Removing Barriers Blog

Federal Government Enters Partial Shutdown
Posted December 21, 2018 by CUNA Advocacy

At midnight on Friday, December 21, 2018, certain federal government agencies and functions shut down as Congressional lawmakers and the president could not come to an agreement over funding for border security.  As a result, funding for roughly 25 percent of the federal government is halted.  Seventy-five percent of the federal government has already been funded through the end of fiscal year 2019 (September 30, 2019).  Functions and personnel deemed “nonessential” are closed until a funding agreement is reached.  This could take hours, days, or even weeks. 

Of the twelve fiscal year 2019 annual appropriations bills, five have been already been signed into law.  These five bills represent about 75 percent of annual discretionary spending.  (Defense, Labor/Health, Energy & Water, Military Construction/Veterans, and Legislative Branch).  The remaining seven appropriations bills are the Interior, Financial Services, Agriculture, Transportation/HUD, Commerce/Justice/Science, Homeland Security, and State/Foreign Operations. 

The National Credit Union Administration (NCUA) and other federal banking regulators will remain open during this and any other government shutdown, regardless of how long the shutdown persists.  The NCUA is funded by member credit unions and is not subject to the Congressional appropriations process. 

In 2017, CUNA won a battle on the floor of the House of Representatives when a CUNA-backed amendment removed a provision from fiscal year 2018 appropriations legislation that would have placed the NCUA under the appropriations process.  CUNA continues to strongly support an independent NCUA because an NCUA subject to appropriations would not only be subject to full or partial government shutdowns, it would also jeopardize the independence of the federal credit union regulator and unnecessarily comingled credit union resources with taxpayer resources, potentially causing credit union resources to be used to pay for other areas of government. 

Maintaining a separate, independent federal credit union regulator and insurer is critically important to the credit union system, and the structural and mission-driven differences between credit unions and banks necessitate such a regulatory scheme:  credit unions' not-for-profit structure and their mission to promote thrift and provide access to credit for provident purposes are fundamentally different than other financial services providers. 

The NCUA-administered National Credit Union Share Insurance Find (NCUSIF) is also independent of the federal appropriations process and is therefore insulated from any government shutdown.  Credit union share deposits remain insured and secure. 

A government shutdown could result in reduced economic activity due to delayed federal payments for discretionary programs and decreases in consumer and business confidence, which would lower the demand for loans and other credit union services, harming credit unions.  Credit unions that primarily serve federal employees, the Washington DC area, and other areas dependent on federal funds—such as tourist destinations near national parks—would be hardest hit.  Nonetheless, government shutdowns of this form tend to be short-lived with little long-term impact on the economy. 

Credit unions that serve federal employees have a history of assisting their members in previous government shutdowns.  This includes advances and short-term loans to members who are also federal employees.  Many of these members may not receive paychecks until the government shutdown is over.  Credit unions often step in to assist their members during such shutdowns so that these members can pay their bills on time.  It is possible that credit unions with branches located in federal buildings may experience limited service interruptions.  NCUA works with such credit unions to minimize any such problems. 

The CFPB and the Federal Reserve will remain open during a government shutdown as they are also not subject to the Congressional appropriations process.  The SBA and the FHA will likely be unable to process loan requests and process loan origination applications during the shutdown.  Credit unions may wish to refer to IRS, FinCen, and other federal agency websites to receive the latest news on services available. 

With the government shutdown, the NFIP does not have the authority to process new flood insurance requests.  Please visit the FEMA website for helpful instructions. 

It’s important to remember that credit unions are made up of “people helping people.”  During this shutdown, CUNA encourages all credit unions to continue to highlight the credit union difference in their communities, especially during this shutdown. 

CUNA will continue to engage with lawmakers to advance credit union priorities in fiscal year 2019 appropriations legislation.