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Wednesday, October 16, 2013

Government Shutdown: Operations of the Department of Defense During a Lapse in Appropriations

Pat Towell and Amy Belasco
Specialist in U.S. Defense Policy and Budget

Because Congress did not provide any FY2014 funding for DOD by October 1, 2013, the beginning of the new fiscal year, DOD, like other agencies, is now subject to a lapse in appropriations during which agencies are generally required to shut down. The Office of Management and Budget (OMB), however, has identified a number of exceptions to the requirement that agencies cease operations, including a blanket exception for activities that “provide for the national security.”

On September 25, 2013, DOD issued guidance and its contingency plan identifying the types of activities that would continue in the event of a shutdown. As a result, during the lapse in appropriations, some DOD personnel would be “excepted” from furloughs, including all uniformed military personnel, while others would be furloughed and, thus, not be permitted to work. Those civilian personnel who supported DOD military operations or necessary to protect health and safety would be “excepted” from furloughs, roughly half of a total of about 750,000, while the remainder would be furloughed and not paid. Normally, such “excepted” military and civilian personnel would continue to work but would not be paid until after appropriations are subsequently provided.

With enactment of H.R. 3210, the Pay Our Military Act (POMA), on September 30, 2013, however, many defense personnel will be paid on time, including all active-duty personnel, and certain civilian and contractor personnel. DOD’s original guidance limited DOD’s excepted civilians to those designated as necessary for military operations and to protect the safety of persons and property. On October 5, 2013, Secretary of Defense Chuck Hagel announced that the language in H.R. 3210 would also allow DOD to recall most but not all of its civilian employees to work. In addition to those DOD civilians already designated as “excepted,” the Administration interpreted H.R. 3210 as permitting the Secretary to recall (and start to pay) those DOD civilians “whose responsibilities contribute to the morale, well-being, capabilities and readiness of service members.” This revision of DOD’s Contingency Plan would increase the number of DOD civilians returning to work from roughly 50% to about 90% according to DOD Comptroller Robert Hale. As the services and DOD components implement this decision, civilians will return to work starting this week, and will become eligible to be paid on time under H.R. 3210.

DOD is continuing to review whether the number of contractor personnel, also covered under H.R. 3210, will be increased. Those defense civilian or contractor personnel who were or remain furloughed would only receive pay for that period if Congress passes legislation to pay furloughed personnel. On October 5, 2013, the House unanimously passed H.R. 3223, which would provide retroactive pay for all federal employees, as occurred during the 1995 to 1996 shutdown. The President has announced his support of the bill. The Senate has not yet taken it up.

On October 2 and October 3, 2013, the House passed five “mini” Continuing Resolutions (CRs) providing funding for the District of Columbia, NIH, various museums, Veterans Administration disability programs, and pay for non-activated reservists, generally at FY2013 levels including the sequester now in effect. That package includes H.R. 3230, which would expand the number of reservists who would be paid on time from activated reservists (such as those deployed for the Afghan war) who are already covered by H.R. 3210, to non-activated duty reservists who are performing weekend drills. Based on press reports of reactions from the Senate leadership, however, the Senate is not likely to take up the bill. 

The authority to continue some activities during a lapse in appropriations is governed by the Antideficiency Act, codified at 31 U.S.C. 1341 and 1342, as interpreted by Department of Justice (DOJ) legal opinions and reflected in Office of Management and Budget (OMB) guidance to executive agencies. Subject to review by OMB, each agency is responsible for making specific determinations on which activities may continue during a shutdown and which may not.

Legally, according to DOJ and OMB guidance, activities that may continue during a lapse in appropriations include (1) activities “necessary to bring about the orderly termination of an agency’s functions”; (2) administration of benefit payments provided through funds that remain available in the absence of new appropriations, including, in the case of DOD, military retirement benefits; (3) activities and purchases financed with prior year funds and ongoing activities for which funding has already been obligated; (4) activities undertaken on the basis of constitutional authorities of the President; and (5) activities related to “emergencies involving the safety of human life or the protection of property.” The Defense Department attributes its authority to carry on national security-related operations mainly to Section 1342 of the Antideficiency Act, which permits the continuation of activities to protect human life and property.

DOD’s September 25, 2013 guidance identities activities that would continue in the event of a shutdown including the war in Afghanistan, certain unspecified military operations and related support activities deemed necessary for those operations. This guidance is almost identical to December 2011 guidance that was issued almost two years ago when a funding lapse was also widely viewed as a real possibility.

The 2013 guidance provides that both ongoing military operations and other unspecified national security activities would continue as well as those support activities considered necessary by DOD necessary—from training and communications to recruiting and intelligence. In addition, activities necessary for safety of persons and protection of property, including emergency response and some equipment repair and acquisition support would also continue. Other activities that would continue are operation of DOD Dependent Schools, child care centers, and DOD medical activities, including TRICARE services for dependents, but not non-essential services, such as elective surgery in military medical facilities.

H.R. 3210 reduces the number of DOD civilians furloughed, but those in that status would continue to face a pay gap, potentially imposing hardships on many families, unless legislation providing retroactive pay is enacted. Contracting activities that supported military activities and payments to vendors derived from prior multiyear appropriations could also continue. The status of many contractor personnel remains unclear. While some new contract obligations to support “excepted” activities could be signed, monies could not be disbursed while other new contracts would be delayed. This could create some confusion and, potentially, disruptions to supplies of some material and services, particularly if full funding for DOD is not restored soon.

Date of Report: October 7, 2013
Number of Pages: 32
Order Number: R41745
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