Insights

Simply put, a government shutdown is caused by a lapse in appropriations funding. The Antideficiency Act of the U.S.  Constitution prohibits the federal government from spending any money that has not been explicitly outlined in legislation passed by Congress. And, government agencies require funding to operate – including paying the contractors that make up a large portion of the collective federal workforce.  

Work deemed ‘essential’ or under an active government contract must continue without pay; the rest of the workforce is subject to an unpaid furlough. While federal employees are eligible for back pay when the government resumes operations, millions of contractors do not receive any compensation unless their company provides it. The financial hardship from past shutdowns have resulted in significant lay offs for contractor and subcontractor employees. Today, there is an even greater reliance on the contractor program to outsource work.

The longest government shutdown lasted 35 days from December of 2018 to January of 2019 hit the U.S. economy hard and costing more than $3 billion in unrecovered economic losses.

With the risk of another closure perennially around the corner, 2.2 million federal workers and more than 4,000 private government contractors employing about 19 million workers are  vulnerable.  In fact, many of these employees – like many Americans – are living paycheck to paycheck and do not have cash reserves needed to continue keeping up with their day-to-day expenses.

Explore the following guidance to help prepare for the next shutdown event.