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Shutdown Delayed: What Comes Next for State and Local Budgets?

While Congress has temporarily averted a government closure, the next 45 days provide uncertainty and opportunity to prepare for future fiscal turmoil.

U.S. Senate Majority Leader Chuck Schumer (D-NY) gives a thumbs up after voting on the continuing resolution passed by the House earlier in the day on Capitol Hill in Washington, D.C., on Sept. 30, 2023.
(Andrew Caballero-Reynolds/AFP via Getty Images/TNS)
In Brief:
  • Programs that serve some of the most vulnerable parts of the population will be the most affected.

  • States and local governments will have to decide how to allocate existing funds to shore up their budgets in the event of a future shutdown.

  • The next 45 days can provide state and local governments with the time necessary to lay out contingency plans to lessen financial burdens in the event of a shutdown.

  • Despite comments from Democratic Senate Majority Leader Chuck Schumer, stating that, “The American people can breathe a sigh of relief: There will be no government shutdown,” the reality is that the problem hasn’t been stopped so much as it has been deferred.

    In the hours before the end of the current fiscal year, Congress came together for a bill that serves as a stopgap measure to hold off the potential of a government shutdown. While H.R. 5860 provides fiscal appropriations to federal agencies, it only extends funding until Nov. 17, leaving its fate up in the air as Congress returns to negotiations.

    For states and localities, the primary threat of a potential shutdown lies in the way it would dry up federal funds necessary for some key aspects of day-to-day operations and essential programs. A primary concern is the way that a shutdown moves the burden of funding onto the states and cities themselves, exerting pressure on already tight budgets.

    Another worry is the impact on public health and safety programs, which tend to serve historically vulnerable groups, according to Yucel Ors, director of public safety and crime prevention at the National League of Cities.

    Citing future furloughs for the Department of Justice’s COPS Office, Office of Justice Programs and the Office of Violence Against Women (notable for the grants they provide to state and local government for public safety purposes), Ors pointed out that, “All of these furloughs depend on how long the government shutdown is. The longer it takes to bring back these services. It's going to have a significant impact on a lot of the efforts local governments are doing to improve their public safety, address some of the violence issues and improving community relations.”

    Health-care budgets at the state and local level will also come under pressure in the event of a future government shutdown. G. William Hoagland, a senior vice president at the Bipartisan Policy Center, expressed concern for the Special Supplemental Nutrition Program for Women, Infants and Children (WIC). “If the shutdown continues, there's no money, there'll be no money,” he says. “There'll be some carryover money, but the WIC program is the one that I'm most concerned about in terms of infants and children, that of course has a major health-care angle to it.”

    In March 2023, the president's budget requested $6.3 billion in budget authority for WIC to serve a projected increase in caseload to an average of 6.5 million participants across fiscal year 2024, according to the National WIC Association.

    The 45-day reprieve provides room for both uncertainties and opportunities. Agencies at the state and local level have more time to plan how to adjust their budgets in the face of a potential late-fall shutdown if Congress can’t come to an agreement about finalizing the appropriation bills for fiscal year 2024.

    Between now and Nov. 17, congressional decisions can set the stage for another potential shutdown that will have far-reaching and long-lasting impacts on government at every single level. In the interim, state and local governments have some options they can take up as they prepare for what the closure would bring to bear on their budgets and constituents.

    “It's not easy to raise additional revenue in a short time for a particular crisis, right?” says NLC’s Michael Wallace, legislative director for housing, community and economic development. “Most cities have tax expenditure limitations on them from the state level, and so they can't just go out and say to the community, ‘we need to raise funds’ like that, so I think cities can pass ordinances that change their budgetary priorities. They can take money away from one account and put it in another, but that's gonna have a consequence to whatever the funding was for. Long-term plans probably get delayed further or put off when they're moving money around to address the immediate impacts. But in terms of raising additional revenue, that's really difficult.”

    Without the option of raising revenue swiftly, state and local officials will need to directly lobby their members of Congress when it comes to negotiating over aspects of the bills. For example, according to Hoagland, the difference in spending allocations between the House and Senate in the Labor-HHS-Education bill, is nearly $50 billion.

    He suggests that in this situation, “officials should take a stand in support of the bipartisan Senate budget allocations for the Labor-HHS-Education bill.” He goes on to note that other ways that state and local governments can prepare their health-care budgets for the potential shutdown at the end of the 45-day period include making sure current federal or state contracts impacting local health care services are finalized within the next 45 days and that agencies should attempt to operate at a flat minimum.

    With uncertainty over government funding still strong, the best thing that local and state governments can do across the next 45 days is to prepare their own flexible finance contingency plans that will allow them to respond swiftly, maintaining their constituents’ trust in government. But they better start preparing now. The clock is already ticking.
    Zina Hutton is a staff writer for Governing. She has been a freelance culture writer, researcher and copywriter since 2015. In 2021, she started writing for Teen Vogue. Now, at Governing, Zina focuses on state and local finance, workforce, education and management and administration news.
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