Cindy Conger, chief financial officer and head of the Finance Section, wrote this column.
Since the U.S. budget and debt ceiling will be back in the news early next year, I’m taking this column to briefly explain how the Fermilab budget interfaces with the U.S. budget.
On Oct. 1, the U. S. government partially shut down because Congress had not passed appropriations legislation for FY2014, which gives government agencies the authority to obligate federal funds. Some parts of the government, including contractors such as Fermi Research Alliance, continued to operate using funding remaining from prior years. On Oct. 16, Congress passed a continuing resolution (CR) funding the government through Jan. 15, 2014. As I wrote in my Aug. 28 column, CRs provide a “budget” to keep things going at last year’s levels but do not allow new projects to start, giving Congress time to pass appropriations legislation covering the entire year.
At the same time the partial shutdown took place, the nation also was approaching its so-called debt limit, the ceiling on the amount that the U.S. Treasury is authorized to borrow to pay the nation’s bills. This situation can happen at any time, including when the government is fully funded and appropriations legislation is in place. The fact that these two events occurred concurrently makes it more difficult to understand that they are separate and distinct and have different effects.
To help explain, let’s use the analogy of putting an addition on your house. You sign a contract with a builder, make an initial payment and approve the builder to start work. The builder completes your home addition and sends you an invoice for the unpaid portion of the work. You write a check to the builder, who deposits it in the company bank account.
Fermilab’s “budget” allows the lab to obligate funds, the equivalent of signing the contract with the builder and having the work completed. The budget does not come with cash but with the authority to draw on the U.S. Treasury when cash is needed, that is, when checks clear. The failure to raise the debt ceiling could mean that there might not be sufficient cash in the laboratory’s bank account to pay the check to the builder, even though the work has been properly authorized and performed. It is not clear what would actually happen in the unlikely event of a U.S. default, but failure to raise the debt ceiling could prevent the Treasury from being able to provide cash and could have an immediate effect on the government’s ability to operate, even if sufficient budget is available. The ceiling will be automatically increased through Feb. 7, but many expect it to be reached again shortly thereafter.
By Jan. 15, Congress will need to pass appropriations bills or a CR to avoid another shutdown. Fortunately, Fermilab has sufficient funding to continue to operate in the event of a short-lived shutdown.