office of Surface Mining
  • The Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement will continue to ensure the safety of drilling and production operations and issue drilling and other offshore permits, however renewable activities and five year plan work is terminated
  • A total of 7,707 personnel are exempted from furlough in order to protect life and property – the majority being law enforcement, wildland fire, emergency response and security, animal caretakers, maintenance and other personnel that are focused on the custodial care of lands and facilities and protection of life and property.

U.S. Department of Justice (DOJ)

  • ​State Criminal Alien Assistance Program reimbursement claims will not be processed
  • There will be no new funding for grant programs such as Byrne JAG, Juvenile Justice, the Office of Violence Against Women and Community Policing, but they can continue operating with carryover funds from FY2013
  • Training for state and local officers will be discontinued during the shutdown
  • Office of Justice Programs (OJP) has sufficient resources to remain operational through October 4. If the shutdown continues past October 4, OJP has provided information in Q&A form for grantees and other stakeholders. To see the Q& A’s click here

U.S. Department of Labor (DOL)

  • ​Unemployment Insurance operations are functional except for administrative cost reimbursements
  • Workforce Investment Act adults, dislocated workers and youth grants that have already been obligated can continue to be drawn down. Any of those to be issued after October 1 are not available for drawing down until the government is reopened. Technical assistance is limited
  • Disaster National Emergency Grants are still accepted

U.S. Department of Transportation (DOT)

  • ​Federal highway programs are not affected because they are funded through the Highway Trust Fund
  • Air Traffic Controllers will stay on the job
  • Most of the Federal Transit Administration (FTA) are furloughed, which will affect new grant applications
  • The FTA has exempted individuals working on Hurricane Sandy recovery efforts from the furloughs

U.S. Department of the Treasury

  • ​Fiscal Service will maintain payments, collections, and daily cash management and processing of essential authority/appropriation transactions based on applicable statutes. This includes resources to support disbursement of interest on the debt and disbursements of Social Security and other federal benefits
  • Internal Revenue Service Office of Tax Exempt and Government Entities is limited to five exempted employees to ensure statute protection during the shutdown period

Contact: Marilina Sanz at or 202.942.4260 


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