State prepping for potential federal government shutdown
Photo | Courtesy of Chris Lisinski, State House News Service
The Massachusetts State House
State government officials are girding for the possibility of a federal government shutdown, and executive branch leaders have been instructed to summarize concerns about their ability to address payroll concerns and lay out their plans to protect Massachusetts residents and resources.
"We are asking departments for a quick turnaround, with responses to this memo due on Tuesday, September 30 by 5:00 pm.," officials in the Office of the Comptroller and the Executive Office of Administration and Finance wrote Sept. 23 in a memo to state chief fiscal officers, budget directors and general counsels.
Thomas Smith-Vaughan, chief operating officer in the Office of the Comptroller, and Assistant Secretary for Budget Christopher Marino told state officials in the memo that with the federal fiscal year set to begin Oct. 1, Congress has not passed any of the 12 full-year appropriations bills needed to fund the government.
In the event of a shutdown, they wrote, federal agencies "must discontinue all non-essential discretionary functions until new funding legislation is passed and signed into law" but essential services will continue to function, as well as mandatory spending programs such as Social Security.
The warning comes as partisan gridlock paralyzes Congress, which has failed to agree on a short-term continuing resolution or full-year appropriations. According to ABC News, members of Congress are on recess until Monday, Sept. 29, giving them just two days to act before the Oct. 1 deadline. With control of the House and Senate split, any funding deal will require bipartisan support — at least 60 votes in the Senate — a threshold that has proven elusive amid disagreements over priorities between Democrats and Republicans.
The prospect of a shutdown comes as Massachusetts is navigating significant fiscal complexity. The Legislature passed a stream of funding bills earlier this year to address shortfalls in the fiscal 2025 budget, and the state's $61 billion fiscal 2026 budget signed by Gov. Maura Healey this summer relies heavily on federal dollars.
About $15.6 billion of the fiscal 2026 budget comes from federal reimbursements and grants, the vast majority of which support MassHealth through Medicaid payments.
"A shutdown could create challenges for certain spending accounts in the General Federal Grants Fund, revenue collected through federal reimbursement, and for programs run and funded primarily by the federal government," the memo says.
Among the programs flagged as vulnerable are Medicaid waiver services at MassHealth and the Department of Developmental Services, the federal highway capital project fund, and Federal Emergency Management Agency grants. These categories align closely with where the state receives the bulk of its federal support.
An analysis from the Massachusetts Taxpayers Foundation recently estimated that federal cuts to Medicaid alone could have a $100 million impact on the state’s fiscal 2026 budget.
The memo also notes that "agencies should not assume that additional state funding will be available. Therefore, please identify any state funding that would be required for the state to take on responsibility for critical federal programs and indicate whether and when legislative authorization would be required," the memo says.
Departments are being asked to assess their ability to cover bi-weekly payroll for employees currently paid through federal sources.
A hearing is planned at the State House on Tuesday, the day before the shutdown deadline, where state officials will hear from economists and policy experts about the implications of federal funding shifts on the state’s economy.
Real gross domestic product increased in the United States at an annual rate of 3.8% in the second quarter, according to the U.S. Bureau of Economic Analysis, after a 0.6% contraction in the first quarter — a sign of economic growth that has yet to resolve underlying fiscal tensions.
The potential shutdown coincides with a broader retrenchment in federal fiscal commitments, particularly in areas like health care and nutrition assistance, putting further pressure on state-level services.
Departments in Massachusetts have been through this before. According to the memo, agencies were asked to develop contingency plans in case of federal shutdowns in 2013, 2015, 2019, 2020, 2021, and most recently in 2024.
"Negotiations are ongoing to attempt to reach a budget deal before the October 1 deadline. However, we must be prepared for the possibility that federal government operations and/or federal funding for many purposes and programs will not be authorized beyond that date," the memo says.
WBJ Web Partners
Most Recent
Most Recent
0 Comments