How a Government Shutdown Can Affect New York Businesses

It was recently announced that, if Congress does not pass a spending bill by April 29, 2017, the federal government will run out of money and shut down. Congress has yet to present a spending bill and, without one in place, the federal government is not authorized to pay its expenses. The last government shutdown lasted 16 days in October 2013 and cost American taxpayers $2 billion for lost productivity, according to the Office of Management and Budget. When the federal government shuts down, it not only affects federal government workers, but also businesses and the U.S. economy overall.

The issue at hand is that members of Congress cannot come to an agreement on whether or not the spending bill should include funding for a U.S.-Mexico border wall President Trump proposed during his presidential campaign. Although the president insisted during his campaign that the wall would be solely funded by Mexico, he has not been able to secure the funding he needs to construct the wall from the Mexican government and, therefore, needs it included in the spending bill to start construction immediately.

From the last government shutdown, we can infer that the Small Business Administration (SBA) will be affected. When the government stopped operations four years ago, the SBA shut its doors and any loan application awaiting processing as of midnight of September 30, 2013 (the day the government missed the deadline to pass a spending budget) was not processed until the shutdown ended. Additionally, any information was not updated, transactions were delayed and inquiries were not addressed until after the furloughed employees returned.

If the government shutdown happens, national parks and monuments will close, and furloughs of some government employees, and delayed pay for others may have a trickle-down effect on small businesses. For example, hotels and restaurants located around national parks which are dependent on tourism may face the backlash of the government shutdown. Businesses that rely on consumers who are sent home without pay or those who are in contracts with the federal government may experience some cash flow problems as well.

In a statement released by the White House in November 2013, the negative effects on the U.S. economy were outlined. Such effects included the halting of federal permitting and environmental and other reviews, delaying transportation and energy projects. Import and export licenses and applications were put on hold, negatively affecting trade. Private-sector lending to individuals and small businesses were disrupted, due to the fact banks and lenders could not access government income and Social Security Number verification services. Agencies, including the Food and Drug Administration (FDA) and the Environmental Protection Agency (EPA), had to cancel safety and health inspections. Multiple surveys revealed that both business and consumer confidence was damaged as a result of the government shutdown.

While a government shutdown may be out of the control of the average American, it is important that business owners have a plan in place to protect their company and employees from the possible fallout. The business law attorneys at Blodnick Fazio & Associates, LLP help New York business owners have proactive plans in place to avoid negative impacts from unforeseen circumstances. To schedule a free consultation, contact our Long Island business law office at (516) 280-7105.

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