Government Shutdown Looms Large as Congress Breaks for August Recess

Congress appears to be on track to trigger a government shutdown on October 1, 2023, as it struggles to reach a consensus on a series of appropriations bills that fund government operations before the start of the new fiscal year.

Every year, Congress must pass, and the President must sign, budget legislation for the next fiscal year — a series of 12 separate spending bills that make up the discretionary spending budget, which funds most departments. However, Congress only passed one spending bill before its August recess, as Democrats and Republicans struggled to reach a spending deal.

Once lawmakers return from recess, they’ll have roughly three weeks before the September 30 deadline to pass the remaining 11 spending bills (or a continuing resolution) or trigger a government shutdown. Continuing resolutions are temporary spending bills that allow federal government operations to continue when final appropriations have not been approved by Congress and the President.

While a continuing resolution temporarily ensures that the government will remain open, it would signal that lawmakers are again unable to agree on a series of year-long spending bills before the ones from the previous year lapse at the end of September. According to the US Government Accountability Office, there have been 47 continuing resolutions between fiscal 2010-2022. These ranged from 1 to 176 days (just under six months).

A similar situation in 2019 led to US history’s most protracted partial federal government shutdown. That impasse lasted 35 days and significantly impacted 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, Maryland is home to many federal contractors who rely on federal contracts to stay in business. It’s unlikely federal contractors recouped 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.