FAQ: How would a federal government shutdown affect Minnesota?

WASHINGTON – The stage is set for a partial federal government shutdown at midnight barring a last-minute agreement both among Republicans and with Democrats to keep the government funded.

Q: If Congress doesn’t keep the government open after tonight, how will Minnesota be affected?

In many ways, most people probably won’t notice  a shutdown right away. Large swaths of the federal workforce with responsibility for public health and safety and national security will remain on the job as essential personnel (though they won’t receive paychecks until a shutdown ends). That includes Transportation Security Agency personnel and federal air traffic controllers at MSP, prison guards at the state’s four federal prison facilities, U.S. Department of Agriculture food inspectors, and medical personnel at VA facilities across the state. Federal student loans and grants would continue to be issued, Social Security checks will still go out, as would Medicare and Medicaid payments, and the U.S. Postal Service will continue to deliver mail. Federal courts are expected to remain open initially but will exhaust reserve operating funds after 10 days and close if Congress does not pass a funding bill. You can read the executive branch’s contingency plans for every department here.

On the closure side of the ledger, the five areas in Minnesota managed by the national parks service would close to the public as would the state’s only passport office in Minneapolis. A protracted shutdown could affect federal education funding. There were 31,800 federal workers in the state as of Sept. 30, 2012 though that number is likely to have fallen in the past year due to budget cuts, according to the Federal Executive Board of Minnesota, an umbrella organization that oversees the state’s federal workforce. Nearly 13,000 are postal employees who are not covered by a shutdown but some portion of the remaining 19,000 federal workers would likely be furloughed.

Some federal contractors could also experience disruptions that lead to furloughs. Companies in Minnesota did about $2 billion worth of business with the government in this past fiscal year and a shutdown that lasts more than few days could mean fewer orders for their products and services.

Q: It seems like it’s all up to Congress now. What happens there today?

The Senate will vote Monday afternoon on the funding bill passed by the House in the early hours of Sunday morning. They’re playing what’s known on Capitol Hill as legislative “ping pong” and could strip out the amendments Senate Democrats don’t agree with in the House bill and send the legislation back to the House for another vote in that chamber.

Q: That House bill contained an amendment eliminating a tax on medical devices that members of Minnesota’s delegation from both sides of the political aisle don’t like. Is there any chance that tax could be eliminated in this showdown?

All of Minnesota’s members of Congress are on record at various points in the past few years as opposing the tax, which is used to fund the healthcare law. Device makers across the country, including Minnesota firms such as Medtronic, argue the tax is hurting their business even though the industry had initially signed off on the measure when the Affordable Care Act was passed in 2010. Republicans certainly think they have a strong hand to repeal the tax, given the widespread Democratic opposition to it. But the tax generates about $3 billion in revenue a year that helps subsidize insurance for those who can’t afford it on their own and the Obama administration has repeatedly said they’d veto the device tax repeal if presented with such a bill.

Q: Does a shutdown at least save the taxpayers some money?

Large parts of the federal government’s operations, including its most costly programs, Social Security and Medicare, will stay open through a shutdown. Many federal workers, probably more than half according to some estimates, would also be deemed essential and stay on the job and receive back pay after a shutdown ends.

After past shutdowns, Congress has also traditionally paid furloughed workers on the grounds that they should not suffer a financial hardship for a political disagreement on Capitol Hill. It’s less clear this time around if Republicans in this Congress would make such payments.

There are also plenty of costs to a shutdown. Most federal agencies have had to slow down their work for the past week to draw up contingency plans, and some of the furloughed workers would have contributed to government revenue, such as IRS agents conducting audits. Research around the last federal government shutdowns in 1995 and 1996 suggested that those events actually cost the government money beyond what it would have cost for the government to stay open.

“A shutdown therefore is public disruption, and not a restraint on federal spending,” concluded an analyst with the conservative American Action Forum in a report issued last week 

Q: Just to be clear–even if the government shuts down, Congress would keep working, right?

Yes, members of Congress keep getting paid because the 27th amendment to the Constitution says Congress can’t vote to change its pay in a congressional session. They’re also deemed essential – though at this point, the public’s opinion seems to differ.

Many congressional staffers are likely to get furloughed which will probably cause a lot of hardship because the entry-level positions pay just $30,000 a year in one of the most expensive cities in the country.

Q: And this is really only the first act in all this because Congress still has to deal with the debt ceiling, right?

Sigh. Yes. The Treasury Department says it needs Congress to raise the country’s borrowing limit Oct. 17th otherwise the federal government may default on its bills. Many Republicans, including, for example, 2nd District Congressman John Kline, believe that the GOP has more leverage over the Obama Administration on this issue than over keeping the government open and want to see major policy concessions there as the price of raising the debt ceiling. Just to be clear, even if Republicans get major spending cuts enacted,  a debt ceiling would still be necessary to pay for obligations already approved by Congress.

Most economists are scared witless about this fight because the consequences of a default could be dire – including a sharp rise in interest rates,  a severe recession and even a currency crisis.