NC Budget and Tax Center

The creeping damage of Trump’s shutdown (UPDATED)

(This post was updated on January 24th to reflect new details on the impacts of the shutdown. We will continue to provide updates as additional impacts become clear.)

President Trump has made it imminently clear that his administration created this shutdown, that a wall along the southern border matters more to him than whether hundreds of thousands of federal employees can make ends meet. More important than families’ ability to put food on the table. More important than whether farmers get reimbursed for crop losses. More important than keeping federal parks safe. More important than a host of other vital government services.

This isn’t how our system of government was designed to function. Funding the government is always about compromises and trade-offs made throughout a process that should be oriented toward the good of our country as a whole, but a responsible President would never shut the entire government down over one line item in a $3.8 trillion dollar budget. That’s why the Senate unanimously passed a measure in December that would have avoided the shutdown, and why a similar extension of funding quickly passed when Democrats took control of the House last week.

Let’s look at a partial list what the President is willing to sacrifice, and the people he’s willing to harm, in his quest to build a symbol along the southern border.

Part or all of the following departments are currently shut down:

  • Homeland Security
  • Justice
  • Agriculture
  • Treasury
  • State
  • Interior
  • Transportation
  • Housing and Urban Development

Federal Workers and Contractors

Federal workers not getting paid: Federal employees in unfunded agencies are not getting paid, both those who are furloughed and employees like airport security officers who are still required to report for work. In North Carolina, roughly 7,800 Federal employees are missing paychecks, a count that does not include contract workers and state employees whose salaries are paid with Federal funds. The agencies with the most employees going without pay in North Carolina are the Department of Agriculture (1,900 employees), Environmental Protection Agency (1,200 employees), and Homeland Security (1,100 employees). Friday January 25th marks the second missed paycheck for impacted federal employees, and many of these families have already run through their available savings. These effects are all the more burdensome because furloughed federal employees can apply for Unemployment Insurance, but have thus far been prevented from collecting payments. A number of states are exploring ways to provide temporary financial relief to federal employees that are not getting paid, but a clear solution has not been implemented in North Carolina.

Federal contractors. In addition to official federal employees, many North Carolinians who work for companies on federal contract may be laid off or forced to take time off without pay. While there are no reliable estimates of the number of businesses or workers who are losing pay in North Carolina because of the shutdown, the harm is substantial and will only grow with time.

Social Services

Food Aid: The Supplemental Nutrition Assistance Program (SNAP) benefits are still being distributed, but the shutdown is already making it harder for North Carolinians to use them. Because the United States Department of Agriculture is unable to renew contracts with stores that normally accept SNAP benefits, more than 150 retailers in North Carolina have been forced to stop participating in the program, many in parts of the state where access to food is already limited. If the shutdown lasts into March, families and children who receive SNAP could go hungry. The Department of Agriculture, which administers the SNAP program, is still issuing checks for now, but available funds could be exhausted within the next several weeks.

Housing Assistance. Payment of rental housing assistance and other programs serving the elderly and others continue to operate for now, but Department of Housing and Urban development informed landlords that its ability to continue payment depends on how much budget authority the agency has, raising the potential that housing assistance could run out. If the shutdown persists, HUD could be unable to renew contracts with local entities that provide housing. It is estimated that over 115 contracts with low-income housing providers have lapsed, threatening the housing security of nearly 2,000 units across the state. In addition, inspection of existing housing units has largely been suspended which may force low-income families to live longer in unhealthy conditions.

Native American health and social services. Many Native American tribes have seen funds for healthcare and other vital services dry up. The Federal Government is legally obligated to support services like medical clinics, food pantries, and educational programs, but the shutdown has stopped many of these payments. This has forced some services to be reduced or eliminated altogether.

Temporary Assistance for Needy Families (TANF). TANF (Temporary Assistance for Needy Families), a federal block grant, is at risk of a lapse in funding. North Carolina could feel the impacts as early as the first few weeks of February, according the National Governors Association. TANF helps to fund our states child care subsidies, NC PreK, and provides cash assistance to families in need. Both the U.S. House and Senate have passed H.R. 430, a bill that extends funding through June. The bill awaits the president’s signature.

Disaster Recovery

Hurricane Florence rebuilding. North Carolina is unable to use $168 million in Community Development Block Grants until guidelines are issued by the Department of Housing and Urban Development (HUD), which has been delayed by the shutdown. This is preventing the State from deploying these funds to assist communities in rebuilding after Hurricane Florence.

Farming Relief Funds. With the United States Department of Agriculture (USDA) unfunded, funds are not being distributed that are meant to reimburse farmers for income lost to last year’s hurricane and the ongoing trade dispute with China. With an estimated $1 billion in lost crops due to storms alone, and with farmers trying to plan for the upcoming growing season, any gap in processing relief claims will severely impact one of North Carolina’s most important industries. David Smith with the State Department of Agriculture and Consumer Services said, “We’re already hearing from farmers who are pretty desperate for relief money.” While some USDA staff were recalled temporarily this month, it remains unclear how many of these reimbursements will be processed and distributed.

Business and Economic Impacts

Farmers’ Planning: USDA crop reports that play a critical role in farmers’ planning for the upcoming year are not being released. As farmers are trying to make decisions about what crops to plant for the approaching growing season and which livestock to invest in, lacking these government surveys could undermine North Carolina’s vital agricultural economy. Particularly in the modern data-driven agriculture economy, the government shutdown is making it far harder for farmers to make informed decisions.

Small Business Loans: Loans provided by the Small Business Administration (SBA) are not being processed, cutting off Mom and Pop enterprises from a vital source of capital. SBA loans are often used to get businesses off the ground, purchase new equipment, make building upgrades, or buy the raw materials needed to fill orders. Because banks are often hesitant to make loans to small businesses, closing the SBA means that some companies may be unable to expand, or may close entirely because they cannot access this essential source of business capital.

Home loans. Several federal agencies that help people purchase homes are shuttered, preventing some applications from being processed and therefore preventing potential buyers from being able to close on the houses they hope to call home. The Federal Housing Authority has said that it will not make new multi-family commitments during the shutdown, the Department of Agriculture has similarly communicated that new rural housing direct loans will not be issued, and the Federal Housing Authority gave notice that it will not make insurance endorsements under the Home Equity Conversion Mortgage program, which is designed to help senior citizens to convert some of the equity in their homes into cash.

Development permitting. EPA will have little to no capacity to process environmental approvals for real estate projects. In a prolonged shutdown, the inability of EPA to process applications could become a profound drag on the economy, preventing new developments from coming into being.

Federal parks unprotected. While most Federal Parks remain technically open, park staff have been sent home and most visitor centers are shuttered. In spite of valiant efforts by volunteer groups and communities, trash is building up and many park advocates worry about mounting damage to natural and cultural treasures because the parks are not being patrolled as usual.

Portions of the Blue Ridge Parkway are closed. Federal Parks are technically open, but portions of the Blue Ridge Parkway have been closed. With maintenance workers furloughed, no one is available to clear trees brought down by recent winter storms, rendering large portions of the iconic route impassible.

Beer, Wine, and Spirits: The Alcohol and Tobacco Tax and Trade Bureau, which processes applications for new labeling is closed, preventing producers from getting new products approved. While by no means the most important impact, it’s an example of the many Federal services that often go unnoticed until they are no longer being performed.

University and Research Funding: If Trump goes ahead with his threat to keep the government shut down for months, university research funding could dry up, threatening several schools in North Carolina that depend on federal funds to pursue their research and teaching missions.

Tax filing. With tax season just around the corner, a significant portion of the Internal Revenue Service (IRS) staff is furloughed. While the administration has pledged that tax refunds will still be issued if the government shutdown persists, it is unclear how the herculean task of processing tax returns can be completed if the already understaffed agency is working with a fraction of its employees. Beyond refund checks, the outage would surely frustrate taxpayers trying to get their questions answered so they can submit accurate returns.  Given the already real underfunding of the country’s Internal Revenue Service, the disruption of the current government shutdown could compound the challenges of administration. 

Public Safety

Victims of domestic violence. Because the Violence against Women Act and the Victims of Crime Act lapsed in December, many local organizations that provide shelter and support to victims of domestic violence are at risk of closing. Many of these life-saving services in North Carolina are provided by non-profit organizations that are already facing the prospect of closing if their federal contracts are not renewed.

Federal Investigations: Most agents with the Federal Bureau of Investigations are considered essential employees and are working without pay during the shutdown. However, a lack of funding is starting to seriously undermine exiting investigations. A few specific impacts include losing informants because agents lack to funds to pay them, inability to set up sting operations in drug cases, and delays in issuing indictments.

Federal courts: If the shutdown lasts past February 1st, Federal courts may have to start closing their doors. The Federal administrative Office of the Courts estimates that sufficient funding exists to keep Federal courts open through January 31st, but not much after that.

Testing for GenX. The State Department of Environmental Quality (DEQ) continues to sample wells for GenX, but the Federal laboratory that would normally run the tests is closed, so samples are piling up in DEQ’s Fayetteville office.

Immigration Legal Proceedings: Immigration courts have suspended hearings on immigration cases where the people involved are currently in detention. This will result in unknown and potentially lengthy delays in resolving cases. Given the backlog of immigration cases, canceling hearings could leave applicants in legal limbo for months, and possibly even years.

Food inspections. If the shutdown persists, the frequency of food safety inspections could be reduced, potentially exposing the eating public to serious risk.

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