Congress Passes Budget Plan to Avoid Shutdown, Government Open Until March 14

Just before noon on Dec. 21, 2024 — about 12 hours after the government lacked funding to stay open — President Biden signed legislation that funds the federal government through March 14. The U.S. House of Representatives passed a bill hours before the deadline by an overwhelming 366-34 margin late Friday following several failed attempts during the week. The Senate voted 85-11 in favor.

The budget plan keeps current fiscal levels in place, includes $100 billion in natural disaster relief for those areas of the country still recovering from hurricane and wildfire damage, and provides $10 billion in farm aid. Missing from the legislation is the debt limit suspension that President-elect Donald Trump demanded be included, a provision stripped by Republicans.

Similar to earlier in 2024 when the government closed for a few hours following Senate approval for a stop-gap spending bill and post-midnight signing by the president, there was no significant impact of the shut down. With funding extended to operate the government, hundreds of thousands of employees will be spared furlough and all government buildings and places funded by the government (e.g., national parks, museums) are open. 

Since 1995, there have been six shutdowns, including four in the past decade.

Even with a shutdown potentially averted, businesses and their employees who rely on the federal government and its employees for their patronage should understand what a government shutdown is and how it might impact them.

What is a Government Shutdown?

A government shutdown means the government can’t spend money that requires annual appropriations, which affects its ability to pay its employees and keep facilities and buildings open where those employees work. Some employees are considered essential such as air traffic controllers and would have to work without pay during the shutdown. Unlike previous shutdowns, however, the Government Employee Fair Treatment Act of 2019 entitles federal employees to backpay for as long as the appropriations are lapsed.

It should be noted that employees of federal contractors are not guaranteed backpay under this 2019 law, but a company can decide if they want to provide backpay to these employees.

What Agencies and Services Would Be Affected by a Shutdown?

Here are some other closures or partial closures that could impact your business based on previous shutdowns:

• Small Business Administration (SBA): This agency provides funding to small businesses to help as they start, maintain, and grow. These could be microloans, working capital loans, and more. Most of the SBA’s loan approval and processing would be unavailable during a shutdown.
• Internal Revenue Service (IRS): All tax payments and filed returns will continue to be accepted by the IRS, but all auditing would be suspended.
  • Expect delays in correspondence from the IRS.
  • All IRS toll-free hotlines will be closed, impacting the ability to get a client EIN Verification via this method.
• E-Verify: The federal internet-based employment verification system will be unavailable for employers to complete the process, but businesses are still required to complete the Form I-9 for new hires. If your business is in a state that mandates the use of E-Verify, you should check with the state website for information, including on alternative methods for employee verification.
  • Delays should be expected with onboarding new employees.

Additional impacts should be anticipated in areas such as customer service, as non-essential functions will be eliminated and the number of employees on the job could be limited throughout a shutdown. On-site audits and food/environmental inspections might be put on hold by agencies such as OSHA, the Department of Labor, the National Labor Relations Board, and others.

Medicare and Medicaid are federal programs that are not subject to annual appropriations, but a shutdown could cause a disruption for participants. For example, there might be a delay in getting Medicare replacement cards and participants would be unable to make enrollment adjustments. 

How Could Businesses Be Impacted by a Shutdown?

There are tangential impacts to consider such as the closing of national parks and national museums (e.g., Smithsonian) during a shutdown. If your business relies on the foot traffic of federal employees or tourists, especially around the corridor in Washington, D.C. and in other cities where federal money pumps in, cash flow could become an issue.

States might have to suspend their unemployment programs and possibly find alternative sources of funding because federal unemployment funding to states will cease during a shutdown.

Although most shutdowns in U.S. history have not influenced the stock market because their durations were brief, a shutdown of significant length could shift the stock market. This would impact employee retirement plans (401k), as well as delay federal reports on job growth, housing starts, and other indicators that investors rely on to make decisions.

Potentially, the most notable impact could be on the U.S. economy, which has steadily moved along following the pandemic. If people are not getting paid then, generally, consumer spending slows and that would trickle down to affect small businesses.

What Won’t Be Impacted by a Government Shutdown?

The list is small of federal agencies and processes that continue to function through a shutdown.

• Social Security checks will go out to recipients.
  • Social Security Administration will not issue Social Security cards.
  • The Employee Services toll-free hotline will be unavailable.
• Medicare open enrollment should not be impacted.
• Medicaid enrollment is handled through individual states.
• The U.S. Postal Service will continue to deliver the mail.
• Members of Congress still get paid.

What’s Next?

Accounting professionals should have conversations with their clients to gain a better understanding of each client’s financial situation and be prepared to offer any resources that might help.

Paychex continues to monitor the developments in Congress and will provide updates as the legislative branch works toward producing a budget that funds the government for the next fiscal year without having to negotiate continuing resolutions every few months. We understand the challenges facing employers and offer educational resources and a variety of funding options to consider that might fit your business needs.