Joint Memo with ANF Letterhead

 
 
To:Department Chief Fiscal Officers, Budget Directors, General Counsels and MMARS Liaisons
From:Mike Esmond, Budget Director, ANF
Martin J. Benison, Comptroller
Date:March 14, 2011
Subject:Potential Federal Government Shutdown
 Comptroller Memo FY#2011-16

Executive Summary
 

The purpose of this memo is to provide information and guidance in the event of a federal government shutdown resulting from Congress not adopting a temporary funding measure for its fiscal year 2011. There could be some potential challenges for spending accounts in the General Federal Grants Fund, which the Executive Office for Administration and Finance (ANF) and the Comptroller's Office (CTR) are requesting planning measures and feedback from your agency (identified below).


Background

The federal government has not adopted a formal budget for its fiscal year 2011. Since October 1, 2010, a "continuing resolution" (CR) has been in effect, which generally provides that discretionary funding (i.e., not including Medicaid, Medicare and other entitlements) shall be funded at fiscal year 2010 levels until Congress adopts a formal budget. The CR was originally set to expire on March 4, but was continued through a stop-gap measure last week that extended the CR through March 18. Current negotiations among the House, Senate and President Obama to agree on a budget for FY11 are ongoing. A number of potential outcomes exist, including a reasonable chance that a further two-week CR will be adopted this week. We must prepare, however, for the possibility that federal government operations and/or federal funding for states will not be authorized. The balance of this memo addresses the potential situation of a shutdown.

Federal Funding Received by the State

Programs of federal financial participation (FFP) for which the accounting and reporting is done via MMARS, can be placed into three categories.

  1. Federal financial participation for joint federal-state programs, where the Commonwealth appropriates 100% of the total program, and the FFP is accounted as reimbursement revenue (examples include Medicaid and TANF).
  2. Federal financial participation where the Commonwealth authorizes spending from a specialized fund and again the FFP is accounted as reimbursement revenue (examples include the federal highway capital project fund and other special revenue funds).
  3. Federal financial participation that is itemized in the General Federal Grants Fund (referred to as MMARS Fund 0100) on a grant by grant and account by account basis.

Our examination indicates that this third category, the General Federal Grants Fund, is most at risk of disrupted fiscal operations if the federal government were to shut down. The measures we are asking agencies to take below directly relate to this category of federal funding. We expect that the likely impact of a federal shutdown on categories #1 and #2 would affect the state's cash flow, which will need to be managed centrally. Where your agency believes further impacts may result from a shutdown, please contact ANF and CTR through the contact information listed below.

Review Accounts in Federal Grant Fund.

If your department has spending accounts in the General Federal Grants Fund, designated fund 0100 in MMARS, we request you take the following actions:
 

  1. For each such grant/account, contact the relevant federal granting department to get updated information on the amount and timing of the expected federal grant awards and to confirm how funding would be affected by a federal government shutdown.
  2. If you conclude the continuation of your grant is unlikely, prepare actions to discontinue spending against such grant. To the extent continued spending depends on further federal budget legislation, you should not incur obligations against the grant beyond the date through which the federal granting department has made funding available.

We currently estimate that roughly 4,500 FTEs are paid from federal funding sources across state government. By close of business, Wednesday, March 16, we request that agencies provide in writing to their ANF budget analyst and Taneka Simmons, CTR Director of the Federal Grant and Cost Allocation Bureau, any concerns that they may have with available federal funding, particularly as they relate to their ability to make bi-weekly payroll for employees currently paid from federal sources. We ask that agencies provide ANF with steps they can take with respect to utilizing other funding sources currently available to them to fund payroll costs, and what the impact of utilizing such funds may be on other state-operated programs and services. ANF is exploring whether any additional state resources could be made available on a limited basis to support payroll costs and the related services that would be impacted by a federal shutdown. However, agencies should assume that no additional funding will be available.

It is the responsibility of each department to manage its respective federal grants. Until you notify CTR otherwise, it will assume each grant in the General Federal Grants Fund will have ongoing funding, and thus will allow transactions in MMARS, including central draw (for CMIA) to proceed in a "business as usual" mode.

As you conduct your grant by grant review, please notify Taneka Simmons, at (617) 727-5000 or at taneka.simmons@state.ma.us and your budget analyst at ANF of results so we have updated information. Further guidance will likely be provided to state agencies once the prospects of a federal shutdown become clearer over the week ahead.

 

Cc:Cabinet Secretaries
 Department Heads
 Internal Distribution