KBRA releases research discussing the expected and unexpected effects of the current government shutdown, which is now in its fourth week, with no end in sight. Since 1980, there have been 11 federal government shutdowns that furloughed employees, the longest of which lasted 34 days. While shutdowns are characterized by the cessation of certain revenue streams and payments to state and local governments, hospitals, and higher education institutions, the current shutdown has also resulted in freezes of previously awarded funds for high-profile capital projects.

In the past, most capital freezes applied to new obligations rather than the withdrawal of funds already awarded for projects underway. In contrast, the current cessation of capital project funding reflects executive-branch policy decisions to withhold previously obligated funds rather than a statutory lapse in appropriations. In KBRA’s view, this represents a paradigm shift from automatic work stoppages to discretionary funding actions, with significant implications for public finance and infrastructure investment.

Key Takeaways

• A federal shutdown disrupts funding for critical revenue streams to issuers, challenging financial planning, operations, and cash flow.
• While the recent capital project funding freeze is technically not related to the shutdown, it can be viewed as collateral damage arising from the political tensions in Congress.
• Issuers will be forced to adjust midstream to address the impact on both their operational and capital budgets—this could lead to credit challenges for some issuers, depending on the ultimate outcome of federal funding for key infrastructure projects.

Click here to view the report.

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About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

Doc ID: 1011896

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