What a Lapse in Appropriations Could Mean for Cities

As a partial government shutdown continues into its third week, the impacts of a funding lapse for affected agencies are beginning to become more visible. Among the seven federal spending bills that lapsed in December is the Financial Services and General Government Appropriations bill. While the name indicates that it provides funding for the Department of Treasury, the bill also authorizes appropriations for many other remaining agencies, independent offices and federal courts. Most of these agencies are either closed or are operating in a reduced capacity due to the shutdown.

However, many financial regulatory agencies that operate largely on fees and other sources of revenue, such as the Municipal Securities Rulemaking Board (MSRB) or the United States Postal Service are not impacted by the shutdown. Here are three ways in which the Financial Services and General Government lapse in appropriations may impact cities, towns and villages:

Federal Communications Commission (FCC) is Closed

Until Congress passes a Financial Services appropriations bill, the FCC will remain shuttered. While this slows FCC action on potentially preemptive regulation that could harm cities, towns, and villages, it also means that the agency is not currently answering its consumer hotline, holding any advisory committee meetings, reviewing approval applications for new devices and technologies, or allowing its commissioners to participate as planned in the Consumer Electronics Show, which often hosts large policy-focused discussions around technology topics. Fortunately, Universal Service Fund programs, such as Lifeline and E-rate, which provide subsidies for consumer and local community anchor broadband access, are funded through fees, rather than congressional appropriations. Consumers participating in Lifeline, and institutions receiving E-Rate or rural health care funds, should continue receiving support without interruption.

Federal Courts Are Open for Now, But Running on Fumes

Lack of funding is also impacting federal courts, which have a number of telecommunications focused cases impacting local governments before them. While federal circuit courts are currently operating on funds from fees, that funding stream is expected to run out over the next week. Each circuit will make its own decisions about which cases to keep moving but are likely to prioritize criminal cases over civil suits. This means that the net neutrality case, which has oral argument scheduled for February 1, may be pushed back, and briefing schedules for lawsuits over wireless infrastructure moratoria and small cell deployment orders from the FCC may be delayed.

Internal Revenue Service (IRS) is Left with a Skeleton Crew

The IRS is continuing to collect income taxes, proving that even during a federal government shutdown, taxes are an inevitable part of life. What is less inevitable is whether the IRS will be able to process federal income tax returns in a timely manner due to staffing constraints. The White House has confirmed that the IRS has the authority to process returns during the shutdown and has promised that tax returns will be made on schedule. Skeptics, however, raise concerns that if the 87 percent reduction in staff capacity continues, delays are likely. If the shutdown persists, the IRS hopes to recall furloughed employees to handle the peak operations that begin with the start of tax filing season on January 28, but some question the Service’s authority to do so. Many residents rely on their tax refunds, especially those who claim refundable tax credits, such as the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). It’s worth noting that this filing season will also be the first under the new changes made by the Tax Cuts and Jobs Act, which only further complicates the situation. Another concern is whether or not the furlough will impact the Service’s ability to deliver Build America Bond Subsidies, although so far the payments seem to be coming on time.

Stay Updated

NLC continues to push Congress and the Administration to reopen the federal government. For updates on the status of the shutdown, along with resources for local governments and information about individual agency budgets, visit www.nlc.org/shutdown. NLC is eager to hear from cities, towns and villages impacted by the shutdown, both directly and on social media. Please tweet your #shutdownstories, tagging @leagueofcities, to share how your community and residents are impacted by this prolonged appropriations fight.


About the Authors: Brian Egan is NLC’s Principal Associate for Finance, Administration and Intergovernmental Relations. Follow him on Twitter @BeegleME.


Angelina_readyAngelina Panettieri is the Principal Associate for Technology and Communication at the National League of Cities. Follower her on twitter at @AngelinainDC.