Unless Congress reaches an agreement to keep the lights on, the U.S. government appears headed for a shutdown at midnight on October 1.  As the deadline looms, stakeholders should not let the legislative jockeying overshadow another consequence of a funding lapse: regulatory delay.  Under normal circumstances, federal agencies publish thousands of rules per year, covering agriculture, health care, transportation, financial services, and a host of other issues.  In a shutdown, however, most agency proceedings to develop and issue these regulations would grind to a halt, and a prolonged funding gap would lead to uncertainty for stakeholders, particularly as the 2024 elections approach.  Another consequence is that more regulations could become vulnerable to congressional disapproval under the Congressional Review Act (CRA).

The Administrative Procedure Act (APA) provides that “General notice of proposed rulemaking shall be published in the Federal Register,” and prescribes requirements for the contents of an agency rulemaking notice.  To initiate or finalize a rulemaking, agencies must submit rules to the Office of the Federal Register (OFR)—the National Archives and Records Administration agency that publishes the Federal Register, the government’s daily journal of rules, regulations, and other activities.

When government funding lapses, however, publication of critical rulemaking documents slows.  Under the Antideficiency Act, both an agency seeking to publish documents and OFR are prohibited from spending or obligating funds during a shutdown.  Government agencies are also prohibited from accepting voluntary services for government work—except in cases of “emergencies involving the safety of human life or the protection of property.”

These restrictions significantly curtail the ability of agencies to initiate new rulemakings that don’t qualify for the exception, or to advance rulemakings that began before a shutdown.  Federal employees are not allowed to draft or submit rules for publication, accept or review public comments, or revise or publish final rules while their agency is unfunded. 

Likewise, because the APA and other statutes require certain executive actions to be published in the Federal Register—OFR must also be funded and operational to publish most agency documents, even if the agency publishing the document has not experienced a funding lapse.

To account for this issue, OFR has set forth guidelines in advance of prior shutdowns that detail when agencies—funded or not—may submit documents for publication in the Federal Register, and when OFR will publish those documents.

First, for unfunded agencies—which, as of today, would include all federal agencies whose budgets are subject to annual appropriations—OFR will only publish documents that are necessary to safeguard human life, protect property, or “provide other emergency services consistent with the performance of functions and services exempted under the Antideficiency Act.”   Agency materials related to “ongoing, regular functions of government” that pose no “imminent threat” to human safety or property protection are not permissible activities for unfunded agencies, and therefore inappropriate for OFR publication. 

This restriction would have significant implications for agency regulatory efforts across the government, with impact on a wide range of regulated sectors.  In one notable example, the rulemaking to implement the President’s recent outbound investment executive order (which we and our colleagues have discussed here) would likely stall for the duration of the shutdown.  Nothing in the order or the Treasury Department’s advance notice of proposed rulemaking (ANPRM) suggests that the order—despite being issued under the International Emergency Economic Powers Act (IEEPA)—involves imminent threats to human safety or property.  Thus, while public comments on the ANPRM are due on September 28, before the end of the fiscal year, a subsequent lapse in the Treasury Department’s funding would prohibit agency staff from reviewing public comments, scheduling and taking meetings with stakeholders, and revising and finalizing the proposed rule.Continue Reading Looming Shutdown Elevates Congressional Review Act Threat for New Regulations

We’ve seen this movie before. Conservatives, eager to bend the curve on federal outlays, are preparing to use the only leverage they have (their votes) while Senate Majority Leader Charles Schumer is talking about “House Republican extremists” causing a government shutdown. In most people’s eyes, Republicans have “lost” every shutdown fight since 1995. So why are conservatives back at it again?

Beyond their preference for a smaller government, conservatives are not alone in seeing runaway spending as a dire threat and will admit that their own party shares the blame. Our political system is structurally ill-equipped to turn off spending once it begins. A new estimate that the deficit will double to $2 trillion this year and Fitch Ratings’ recent downgrade of government credit are the most recent reminders that the problem is real. Efforts to rein in the deficit date back at least to the Gramm-Rudman-Hollings agreement in 1985 and include proposed Constitutional amendments, the Budget Enforcement Act of 1990 (PAYGO), the Line Item Veto Act of 1996, the Balanced Budget Act of 1997, a “sustainable growth rate” for Medicare reimbursements, George W. Bush’s plan to make Social Security sustainable, the 2010 Simpson-Bowles Commission, the 2011 ‘Supercommittee,’ sequestration, the discretionary spending caps in the Budget Control Act of 2011, revenue-producing tax increases, and growth-generating tax cuts.

None of it worked and the government is $32 trillion in debt. Congress rarely makes tough decisions without an action-forcing mechanism and conservatives want to be that mechanism. The House’s two conservative caucuses, the Freedom Caucus and the larger Republican Study Committee have identified similar priorities. Most broadly, they do not want the Covid-era surge in spending to serve as the baseline for future spending. The FY 2023 omnibus, which was called a “monstrosity” by Speaker Kevin McCarthy, passed the House with almost no GOP support in the very last days of the Democrats’ majority. Conservatives want to return to pre-Covid levels or lower. With $115 billion in rescissions, House appropriators have offered budgetary authority at pre-pandemic (FY 2022) levels, but conservatives say this is a gimmick that won’t reduce actual outlays. On this point, the Heritage Foundation says, ‘This represents an unprecedented expansion of rescissions as a budgetary tool to add spending within appropriations caps.’ Many conservatives also see the President’s emergency supplemental request as an end-run around the debt-limit agreement and have a longstanding position that supplementals should be offset.Continue Reading What Conservatives Want From the Spending Spat