How Government Shutdowns Can Affect Military Pay

Whenever we start talking about a government shutdown, there is a lot of confusion. It’s understandable – these things are confusing.  Heck, I have to re-learn it every single time it comes up, just to be sure I’m not messing something up – and this is my job. There are a lot of little details, and it’s often unclear how the parts fit together.

What Is A Government Shutdown?

A government shutdown is when the federal government ceases many operations.  It typically happens for one of two reasons: either Congress has failed to appropriate the money to spend (budget), or we have run out of ability to borrow (debt ceiling). The most common cause of a government shutdown is failing to pass a budget – that’s what we’re dealing with right now. 

How The Budget Process Works: Appropriation vs Authorization

Our federal government spending is organized by a two-part process. The two parts are called appropriations and authorizations. They’re entirely separate but they work together. Like peanut butter and jelly.

To relate them to your personal budget: Appropriations is like deciding how much you will spend on travel this year, and you move that into your travel account. You’re appropriating the money for that purpose. Authorization is like deciding where you are going to go, how you are going to get there, and whether you are sleeping in a tent or a five-star hotel. You already had the money with the appropriation, but authorization is the plan for spending it.

As far as the military is concerned, authorization is passed in the form of the National Defense Authorization Act, or NDAA. The 2021 NDAA has been passed in Congress, but has been vetoed by the President. Thankfully, there is a provision whereby spending automatically remains at the previous year’s level until the new NDAA is passed. So that’s not the big(gest) concern here. Our big problem is:

Appropriations, often called “the budget,” is when the federal government sets a broad spending plan for the fiscal year. Our constitution requires that all money spent by the federal government be pre-approved:

“No money shall be drawn from the treasury, but in consequence of appropriations made by law; and a regular statement and account of receipts and expenditures of all public money shall be published from time to time.” – Article one, Section nine, Clause seven of the U.S. Constitution

By law, the budget is supposed to be finalized by the start of the fiscal year, which runs from 1 October to 30 September, with the 2021 fiscal year running from 1 October 2020 to 30 September 2021. Unfortunately, setting a budget that big is hard, so it is pretty normal (in the last couple of decades) for Congress to fail to approve the budget by the 1 October deadline.

If we don’t have a budget by the 1 October deadline, Congress can choose to pass a continuing resolution that permits the government to keep running until a budget can be passed. These continuing resolutions have expiration dates, and sometimes a series of continuing resolutions are passed before the actual budget is done.

And Whoohoo – the President has signed the Omnibus Spending Bill, aka, the Budget, on the night of Sunday, 27 December 2020.

Which is where we are right now. We’ve had a series of continuing resolutions to keep the government running even though Congress did not pass a budget by 1 October. The current continuing resolution expires 28 December 2020. So, Congress either needs to pass a budget, or another continuing resolution, and the president needs to sign whatever they pass. Lawmakers state they are optimistic that they’ll have a bill – fingers crossed.

If this seems a little backwards, let’s return to our personal example. Have you ever planned a trip before you had the money for it? That’s what happens when the NDAA is passed before the budget is passed – Congress has made plans for the military budget, but they still can’t do anything without a budget. Just like your amazing world cruise can’t happen until you have the money.

How A Government Shutdown Affects Military Pay

Government shutdowns can affect military pay. Anyone who tells you that military pay will not be affected by a government shutdown is either a) very optimistic, or b) not very knowledgeable. It’s true that it has been years since a government shutdown affected military pay, but that doesn’t mean that it can not happen. And the Coast Guard, while technically not part of the Department of Defense, did not get paid for a lengthy period earlier in 2019 because the Department of Homeland Security was not funded. Frankly, it seems like anything is possible right now.

Talking about budget-related shutdowns, the Defense Finance and Accounting Service (DFAS) – you know, the people who pay you – says,

“the Department of Defense has no legal authority to pay any personnel – military or civilian – for the days during which the government is shut down.”

Thankfully, a number of different things come together to reduce the likelihood of a government shutdown delaying service member’s pay. Notice I said reduce, not eliminate.

First, government shutdowns are usually short – one to 21 days. Most last less than a week. Because military members are paid twice a month, most shutdowns fall in between pay periods. Legislation to end the shutdown usually specifies that some or all federal workers will be paid for the time of the shutdown. However, as we saw last week, even the threat of a shutdown can potentially delay military pay if the timing is right – or wrong.

Second, Congress understands that military pay is a politically sensitive topic, and typically tries to find a way to pay the military. In the 2013 government shutdown, Congress passed the Pay Our Military Act, which guaranteed that service members would continue to be paid for any shutdown during the 2014 fiscal year. In the event of another government shutdown, it is possible that Congress would pass a similar bill. Note that I said possible, not probable or likely or guaranteed. Don’t make your plans based on the fact that this happened once in the past.

However, please remember that just because things have unfolded this way in the past does not guarantee that they will happen the same way in the future. There is no guarantee that military pay will not be affected by a government shutdown, regardless of what your buddy or your neighbor or your Facebook friend tells you. Because without a budget, the government can’t spend money, and paying people is spending money.

What Should You Do?

For starters, become informed. These issues are important, and not just because they could hold up your paycheck. Fully understand the situation. Every time our country reaches these semi-emergencies, I have readers tell me that it isn’t possible for the military not to get paid on time. It is possible, and it has happened in the past. (Thankfully, it has been decades. *Except for the Coast Guard, which is part of the Department of Homeland Security and not part of the Department of Defense.)

Second, formulate a loose plan. No need to do anything drastic at this point, but consider your options. Do you have a solid emergency fund to tide you over until pay arrives? How are your bills structured – do you have wiggle room with amounts or due dates? If you’d like to do something more proactive, consider delaying purchases or cutting some costs for a few weeks until the dust settles, or even picking up that part-time job that you’ve been considering.

Third, consider how you would like to be prepared if this happens again next year, or the year after that.  It is easy to become comfortable when the military pays twice a month, every month. If you seriously knew that your pay might not happen on time each October, how would you prepare differently? Since this is the reality of our current fiscal and political climate, take steps to be prepared for it.  See also: 12 Ways To Prepare For The Next Government Shutdown

What About the 31 December 2020 Military Paycheck?

Update 27 December 2020:
The President has signed a spending bill on Sunday, 27 December 2020. We shall get paid! It is possible that some banks and credit unions that typically offer early direct deposit won’t get the information in time to push those early payments, but we do have a couple of days.

Update: Congress has sent a budget to the President. 

At this point, nothing is guaranteed. Congress seems to be working hard to agree to a budget before the current Monday, 28 December 2020 deadline.

However, that date falls awfully close to the 31 December 2020 military payday. The Defense Finance and Accounting Service (DFAS) starts pushing pay information to banks and credit unions several days prior to the actual payday, so that the financial institutions can be prepared to process all those pay deposits in a timely fashion. This early information is also how certain military-friendly banks and credit unions are able to credit military pay before the actual payday – often called “early direct deposit.”

During the April 2011 near-shutdown, DFAS went ahead and processed pay for the period of time before the shutdown. It then processed the remaining pay in a separate transaction, and folks got their full pay in two deposits.

I thought that was what would happen with the 15 December 2020 military pay, but it didn’t. DFAS waited until the continuing resolution was signed, and then pushed the full pay information to the various banks and credit unions. It meant that everyone got their pay, in full, on the actual military payday. But those folks who were counting on receiving their pay early, as usual, were unpleasantly surprised.

I don’t have a crystal ball (gosh, I wish that I did), but I think there are a couple of likely scenarios for this 31 December 2020 military paycheck:

Scenario 1: Congress returns on 28 December 2020, passes a budget, the president signs it, and DFAS pushes pay information immediately. Early pay may be delayed but everyone gets paid by the actual 31 December 2020 military payday.

Scenario 2: Congress returns on 28 December 2020, and sees that a delay in finalizing the budget will delay military pay. They pass a law to authorize military pay, either for the 31 December 2020 payday or for the duration of any shutdown.

Scenario 3: Congress returns on 28 December 2020, and doesn’t get a bill finalized and signed until later in the week. Military pay is delayed until at least 4 January 2021.

Which will it be? Your guess is as good as mine.

Will A Government Shutdown Affect Military Retirement Pay?

Government shutdowns for budget issues should not affect military retirement pay. That’s because military retirement pay is budgeted in the years when it is earned, not when it is paid.

Will A Government Shutdown Affect Veteran Benefits?

Most benefits through the Department of Veterans Affairs will not be affected by a government shutdown because the money for these programs is allocated outside of the federal budget process. This includes disability compensation, pensions, health care, education claims processing, and VA home loan guarantees.

Government shutdowns can and do delay military paychecks. Be informed, prepare for the worst-case scenario, and encourage your legislators to get this problem solved.

Please ask questions if you don’t understand. I love explaining this stuff, even if I do have to re-teach myself every single year 🙂 .