December 21, 2018

Government Heads Towards Partial Shutdown

Earlier this year, an uncharacteristically smooth appropriations process allowed lawmakers to pass FY19 spending legislation funding nearly 75 percent of the government. The remaining federal agencies were bundled together in a continuing resolution (CR), which expires at midnight tonight. Both the House and Senate have passed different stopgap bills to continue funding for those agencies at FY18 levels through February 8, but it seems unlikely that the two chambers will come to an agreement before tonight’s deadline. The main sticking point is the fact that the House’s CR includes $5.7 billion in funding for a border wall, while the Senate’s does not. With Senate Democrats vowing to reject any funding for the border wall, and the President stating that he will veto any funding legislation that does not include that money, a government shutdown looks highly likely.

Since the current CR includes funding for the Departments of Housing and Urban Development, Agriculture, and Treasury, a shutdown would affect many of the agencies that manage vital affordable housing and community development programs. While the shutdown’s impact on these agencies and programs remains somewhat uncertain, particularly because a lot depends on how long the shutdown lasts, some insight into how essential programs will continue to operate can be found in the contingency plans for potential lapses in appropriations that agencies are required to post. Here are the relevant plans from HUD, USDA, and Treasury.  

At HUD, agency employees who are deemed non-essential will be furloughed and only essential payments to grantees will continue. Leadership has indicated that the agency will still be able to close time-sensitive transactions and process rental assistance payments. In addition, in the event of a shutdown project-based rental assistance should have sufficient funding through the end of next month. Funding availability for project rental assistance contract renewals, however, could be more tenuous if a shutdown continues far into January.

For rural housing programs at USDA, all staff deemed excepted will operate out of the Washington, D.C. and St. Louis, Missouri, offices, while state and area offices would be closed and the staff furloughed. Rental assistance checks will continue to be processed for RD-515 owners, but most loan programs will be put on hold except any government advances to protect properties. However, the state and area office staff are the ones who do most of the loan/grant processing, so their office closings will hinder the agency’s ability to respond to any inquiries, loan requests, or loan servicing requests. 

At Treasury, non-essential employees at the CDFI Fund will be furloughed. Under a shutdown, no new contracts funded by appropriations, including those at the CDFI Fund Program, can be entered. In addition, CDFI Fund’s current work of completing its phase 2 review of New Markets Tax Credit (NMTC) applications would be put on hold, delaying its current plans to make NMTC announcements in February. 

Regardless of contingency plans, a prolonged government shutdown could result in administrative backlog and delayed payments. It could also undermine vital public-private partnerships by creating uncertainty. The 116th Congress will come in to office on January 3rd, and the combination of an influx of new members and the change from a Republican to a Democratic majority in the House make it difficult to predict how negotiations would unfold should a shutdown continue into the new year. Enterprise strongly urges Congress and the Administration to quickly arrive at an agreement on full-year spending bills for each agency impacted by this potential shutdown.

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