When the clock struck midnight on October 1, government funding lapsed as lawmakers had not secured a deal to fund the government past the end of Fiscal Year (FY) 2025.
The federal government shutdown comes after weeks of negotiations in Congress on whether to approve a short-term continuing resolution that would have kept the government open through November 21 at FY 2025 spending levels. This short-term funding deal would have allowed appropriators and congressional leaders more time to craft a year-long spending agreement.
Despite passing the House of Representatives, the legislation could not muster enough support in the Senate to reach the 60-votes to stave off a filibuster. The central issue in agreeing to a funding patch are health care demands by Democrats.
Specifically, Democrats want to condition U.S. government funding on extending tax credits that have made health insurance more affordable for millions since the COVID-19 pandemic. Democrats are also looking to reverse Medicaid cuts passed in the One Big Beautiful Bill Act (OBBB) signed by President Trump in early July, which includes more than $1 trillion in cuts to Medicaid and food assistance over the next decade.
On Wednesday morning, agencies across the federal government began winding down their operations and furloughing staff. The effects of the shutdown will be wide ranging, but the scope of its impacts will depend on how long the government remains shuttered. The Congressional Budget Office estimates that up to 750,000 federal workers could be furloughed during the shutdown and cost taxpayers $400 million for each day the affected agencies remain closed.
What Happens During a Government Shutdown?
The laws governing federal shutdowns have remained relatively constant for years, but the Office of Management and Budget (OMB) has significant discretion in how it interprets these laws.
Generally, the federal government is prohibited from incurring additional debt and making expenditures in the absence of funding. The government is also prohibited from receiving voluntary services from federal workers in the absence of appropriations, except for “emergencies involving the safety of human life or the protection of property.”
Because of this, federal agencies must pause or diminish their activities in the absence of appropriations, resulting in a “shutdown.” All federal agencies are required to develop and update shutdown contingency plans, which are posted on their websites once approved by OMB.
Earlier this year, OMB issued a memo stating that activities financed with appropriations that have not lapsed can continue to operate in a shutdown, which could include mandatory funding (i.e., reconciliation bills or entitlement program funds) or unexpired prior-year funding with valid apportionments.
The salaries of U.S. government workers carrying out these activities may be funded by lapsed appropriations. Whether a specific program will continue to operate is at the discretion of each individual agency.
What Programs Will Continue During the Shutdown?
Some of the government’s activities – such as those funded by permanent, mandatory or advanced appropriations – are not dependent on current fiscal year funding. Examples of these programs are Social Security, Medicaid, Medicare, Supplemental Nutrition Assistance Program (SNAP) and veterans’ healthcare benefits. These programs will continue despite the federal government shutdown.
Certain government activities that are funded by user fees or trust funds that are outside of the appropriations process, such as reimbursements from the Highway Trust Fund, have usually continued during past shutdowns if the staff responsible for these projects are called into work.
Government activities funded through legislation outside of the annual appropriations process, such as the IIJA and the OBBB, also typically continue during shutdowns.
In addition, federal law allows the continuation of activities that are necessary to protect human life, safety, property or to discharge the president’s constitutional powers. For this reason, military operations, federal law enforcement and air traffic control will continue without interruption during the government shutdown.
What to Expect
Historically, federal agencies have worked to minimize the disruption of government shutdowns by using prior-year carryover funds available or other strategies. That said, the Trump administration is pursuing a different approach.
In a memo from OMB published just before the shutdown came into effect, it indicated there may be mass layoffs in store for federal workers. The memo stipulates that Reduction in Force notices are to be sent to all employees in programs, projects, or activities that satisfy the following three conditions:
- Discretionary funding lapses on October 1, 2025;
- Another source of funding, such as OBBB is not currently available; and
- he project, program or activity is not consistent with the president’s priorities
The memo states these conditions would apply to staff who normally would be exempt or furloughed during a U.S. government shutdown.
The furloughs will be extensive at some agencies. At the Environmental Protection Agency, nearly 90 percent of its staff will be furloughed. The Departments of Energy and Transportation will see 59 percent and 23 percent of their respective staff furloughed during the ongoing shutdown.
These employment suspensions come on top of the 300,000 fewer workers who have or are expected to depart from federal employment in 2025 due to firings, layoffs and resignations.
Moreover, the Trump administration has already said it will withhold $26 billion in funding for infrastructure and green energy projects in response to the shutdown, including 321 awards for more than 200 climate-related projects funded through the Department of Energy and funds designated for the Gateway Tunnel and Second Avenue Subway projects in New York.
As of Friday October 3rd, there is little indication of when the impasse over government funding will be resolved. The most recent government shutdown happened from 2018-2019 during President Trump’s previous administration and lasted 35 days – the longest in U.S. history.
ASCE Government Relations will continue to monitor the latest developments surrounding the ongoing shutdown and provide relevant updates to its members over the coming days.