Congress Scrambles to Avoid Looming Government Shutdown

Federal lawmakers are scrambling to avert a partial federal government shutdown that could lead to furloughs for hundreds of thousands of federal workers amidst a public health crisis.

On Monday, the United States Senate failed to pass a critical procedural vote to advance the House-passed short-term government spending bill as the deadline to avoid a federal government shutdown looms at the end of the week.

Every year, Congress must pass, and the President must sign, budget legislation for the next fiscal year — a series of bills that make up the discretionary spending budget. However, Congress has yet to enact any spending bills for fiscal 2022 as Democrats and Republicans struggle to reach a funding agreement.

The House-passed short-term spending measure, known as a continuing resolution, would give lawmakers time to strike a long-term appropriations deal. But Senate Republicans balked at the plan because of a provision to suspend the debt limit for another year.

The United States will reach its borrowing limit by mid-October, and without action, the government could default on its debt for the first time in the nation’s history. Raising the debt limit does not incur new federal debt, but it is a statutory requirement to allow for previously approved borrowing.

The discretionary budget funds most federal departments. If Congress does not reach a spending agreement by September 30 — the end of the federal government’s fiscal year, these departments must close unless they have surplus funds.

A similar situation in 2019 led to the most protracted partial federal government shutdown in U.S. history. That impasse, which lasted 35 days, had a significant impact on federal employees and related segments of the Maryland and regional economies.

As previously reported on Conduit Street, approximately 172,000 Marylanders affected by the 2019 partial government shutdown missed out on an estimated $778 million in wages, resulting in $57.5 million less in state and local income tax withholding and $2.1 million less in sales tax collections. While furloughed federal workers received back pay once the shutdown ended, it’s unlikely that federal contractors could recoup lost wages.

In response, the Maryland General Assembly passed the Federal Shutdown Paycheck Protection Act, which provides no-interest loans to essential government employees who must report to work without pay.

Stay tuned to Conduit Street for more information.