Interim Continuing Resolutions (CRs): Potential Impacts on Agency Operations
Released: 2012-07-25T00:00:00

Introduction

Continuing appropriations acts, commonly known as continuing resolutions (CRs), have been an integral component of the annual appropriations process for decades. When Congress and the President do not reach final decisions about one or more regular appropriations acts, they often negotiate and enact a CR. Two general types of CRs are used. An "interim" CR provides agencies with stopgap funding for a period of time until final appropriations decisions are made, or until enactment of another interim CR. A "full-year" CR, by contrast, provides final funding amounts for the remainder of a fiscal year in lieu of one or more regular appropriations acts. If interim or full-year appropriations are not enacted, a funding gap and government shutdown occur for affected agencies and programs.

This report analyzes potential impacts that interim CRs might have on agency operations. CRs have become commonplace in the federal budget process, with CRs occurring in some form in all but four years out of a 61-year period from FY1952 to FY2012. However, studies of the impacts of interim CRs are quite limited aside from mostly anecdotal accounts. Furthermore, interim CRs are formulated differently from time to time, and may affect highly diverse agencies and programs in varying ways. Without in-depth analysis of specific circumstances, therefore, it may be difficult, or in many cases impossible, to make generalizable statements about the impacts of interim CRs on particular agencies at particular times.

It is possible, however, to identify some potential impacts of interim CRs prospectively, utilizing several approaches. This report uses three. First, the report discusses how an interim CR's provisions and requirements may impact directly upon an agency, based on what an interim CR explicitly is formulated to do. Second, the report analyzes Office of Management and Budget (OMB) and agency documents that have provided guidance or requirements for how an agency should navigate through periods of interim CRs. The existence and emphases of such documents may suggest the occurrence, or at least the risk of occurrence, of interim CR-related impacts on the operations of agencies. Third, the report analyzes brief mentions of claims of impact contained in Government Accountability Office (GAO) reports from a 20-year span, typically made by agency officials without independent GAO validation. In addition, a GAO report from 2009 provided the results of a case study, in which GAO evaluated the effects of interim CRs on six federal bureau-size agencies.

The possibility that an interim CR might cause impacts may raise corresponding issues for Congress. One issue relates to the fact that the President, OMB, and agencies may play roles in the formulation, negotiation, and implementation of interim CRs. An implication of this involvement is that Congress typically does not solely determine what the impacts of an interim CR will be, because the President, OMB, and agencies may influence the nature and extent of potential impacts. Another issue relates to interim CRs as a product of high-stakes negotiation over major issues of fiscal and substantive policy. Claims about positive or negative impacts of CRs may be used to argue that changes in CR language, budget priorities, or the budget process are necessary. The ways in which such claims are framed, however, typically rest on implicit assumptions about what would have happened in the absence of the interim CR (e.g., a government shutdown, on one hand, or agreement on final appropriations, on the other). Viewing interim CRs as a product of high-stakes negotiation helps explain why differing assumptions sometimes may be plausible. Given the nature of budget deliberations and the potential for changes in the budget process to change power relationships among participants, the ways in which the impact of an interim CR may be framed might be viewed as similarly significant. The report's final section discusses these and other topics.

Full-year CRs occur less frequently than interim CRs. Historically, the term "CR" has been used in different ways in the context of providing full-year appropriations amounts. In any case, full-year CRs effectively become regular appropriations acts for the fiscal year, complete with the certainty of final funding decisions. For this reason, full-year CRs generally are not discussed in this report.

Interim CRs and Their Requirements

Usage of the term "continuing resolution," like other budget terms, has varied sometimes to reflect evolving budget practices. This section of the report discusses several aspects of how interim CRs typically have been formulated and implemented, in order to identify how interim CRs may impact upon the operations of agencies. Some related terms also are highlighted, in order to distinguish between interim CR-related provisions and other provisions that sometimes appear in the context of CRs.

Contexts and Purposes of Stopgap Funding

The federal fiscal year begins October 1. For agencies and programs that are funded through annual appropriations acts, appropriations must be enacted by this date if many governmental activities are to continue operating. These funds pay for most of the routine operations of federal agencies, including salaries, contracts, and grants. Final action on some of the regular appropriations acts is frequently delayed beyond October 1. A delay may occur, for example, when negotiations between Congress and the President have not resulted yet in final decisions. When action on one or more regular appropriations acts is incomplete after the beginning of a fiscal year, Congress often provides temporary funding for affected agencies by using an interim CR. The stopgap funding is available until a date specified in the CR, enactment of a new interim CR, or enactment of full-year appropriations, whichever occurs earliest. In this sense, the term "continuing" has been used to indicate that appropriations will continue at a certain level (and subject to certain conditions), pending further decisions.

Interim CRs usually are enacted in the context of ongoing and high-stakes budget negotiations between Congress and the President and within Congress. In general, interim CRs typically are intended to (1) preserve congressional prerogatives to make final decisions on full-year funding levels and (2) prevent a funding gap and corresponding government shutdown. Consequently, interim CRs provide relatively restrictive funding levels for agencies. In addition, an interim CR may be structured purposefully as less than optimal from the perspective of many stakeholders, in order to retain sufficient incentive for negotiating parties to come to an accord for final decisions. Participants in a negotiation also may find it necessary to compromise, purposefully accepting what they perceive as some undesirable impacts in an interim CR (e.g., temporary constraints on funding) in order to achieve what they perceive as more important, desirable impacts (e.g., achievement of budget policy goals or avoidance of a government shutdown). In other words, some impacts of interim CRs may be a product of intentional concessions in negotiations, in order to achieve other impacts.

Provisions and Agency Requirements

"Rate for Operations" Formula

Interim CRs have remained fairly constant in form and structure in recent years. In contrast to regular and supplemental appropriations acts, an interim CR generally does not provide a specific amount of budget authority for an appropriations account for a specific time period of availability. Rather, an interim CR provides authority to obligate and spend funds at a statutorily prescribed pace, or "rate," over time, for an appropriations account. More technically, an interim CR typically provides funding at a specified "rate for operations" for accounts covered by the CR. An agency may continue to obligate and spend funds at this rate for the duration of the interim CR—that is, until the CR expires or is superseded. The interim CR uses a formula to calculate this rate. These formulas, which are based on annual amounts or levels of spending, may be set in various ways. For example, funding has been based on formulas such as (1) the lower of the amounts provided in the House-passed version or Senate-passed version of the bill (assuming both houses have acted); (2) the amounts provided in a particular committee-reported bill; or (3) the funding levels available for the previous fiscal year. Interim CRs frequently provide rates that vary among the regular appropriations bills funded. Under an interim CR's formula, an agency that ultimately expects to receive a substantial increase in its full-year funding level compared to the previous year typically would be subject to rate restrictions and would not receive the increased level of funding for the duration of the interim CR, unless special exceptions were made.

Apportionment

After enactment of an interim CR, OMB provides detailed directions to executive agencies on the availability of funds and how to proceed with budget execution, typically in a bulletin. The bulletin includes announcement of an "automatic apportionment" of funds that will be made available for obligation, as a percentage of the annualized amount provided by the CR. Under a typical OMB bulletin, part of the annualized amount is apportioned and made available for obligation. Funds usually are apportioned either in proportion to the time period of the fiscal year covered by the CR, or according to the historical, seasonal rate of obligations for the period of the year covered by the CR, whichever is lower. A 30-day CR might, therefore, provide 30 days worth of funding, derived either from a certain annualized amount that is set by formula or from a historical spending pattern. In an interim CR, Congress also may provide authority for OMB to mitigate furloughs of federal employees by apportioning funds for personnel compensation and benefits at a higher rate for operations, albeit with some restrictions. Interim CRs impose some paperwork burden on agencies as a result of these procedures.

Restrictions on "New Starts" and Other Activities

Congress has used interim CRs to protect its prerogative to set full-year funding levels by restricting and guiding agency activities in other ways, as well. For example, an interim CR may prohibit an agency from initiating or resuming any project or activity for which funds were not available in the previous fiscal year (i.e., prohibit "new starts"). In addition, Congress has included provisions like the following in interim CRs, concerning programs that have high initial rates or distributions of funds (see Sec. 109, below) and concerning projects and activities generally (see Sec. 110).

Sec. 109. Notwithstanding any other provision of this joint resolution, except section 106, for those programs that would otherwise have high initial rates of operation or complete distribution of appropriations at the beginning of fiscal year 2008 because of distributions of funding to States, foreign countries, grantees, or others, such high initial rates of operation or complete distribution shall not be made, and no grants shall be awarded for such programs funded by this joint resolution that would impinge on final funding prerogatives.

Sec. 110. This joint resolution shall be implemented so that only the most limited funding action of that permitted in the joint resolution shall be taken in order to provide for continuation of projects and activities.

Anomalies

Congress, the President, and agencies sometimes negotiate for the inclusion of "anomalies" to the formulas and restrictions in a CR, to accommodate what they perceive as exceptional circumstances for an agency, program, or policy. Anomalies typically are included to prevent what some or all stakeholders and parties to CR negotiations perceive as major programmatic, operational, or management problems that would be caused if an otherwise "cookie cutter" approach were used to provide funding at a uniform rate and with uniform restrictions. However, when measured against the typical coverage of interim CRs, anomalies tend to be rare.

Substantive Legislative Provisions

CRs do not necessarily provide only stopgap or final funding. Some interim and full-year CRs have included "substantive" legislative provisions—that is, provisions under the jurisdiction of committees other than the House and Senate Appropriations Committees—covering a wide range of subjects. CRs are attractive vehicles for such provisions because they are considered must-pass legislation on which Congress and the President eventually must reach agreement.

"Clean" CRs

A CR that contains a rate for operations but does not contain any anomalies or substantive legislative provisions is sometimes referred to as a "clean" CR. However, a CR has at times been described as clean if it includes a limited number of such provisions that an observer views as acceptable. The level of cleanliness of a CR is typically in the eye of the beholder, therefore.

Types of Potential Impacts

As discussed above, provisions and requirements of interim CRs may impact upon the operations of agencies in many ways. If impacts were viewed in more general categories, an interim CR might be characterized as having several types of potential impacts on the operations of agencies.

Avoidance of Government Shutdowns

In the absence of agreement about full-year appropriations among the House, Senate, and President, an interim CR may have the impact of preventing funding gaps and shutdowns of government agencies. Historically, shutdowns prior to FY1996 generally were of short duration and were seen as having relatively modest effects, especially when they occurred over a weekend. Partial shutdowns of the federal government in FY1996, however, were more far-reaching in their effects. A five-day shutdown in November 1995 resulted in the furlough of an estimated 800,000 federal employees. A second, 21-day shutdown occurred a month later, resulting in the furlough of nearly 300,000 federal employees. A large but unspecified number of federal contractor employees were also furloughed or laid off as a result of suspended contracts. The shutdowns also had pervasive effects on the delivery of services.

Compliance with Administrative Requirements

Because an interim CR imposes tight restrictions on the obligation of funds for its entire duration, an interim CR may impact upon an agency's administrative work. As one study of the potential impacts of interim CRs on DOD summarized, "[t]he most visible effect" of a short-term CR is its impact on the time and paperwork necessary to manage the distribution of funds. As a consequence, comments from agency budget officials about the impacts of interim CRs might focus on, or be colored by, this experience.

Funding Level

An interim CR determines the funding level that is available for the duration of the CR. At least three funding scenarios appear to be possible for an agency that is funded by an interim CR: (1) less funding than otherwise would have been provided under a full-year appropriation (or, essentially, a lower rate for operations during the CR's duration); (2) more funding; or (3) the same amount. For example, suppose an agency anticipated an increase in its full-year budget because of apparent consensus on a higher prospective funding level among the House, Senate, and President. Further suppose, however, that the agency's budget is included in a legislative vehicle that is the subject of some controversy due to budget or programmatic issues elsewhere in the legislation. If the level of policy conflict among the House, Senate, and President were such that an interim CR were used to provide funding until disagreements were resolved, the agency might receive a considerably lower rate for operations than was anticipated for the duration of the CR. Assuming a final funding decision were made at the anticipated level, an agency might or might not be able to "catch up" with what it had planned to do. By contrast, if an agency expected a lower full-year amount than the rate that was provided by an interim CR, the agency might experience more flexibility than previously had been anticipated for the duration of the CR. Finally, if an agency expected flat funding from one year to another, there might be little or no impact associated with an interim CR's funding amount. In the face of a restrictive funding level, agency personnel may reduce or delay a variety of actions, including hiring, award of contracts, and travel. Whether any potential impacts manifest themselves in actual cases would depend on specific circumstances, including how the interim CR is crafted, the time of year, and an agency's or program's particular operations.

Restrictions on New Projects and Activities

Prohibition on new projects and activities may delay or disrupt an agency's ability to undertake planned activities. For agencies with little need to engage in "new starts," this prohibition may not be significant in its implications. For agencies that typically engage in new projects or change their funding priorities from year to year, however, the prohibition may have more significant impacts on operations.

Funding Uncertainty

Uncertainty related to full-year funding levels may impact upon an agency's ability to follow its plans. Uncertainty may have two dimensions, concerning (1) the level of full-year funding that ultimately will be available and (2) the timing of when the full-year amount will be available. If one or both kinds of certainty were needed for an agency to make decisions (e.g., when to begin a critical sequence of actions or events), an interim CR might cause an agency to alter its operations, rates of spending, and spending patterns over time, with potential ripple effects for internal management of the agency and its programmatic activities.

Additional Perspectives on Potential Impacts

Other sources of information may suggest more specific ways in which an interim CR prospectively might impact, or retrospectively may have impacted, upon an agency's operations.

OMB and Agency Documents

OMB and agencies have extensive experience operating under interim CRs. It seems plausible that they have learned many related lessons in recent decades. Perhaps as a consequence of such lessons, OMB and agencies have provided to their personnel written guidance and requirements for how to operate under an interim CR and how to avoid undesirable impacts. The existence and emphases of such documents may suggest the occurrence, or at least the risk of occurrence, of interim CR-related challenges for the operations of agencies.

OMB Documents

OMB has issued several documents that provide guidance or requirements to agencies, including its annually issued Circular No. A-11 , occasionally issued bulletins, and other documents. These documents suggest the following:

There is some risk that an agency may not correctly calculate the funds available under an interim CR and OMB's automatic apportionments without close OMB supervision and guidance. Both Circular No. A-11 and OMB's occasional bulletins devote the majority of their attention to CR formulas and apportionment amounts, in compliance with the Antideficiency Act and the CR-imposed direction to "operate at a minimal level until after your regular appropriation is enacted." There is some risk that an agency may undertake a new project or activity, contrary to an interim CR's requirements. Both Circular No. A-11 and OMB's occasional bulletins address this point. During a CR of extended duration, there is some risk of "major disruptions to essential government services" if care is not taken to conduct acquisitions using certain practices and "basic steps." According to OMB, these practices and steps include determining the availability of funding for existing and new contract requirements; modifying existing contracts as required by the "fiscal constraints imposed by the CR"; giving contractors and especially small businesses appropriate notice of funding limitations; following "prudent contracting principles and practices" to ensure available funds are used "as efficiently and effectively as possible" and to "minimize disruption of agency operations"; and funding only ongoing projects and activities, "not new initiatives or projects."

Agency Documents

Agency documents that provide guidance and impose requirements for how to operate under an interim CR appear to range from the highly elaborate to the more ad hoc. For example, the Department of the Army issued extensive "general guidance" concerning "rules for operation" under a CR and during a funding gap. The National Aeronautics and Space Administration (NASA) has integrated CRs and shutdowns into its instructions and process diagrams on budget execution. Smaller entities have created their own guidance memoranda and "instruction" documents. Agencies also may issue documents advising on the status of grant awards under a CR, and providing advice to federal and state officials on how to make timely grant awards under a CR. As with OMB documents, the existence and emphases of agency-level documents suggest the following:

There is some risk that agency personnel may not properly comply with CR-related statutory requirements and non-statutory congressional directives without detailed guidance on, for example, the execution of new funds for things such as military personnel appropriations, operation and maintenance appropriations, and other categories of spending. To ensure compliance with congressional directions, agency personnel need to be instructed that objects of expenditure such as "[t]ravel, training, and other discretionary costs should be limited to essential programmatic requirements," and agency staff need detailed guidance for actions that obligate funds, including procurement requests and other purchases. There is some risk that agency spending may exceed congressionally directed minimal amounts in some situations, making it necessary to caution agency personnel to restrain spending even if both Senate and House versions of appropriations bills may provide for an increase. Although an agency may have the tools and policies to award grants in a timely way when operating under an interim CR, and even improve the timeliness of awards to states under current policies, it is nevertheless "more difficult ... to make timely awards while the Agency operates under a series of short continuing resolutions, but it is still possible." There is some risk that stakeholders and grant recipients will not know that grant awards may not be fully funded until enactment of full-year appropriations. Therefore, stakeholders and grant recipients must be notified or reminded.

GAO Reports

GAO Case Study

A literature review identified a single GAO report that focused primarily on the issue of potential or actual impacts of interim CRs. GAO interviewed officials at six bureau-size agencies about the effects of interim CRs on "program delivery, management support, and revenue collection." GAO noted that interim CRs enabled agencies to continue to carry out their missions until their regular appropriations were enacted, and that "legislative anomalies may alleviate some challenges of operating during the CR period." Nevertheless, although the case study agencies' experiences varied, GAO found that all of the agencies reported administrative inefficiencies like delayed hiring (due to funding uncertainty) and some repetitive work (e.g., entering several short-term contracts or issuing multiple grants instead of annual or quarterly awards). Hiring delays may have affected some agencies' abilities to conduct all planned activities (e.g., food and medical device inspections). Agencies reported also that longer-term interim CRs delayed contracts for nonrecurring projects or compressed the time available for discretionary grants. However, some agencies shifted their contract and grant cycles to later in the fiscal year to reduce the amount of additional work required to modify contracts and award grants in multiple installments. Long-term CRs may allow for better planning in the near term, compared to a series of short-term interim CRs. However, GAO reported that some officials said a prolonged interim CR "limited their decision-making options, making trade-offs more difficult" (e.g., needing to reprioritize funds from other operations to address emergency situations).

Evidence From Other GAO Reports

Apart from the study described above, GAO reports also may be used to suggest basic categories of potential impacts. A full-text search of all GAO reports and testimonies from a 20-year span of time identified a number of items focusing on non-CR topics that also contained brief mentions of claims of impact associated with interim CRs. In most cases, the claims were made by agency officials without independent validation, because potential or actual CR impacts were not the focus of the GAO documents. The claims of impact are analyzed and cited here in two categories, based on their attribution to interim CR-related (1) funding levels or (2) funding uncertainty.

Funding Levels

A number of GAO reports and testimonies cited claims of impact that agency officials attributed to the funding levels of interim CRs. The claims cited travel expenses being "held to a minimum"; delayed or frozen hiring and cancellation of training; possible limitation of funding available for some construction projects; suspension of the issuance of loan guarantees; delayed contracts; prolonged interagency transfer of funds and differences between estimated and actual costs; impeded use of funds from previous years for a new agency; and delayed delivery of funds to recipients. In one instance, GAO cited a claim that an interim CR should have no impact on the timeliness of assistance payments.

Funding Uncertainty

In addition, GAO reports and testimonies cited alleged impacts that agency officials attributed to funding uncertainty related to interim CRs. These claims cited difficulties in managing a new agency; frozen hiring and overtime pay, as well as reduced numbers of cases that were processed; and delayed start-ups of an office, pilot initiative, and process reengineering.

In the absence of validation studies, it is not clear what conclusions can be drawn about the potential (or actual) impacts of interim CRs. However, the claims of impact contained in the GAO publications may suggest a number of hypotheses, including the following:

impacts of interim CRs may occur in many or all of the cited activities in some agencies and circumstances; some or all of the cited activities may be at risk of impacts from interim CRs unless an agency undertakes focused planning and execution, or requests that relevant anomalies be included in interim CRs; and agencies that anticipate large funding increases may be at particular risk of impacts from interim CRs.

Potential Issues for Congress

The possibility of interim CR-related impacts may raise issues for Congress. Notably, claims of impacts may generate arguments that changes in CRs, budget priorities, or the budget process are necessary to avoid or modify some purported impacts. Given the high-stakes nature of budget deliberations and the potential for changes in the budget process to change power relationships among its participants, claims of impact might be viewed as similarly significant.

Managing Potential Impacts of CRs with Anomalies

If Congress considers pursuing an interim CR, the subject of anomalies usually arises. Anomalies may be included among the provisions of an interim CR in order to modify or eliminate potential impacts of an interim CR. Depending upon how an anomaly is structured, an anomaly may cause the funding for an agency to behave exactly like it would under a regular appropriations act, at least for the duration of the CR. However, anomalies frequently are not included for many programs in interim CRs. A potential explanation for the rarity of anomalies is that the granting of too many anomalies would reduce incentives to negotiate seriously and come to final agreement on full-year appropriations. Another, related explanation is that an anomaly could, in effect, constitute a concession during negotiations and reduce a stakeholder's leverage, unless there were consensus the anomaly was necessary.

In situations when an agency expects a higher level of funding in an upcoming fiscal year, or if an agency needs authority to undertake new projects or activities in order to achieve a task, the agency could request an anomaly. For executive agencies, such a request can be made through the President and OMB, if the White House elected to propose the anomaly to Congress. Alternatively, an agency might make such a request directly to Congress, either formally or informally. An agency could make a request to the President or OMB but have the request denied. In such a case, an agency might or might not informally make its views or concerns known directly to Congress. The possibility of direct communications between agencies and Congress has sometimes been a contentious issue in congressional-executive relations, both generally and in a budgetary context. In a budgetary context, most executive agencies have operated under statutory requirements since 1921 that require budget-related requests to be submitted through the President, as noted below.

Congressional Access to Agency Information and Employee Views

The President, OMB, and agencies often are involved with Congress in the process of formulating, negotiating, and implementing interim CRs. Therefore, they may influence the potential impacts of interim CRs. Some influence may come from the bargaining power of the President. Another source of influence, however, may stem from the issue of access to information from agencies and views of their employees. Because agencies and their employees are "in the trenches" implementing and formulating public policy, they may have considerable access to information about the potential impacts of an interim CR. Congress may not always have ready access to such information. Under the Budget and Accounting Act, 1921, as amended and recodified, Congress has prohibited most executive branch officers and employees from submitting budget requests to Congress, except through the President and subject to presidential modification. However, Congress has statutorily exempted some agencies from such restrictions through provisions sometimes referred to as "bypass authority." OMB regulations governing the budget process also direct agency officers and employees to "avoid volunteering" opinions to Members and committees of Congress that are inconsistent with Administration policies. Therefore, the extent to which information and views flow from agencies and their personnel to Congress about the potential impacts of interim CRs, both formally and informally, may vary.

Role of Assumptions in Assessing Potential Impacts

A claim about the impact of an interim CR may rest on implicit assumptions. The term "impact" implies a comparison between the described change that is caused by an interim CR, on one hand, and an assumption about "what otherwise would have happened" without the interim CR, on the other hand. The assumption or estimation of "what otherwise would have happened" is crucial for any claim about the impact of an interim CR.

For example, suppose an observer characterized an interim CR as having caused a high level of uncertainty for an agency's program planning or execution. This statement claims that the CR caused the stated impact (i.e., high level of uncertainty), which otherwise would not have happened, all other things being equal. In this case, the claim of impact implicitly assumes a scenario under which, in the absence of an interim CR, full-year appropriations would have been passed by October 1. Passage of full-year appropriations, in turn, would have eliminated uncertainty about funding. However, it also may be plausible that absence of a CR might instead cause an impasse in negotiations and a government shutdown, rather than enactment of full-year appropriations, rendering the observer's claim contestable. The reverse argument may also be made. Suppose another observer characterized an interim CR as having prevented a government shutdown. However, it may be plausible that absence of a CR might cause negotiators to reach agreement on full-year appropriations, thereby avoiding the shutdown without need for a CR.

Claims of an impact or lack of impact can be debatable, therefore, and become subjects of scrutiny or even controversy. Some observers, for example, might question the validity of an assumption. An observer might be partly motivated to raise such objections, because claims of impacts may generate an argument that a change in budget priorities or the budget process is necessary in order to avoid or modify some purported impact. Viewing interim CRs as a product of negotiation, in which parties may come to the table with different underlying values and assumptions, helps explain why differing perspectives may be plausible. It is conceivable, for example, that participants in a negotiation may hold opposite perspectives about the impact of an interim CR in a particular situation. Each participant's views might be based both on his or her aspirations for the outcome of negotiations and the negotiating leverage the participant believes he or she could wield. In other words, because there typically is some uncertainty about the outcome of any negotiation, contrasting viewpoints may be plausible until decisions are made.