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Utah Business

Government shutdown

The Government Shutdown Is Over, Now What?

The partial government shutdown ended last Friday.  Pray it never returns.  It derailed the personal finances of 800,000 federal employees and unsettled financial markets.  What its long-term effects will be is a complicated question, one for the economists and political analysts.  For businesses, however, there is a more immediate concern: dealing with the massive backlog that has built up in many key functions of the government.

No Department Was Left Unscathed

Just how meaningful is this backlog?  The IRS claims it has 5 million pieces of correspondence to deal with.  So don’t expect an answer anytime soon to the question of whether your company can expense a pair of massage chairs for the break room (please, yes).  It has been reported that it may take a year for the IRS to catch up.

Even some of the lesser known departments of the government will need time to return to normal activity.  The commercial services branch of the Commerce Department fields agents across the country to assist local businesses with foreign trade and investment.  They help U.S. companies make things happen overseas, and there are times when their support can be critical.  But if a business reached out during the shutdown, they would have gotten an out-of-office email reply, which might have looked a lot like the following (because, in fact, this was an actual response):

Due to the federal government shutdown, I am unable to access e-mails or telephone voicemails.  I will respond to your message in a timely manner once funds have been appropriated and the shutdown ends.  I apologize for any inconvenience and look forward to acting upon your message once operations resume.

Notice the difference from the typical out-of-office message, which might say something along the lines of: “I’m traveling this week.  If your message is urgent, please contact Jane Doe.”  During the government shutdown, there was no Jane Doe to contact.  It can be hard enough to get a bureaucrat’s attention during the best of times,  imagine it now when they have an inbox filled with a month’s worth of issues ahead of yours.

Some Utah companies won’t necessarily feel an impact.  Retail businesses, for instance, tend to be only indirectly affected.  But those in highly regulated industries, like health care, feel the absence of authorities who facilitate reimbursements and provide clarifications.  Other companies may be going through an important strategic moment like an IPO or a merger that requires timely interactions with the federal agencies in order to progress the deal.  The risk of missing a market window for a transaction like this can mean everything to a business.

Entrepreneurs Are Also Hurting After The Shutdown

Even innovation can be disrupted.  New drugs and medical devices require FDA approvals, and new chemical compositions can require review by the EPA.  During the shutdown, these processes were slowed and sometimes even halted.  And consider Utah’s burgeoning financial services and fintech industry.  During the shutdown, the IRS was unable to provide financial information to support mortgage and loan approvals, slowing the flow of consumer lending; and the small business association (SBA) stopped approving new loans altogether, resulting in billions of dollars not being funded to entrepreneurs across the country.  There are even federal programs that have been on hold that support Utah’s agriculture and energy industries via loans and grants. They too are behind and won’t be caught up anytime soon.

For impacted businesses, the challenge now turns to obtaining a favorable position in the queue of people clamoring for attention of the returning officials—officials who today are warming up their computers for the first time in a month.  In this effort, creativity will no doubt be rewarded, but relationships are likely to be the real key.  To get timely attention during this transition period, the old adage of “it’s not what you know but who you know” may become especially relevant.

Troy Keller is an attorney at the international law firm Dorsey & Whitney in its Salt Lake City office. He has a deep experience in M&A, corporate governance and government relations.

keller.troy@dorsey.com

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