How will a government shutdown affect freight railroads?

September 29, 2023

On the surface, a government shutdown — which can occur if Congress can’t agree on how to handle the appropriations budgets — would have a limited impact on freight rail operations.

Freight railroads will keep running, transporting parts, materials and goods within North America and to and from the coastal ports. Ensuring safe operations will also be paramount, according to the Association of American Railroads (AAR).

“As a privately owned and maintained industry, rail operations will continue largely uninterrupted in the event of a government shutdown,” AAR told FreightWaves. “Railroads employ hundreds of inspectors who will continue to be at work ensuring the safety and integrity of our infrastructure and equipment. Ongoing rail construction projects will continue unimpeded as well.”

But while freight railroads themselves would still operate, that doesn’t mean the industry is necessarily immune to the effects of a shutdown, Transportation Trades Department (TTD) President Greg Regan told FreightWaves.

Efforts to construct grade crossings and expand intermodal facilities at the ports could potentially stall because those projects receive federal funding, according to Regan, while grant processing at the Federal Railroad Administration could slow as a result of a shutdown.

Retirement benefits under the Railroad Retirement Act would continue, but any legal, financial, administrative or information technology activities not related to the payment of benefits “would cease during a lapse,” according to a White House web page listing the contingency plans of all federal agencies. Roughly 30% of full-time employees working for the Railroad Retirement Board would be affected by a government shutdown, with the remainder being either deemed essential employees or exempt because their salaries and budget come from a different funding source other than annual appropriations.

Progress would stall on rail safety legislation and matters before regulators

A shutdown would also affect the pace of economic and rail safety rulemaking.

See What happens to freight if the government shuts down?

Nearly all employees working for the Surface Transportation Board would be furloughed in a fall 2023 government shutdown, except those in certain leadership roles. Board members also cannot be furloughed by law, according to the White House document and STB.

At the Federal Railroad Administration, about 65% would remain at work in the event of a government shutdown because they are either necessary to protect life and property, must perform activities implied by law, or have budgets or salaries coming from funding other than annual appropriations. The remaining 35% would be furloughed.

However, those essential employees, such as railroad safety inspectors, would be working without pay, the TTD said in a Wednesday letter to members of Congress calling to avert a shutdown.

Rulemaking activity, such as rules focused on rail safety in the aftermath of the Feb. 3 Norfolk Southern train derailment in East Palestine, Ohio, would also be halted, TTD said in its letter. That derailment involved rail cars carrying hazardous materials.

A government shutdown “would put any new rulemaking completely on pause. And there’s a lot of them that are dealing with safety, whether it be crew size mandates — we’re still pushing to get everybody signed on to the close call reporting system — as well as any other stuff that FRA is looking at and trying to move forward,” Regan said. “So, it really does put a big stick in the spokes of the agency as it tries to evaluate the safety culture of the railroads and figure out what needs to be done to make it safer in the aftermath of East Palestine and all these accidents that have happened since then.”

Any rail safety legislation in Congress would also stall because Congress is focused on getting a budget passed, Regan said.

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