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Shutdown watch: What will congressional inaction mean for TBED?

September 28, 2023
By: Jason Rittenberg

As of this writing, Congress has yet to agree to fund the federal government beyond this Saturday, Sept. 30. Major media outlets are covering the play-by-play of these developments—i.e., the Senate’s slow progress toward a weekend vote on a continuing resolution and uncertainty about the House—and providing some information about broad effects, but how would a shutdown affect tech-based economic development (TBED) programs? The answer varies by agency and program, with many details remaining unclear, even at this late hour.

General approach to shutdown activities

According to guidance provided by the White House Office of Management and Budget (OMB) on agency contingency plans for a government shutdown, activities funded by a lapsed appropriation generally must stop unless the activity is necessary to protect life or property (or implied to be necessary for the continuation of such activities).

Most TBED activities do not meet this standard, which is reflected in agency plans. For example, the National Institutes of Health’s (NIH) 2023 plan is to continue with 22% of their staff, who are primarily working with patients and securing/maintaining important facilities and research. Department of Energy identifies just 10% of its staff as fulfilling such functions (although it intends to have additional staff continue working—more on this, below).

Determinations about grant and contract work are more subjective. Staff overseeing and supporting external projects are subject to similar restrictions as other federal staff. In cases where grant or contract funds are obligated prior to the shutdown, the ability of the awardee to continue working depends on the necessity of their activities, the project’s reliance on the availability of federal staff, and the best use of taxpayer funds. This guidance affords agencies a great deal of leeway in determining whether the work should continue and, if work may continue, whether any federal staff can provide any programmatic or financial assistance and approvals. Such decisions may be on a program-by-program or award-by-award basis.

For example, the Appalachian Regional Commission’s 2023 plan states that the agency will continue to administer grants already awarded for prior funds. The Department of Commerce’s 2023 plan stated that Economic Development Administration (EDA) and National Institute of Standards and Technology (NIST) programs funded by the CHIPS Act of 2022, supplemental appropriations, and other multi-year funding would continue but that “assistance and support to recipients of financial assistance” would otherwise cease—meaning that even if work may continue on those awards, staff support and oversight may hinder funded activities or operations.

Note: Any current grantee or contractor interested in how a shutdown will affect their operations or ability to be paid on time, late, or ever should review their specific agreement terms and contact their award manager with questions.

Any new awards made during a funding lapse must involve staff authorized to work and, generally, activities that fit the conditions above or utilize alternative funding sources.

For example, the National Science Foundation’s (NSF) 2023 plan states that no new grants or cooperative agreements will be awarded, no new funding opportunities will be issued, and any award review panels scheduled during the lapse will be canceled.

Funding availability during a shutdown

Despite the breadth implied by the term “government shutdown,” many agencies can continue with some or all of their functions for a period of time. The broad term refers to the lapse of annual appropriations, which may be the case as of Oct. 1, but this is not the only funding accessible to many agencies. Some programs and operations are funded through fees, foundations, or appropriations available for multiple years.

For example, the Energy plan referenced above states an intention to allow an additional 30% of its staff to continue during a shutdown. Many of these employees work in self-funded power administrations while others are funded through the Infrastructure Investment and Jobs Act and Inflation Reduction Act, which do not have appropriations that expire on Sept. 30. Further, Energy reports having enough regular, non-expiring appropriations on hand to continue normal operations if the shutdown lasts for less than five days.

In recent years, TBED programs have received substantial investments from appropriations available for multiple years or until expended. Due to the nature of their appropriations, funding for all of these programs should be available during a shutdown. Examples include:

  • American Rescue Plan Act (ARPA) funded the EDA Build Back Better Regional Challenge and the Department of the Treasury’s State Small Business Credit Initiative;
  • CHIPS and Science Act funded semiconductor manufacturing incentives and R&D at NIST;
  • Infrastructure Investment and Jobs Act funded the Future of Industry program at Energy;
  • Inflation Reduction Act funded the Greenhouse Gas Reduction Fund at the Environmental Protection Agency; and,
  • Supplemental funding attached to the FY 2023 omnibus funded EDA Tech Hubs and Recompete Pilot, and NSF’s Regional Innovation Engines.

While program funding will continue for such initiatives, the availability of the staff working on these programs depends on whether their positions were funded from any associated administrative funds. It may further depend upon the discretion of political leadership. Similarly, the ability of an agency to process any new awards from these programs depends on whether the relevant programmatic, legal, financial, and supervisory staff are available to work.

Selected TBED-related agency plans

In addition to the examples cited above, the most recently available plans, supplemented by other information, provide further context for what agencies intend to do with TBED-related programs once a government shutdown begins.

Department of Commerce

Commerce’s 2023 plan explicitly states that work on CHIPS manufacturing incentives and research programs at NIST and Tech Hubs and Recompete at EDA will continue during a lapse in annual appropriations, as each of these efforts is funded by multi-year funding.

In a hearing before the House Committee on Science, Space, and Technology last week, Secretary Gina M. Raimondo was asked about the effects of a shutdown and said, “Export control enforcement, export control work, investment of the CHIPS money, investment of the Tech Hub money—it all stops.”

While the Commerce plan and Raimondo’s statement seem contradictory, it could be that these characterizations neatly clarify how the agencies will operate during a shutdown. Program staff could continue to conduct evaluations of submitted proposals and perform other activities but not actually approve any investments of program funds for as long as the shutdown is in place. With NIST already reviewing some CHIPS incentives proposals, EDA reviewing Tech Hubs, and Recompete proposals due on Oct. 5, a shutdown could cause delays in companies and organizations being able to receive and implement funds.

The Commerce plan indicates that work on programs funded from lapsed annual appropriations will halt during a shutdown. While not referenced in the plan, this includes Build to Scale, Economic Development Assistance, and the Manufacturing Extension Partnership (with the exception of a small supplemental appropriation in FY 2023).

Commerce has its own furlough information page with this contingency plan and other information for department employees.

Department of Defense

Given the agency’s large budget and many activities that are deemed necessary during a shutdown, it is not surprising that the current-year contingency plan does not provide many details about TBED-related activities. However, the plan does state that research programs will have unobligated balances that may be used to make new awards.

The timing of this potential shutdown may avoid causing serious delays for the next round of Small Business Innovation Research (SBIR) awards. This timing is important because the department funds nearly half of all SBIR awards annually. Defense recently published a new broad agency announcement for SBIR that made proposals due Oct. 18.

National Science Foundation

NSF’s 2023 plan allows most grant and contract awardees to continue working so long as federal staff oversight is not required for progress, but no new awards will be made or considered during this time. The agency states that a notice to this effect will be posted to nsf.gov in the event of a shutdown.

The FY 2023 funding bill provided NSF with $335 million in supplemental appropriations, largely for the Technology, Innovation, and Partnerships Directorate, that will not terminate on Sept. 30. While employees working on these programs are likely eligible to continue work—NSF’s plan has about 16% of its workforce listed as eligible due to non-lapsing funding—the agency’s intentions for these activities are unclear at this time. The plan does not explicitly discuss the directorate nor Regional Innovation Engines, nor does it make an exception in its blanket halting of new awards for programs funded by supplemental appropriations.

Small Business Administration

SBA’s 2021 contingency plan (the most recent year available—older plans are under review and may be updated) stated that only two employees would be working in the Office of Investments and Innovation, which covers SBIR, Growth Accelerators, FAST, Small Business Investment Company, and Regional Innovation Clusters, and that no employees would continue working in the Office of Entrepreneurial Development. These programs have grown over the past two years but through regular appropriations rather than the supplemental appropriations that have expanded some of the other initiatives discussed in this article.

SSTI has reached out to SBA for comment on current year contingency plans and will update this article if we learn more.


Editor's note: After this article was originally posted, SSTI was alerted to new Commerce and NSF plans that were posted to the agencies' websites but not yet available on OMB's directory of contingency plans. The article has been updated accordingly.

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