Authorities Shutdown Advisory: Abstract of Doable Lapse in Appropriations | Insights

A lot of the federal authorities is funded by 12 annual appropriations payments. The federal fiscal 12 months (FY) for 2026 begins on Oct. 1, 2025, and, if appropriations payments haven’t been enacted into regulation earlier than that date or a short lived funding measure – often known as a seamless decision (CR) – has not been enacted, a niche (or lapse) in appropriations will happen.

Timeline

On Sept. 19, 2025, by a vote of 217-212, the U.S. Home of Representatives handed a Republican-sponsored CR (H.R.5371) to maintain the federal government open by means of Nov. 21, 2025, usually extending funding at present ranges with enhanced safety funding for presidency officers and extension of some expiring authorizations associated to veterans’ advantages and healthcare. They included the Medicare-dependent hospital and low-volume adjustment applications, telehealth and hospital-at-home flexibilities, in addition to the Cybersecurity Info Sharing Act. The invoice additionally would have delayed Medicaid Disproportionate Share Hospital cuts which are set to develop into efficient Oct. 1, 2025. Later the identical day, nevertheless, the U.S. Senate rejected H.R.5371 by a 44-48 cloture vote.

The Senate additionally rejected a Democrat-sponsored CR (S.2882) on Sept. 19, 2025, to fund the federal government at present ranges by means of Oct 31, 2025, by a 47-45 cloture vote. Although the Democratic model included an extension of the identical public well being provisions because the CR (H.R5371), it additionally included a everlasting extension of the improved premium tax credit (EPTCs) which are set to run out on Dec. 31, 2025. The invoice would additionally repeal the healthcare provisions within the One Large Lovely Invoice Act (OBBB), Pub. L. 119-21. On Sept. 18, 2025, the Congressional Finances Workplace (CBO) launched an evaluation¹ estimating {that a} everlasting extension of the EPTCs would value roughly $350 billion between 2026 and 2035 and develop medical insurance protection to a further 3.8 million folks by 2035. As well as, repealing provisions of the OBBB that limit market eligibility and enrollment – reminiscent of these concentrating on sure immigrants and low-income people – would add about $272 billion in prices and enhance protection by 2.9 million folks in 2035.

Subsequent steps are unclear as lawmakers departed for the Rosh Hashanah recess, and the Home will not be scheduled to return till after FY 2026 begins. President Donald Trump is now scheduled to fulfill with Home and Senate Republican and Democratic management on Monday, September 29, after beforehand cancelling a proposed assembly with the Democratic leaders final week.

On Sept. 24, 2025, it was reported that the Workplace of Administration and Finances (OMB) has directed businesses to think about in depth worker layoffs in unfunded applications that aren’t administration priorities if the federal government shuts down on Oct. 1, 2025. An OMB memo directs businesses “to make use of this chance to think about Discount in Pressure (RIF) notices for all workers in applications, tasks, or actions (PPAs) that fulfill all three of the next circumstances: (1) discretionary funding lapses on October 1, 2025; (2) one other supply of funding, reminiscent of OBBB, will not be at present obtainable; and (3) the PPA will not be in step with the President’s priorities.” The memo asserts “Federal applications whose funding would lapse and that are in any other case unfunded … are not statutorily required to be carried out.”

The memo was first reported by Politico, citing an OMB supply as saying the next applications “will proceed no matter a shutdown”: Social Safety, Medicare, veterans advantages, army operations, regulation enforcement, U.S. Immigration and Customs Enforcement (ICE), U.S. Customs and Border Safety (CBP) and air visitors management. Notably, every of those applications has funding from the OBBB or different obligatory or superior appropriations which may be spent throughout a shutdown or includes actions simply deemed by OMB to be vital for the security of human life or the safety of property underneath the Antideficiency Act.²

Historical past of Authorities Shutdown and Potential Impacts

The related legal guidelines that govern shutdowns have remained comparatively fixed in latest a long time. Nonetheless, OMB workout routines nice discretion in the way it defines and interprets exceptions to the regulation, and OMB’s actions underneath the Trump Administration have led to nice friction with Democrats and a few Republicans in Congress.

The Antideficiency Act usually bars the federal government from incurring obligations³ or making expenditures within the absence of appropriations.⁴ It additionally bars the federal government from receiving voluntary providers from federal personnel within the absence of appropriations that pay their salaries, apart from “emergencies involving the security of human life or the safety of property.”⁵ Accordingly, federal businesses are required to curtail many actions within the absence of an appropriation, generally known as a “authorities shutdown.” Each company is required to develop and replace shutdown contingency plans, which shall be posted to company web sites as soon as permitted by OMB. 

OMB’s Round No. A-11 (August 2025) offers that actions financed with appropriations that haven’t lapsed can proceed to function in a shutdown, which may embrace obligatory funding (i.e., reconciliation payments or entitlement program funds) or unexpired prior-year funding with legitimate apportionments.⁶ Nonetheless, the salaries of company personnel executing or supporting these legally exempted actions could also be funded by lapsed appropriations, so whether or not a selected program will proceed to function in observe can finest be decided by reviewing the company’s contingency plan. OMB states these plans shall be posted to company web sites as soon as permitted by OMB.⁷

Prior to now, there have been funding gaps that led to occasional authorities shutdowns. In lots of circumstances, these had been “partial” authorities shutdowns, as among the 12 common appropriations payments had already been enacted. The federal government was shut down beforehand for:

• 21 days, starting Dec. 16, 1995
• 16 days, beginning Oct. 1, 2013
• 35 days, starting Dec. 21, 2018 (5 of the 12 common appropriations payments had been enacted prematurely of this shutdown; businesses and actions funded by these measures had been unaffected)
• two temporary shutdowns in January 2019 and February 2019

In prior situations, not all the pieces that the federal authorities does was discontinued throughout a niche in discretionary appropriations. Some actions – reminiscent of these funded by everlasting, obligatory or superior appropriations – are usually not depending on a current-year appropriation, so their funding continued in an appropriations lapse. Frequent examples embrace Social Safety, Medicaid, Medicare, Supplemental Vitamin Help Program (SNAP) and veterans’ healthcare advantages.

As well as, actions funded by person charges or belief funds which are independently obtainable outdoors of the appropriations course of (for instance, pupil mortgage processing, reimbursements from the Freeway Belief Fund or Medicare supplier claims funds) have traditionally continued so long as workers accountable for processing these funds are additionally known as into work.

Actions funded by means of payments outdoors of the annual appropriations course of sometimes proceed throughout shutdowns, together with, for instance, the advance appropriations within the Infrastructure Funding and Jobs Act (IIJA), Pub. L. 117-58, and obligatory appropriations in price range reconciliation acts such because the OBBB and American Rescue Plan (ARP) Act, Pub. L. 117-2. Of be aware, the Trump Administration acquired unprecedented ranges of recent funding for enhanced ICE and CBP operations within the OBBB.

Even for actions funded with lapsed appropriations, the Antideficiency Act permits a number of excepted actions to proceed, together with, for instance:⁸

• actions vital to guard human life or security or property
• actions essentially implied by regulation to carry out statutorily required actions
• actions essential to discharge of the president’s constitutional duties or energy

Unsurprisingly, U.S. army operations sometimes proceed throughout a shutdown because of the important nationwide safety curiosity. As well as, latest reporting signifies different safety-critical actions will stay operational, together with federal regulation enforcement and air visitors management.

Federal authorities shutdowns have a variety of impacts, the severity of which may rely upon the shutdown’s size. Along with the disruption of inner authorities capabilities, the unavailability to the general public of many authorities providers and lack of entry to public services, shutdowns can profoundly influence authorities contractors, private and non-private recipients of federal grants, and most of the people.

As an example, these touring may expertise delays as a consequence of air visitors controllers and Transportation Safety Administration (TSA) officers having to work with out fast pay. And although social security web applications reminiscent of SNAP will proceed to operate, a prolonged shutdown interval may squeeze remaining funding. However, less-essential actions utilized by most of the people – reminiscent of nationwide parks – might be suspended till authorities funding resumes.

Some federal contracts funded with unexpired prior-year funding could also be eligible to proceed. It’s a finest observe for federal contractors and grant recipients to contact their program officer to debate these points prematurely of a possible shutdown, as these people could also be unavailable as soon as the shutdown is triggered. Traditionally, contract exercise throughout a CR depends on obligation authority, and businesses may place orders on present contracts the place the prior-year funding is already obligated, reminiscent of government-wide and enormous task-order-type contracts. For instance, throughout prior shutdowns, contractors engaged on some Pentagon acquisition applications had much less publicity as a result of that they had entry to unused funding from multiyear appropriations. ⁹ The Pentagon’s up to date shutdown steerage launched on Sept. 27, 2025, usually permits actions which are funded with unexpired appropriations, together with funding supplied within the OBBB, to proceed throughout a shutdown. 

The Congressional Analysis Service additionally has on-line sources to help events in understanding the implications and historical past of presidency shutdowns:

Contingency Plans by Company

Traditionally, per week previous to a shutdown, federal businesses publish contingency plans for the way they may function within the occasion of a lapse of appropriations. These plans historically had been posted collectively on the OMB web site, however the present OMB website states every company’s web site will solely host the contingency plan for the company. Contingency plans lay out what capabilities will proceed to be supplied and which federal staff should report back to work as a result of they’re deemed “important.” OMB directed businesses to replace their contingency plans in August 2025, noting that plans could be printed as soon as permitted by OMB.

As of at present’s date, the next up to date company contingency plans have been printed:

For illustrative functions solely, this Holland & Knight doc offers particulars of prior contingency plans for 13 key departments and businesses:

• U.S. Division of Agriculture
• U.S. Division of Commerce
• U.S. Division of Protection
• U.S. Division of Schooling
• U.S. Division of Power
• U.S. Division of Well being and Human Providers
• U.S. Division of Homeland Safety
• U.S. Division of Housing and City Improvement
• U.S. Division of Justice
• U.S. Division of Transportation
• U.S. Division of the Treasury
• U.S. Environmental Safety Company
• U.S. Social Safety Administration

There isn’t a assure the present administration will undertake all or any a part of prior contingency plans.

Notes

¹ The Estimated Results of Enacting Chosen Well being Protection Insurance policies on the Federal Finances and on the Variety of Folks With Well being Insurance coverage, Congressional Finances Workplace

² See 31 U.S.C. 1342.

³ On this context, “obligations” are known as “A proper order legally committing the federal entity to finally pay a future legal responsibility.”

⁴ 31 U.S.C. 1341.

⁵ 31 U.S.C. 1342.

⁶ See id. Sec. 124 (“Company capabilities which are financed with appropriations that haven’t lapsed could proceed and are ‘exempt’ from any shutdown procedures, even whereas a lapse has occurred in different appropriations.”).

⁷ See A-11 Round (Aug. 2025) (“As soon as the up to date lapse plan is reviewed by OMB, the company will publish the ultimate lapse plan utilizing a specified touchdown web page on their company web site.”).

⁸ See e.g., 31 U.S.C. 1341-1342; OMB’s A-11 Round (Aug. 2025) at Sec. 124.

⁹ For a dialogue of practices throughout prior price range impasses, see Holland & Knight’s earlier weblog submit, “A Contractor’s Information to the Impending Authorities Shutdown,” Sept. 21, 2023.

Info contained on this alert is for the overall schooling and information of our readers. It isn’t designed to be, and shouldn’t be used as, the only supply of data when analyzing and resolving a authorized downside, and it shouldn’t be substituted for authorized recommendation, which depends on a particular factual evaluation. Furthermore, the legal guidelines of every jurisdiction are totally different and are continuously altering. This info will not be supposed to create, and receipt of it doesn’t represent, an attorney-client relationship. When you have particular questions relating to a selected reality scenario, we urge you to seek the advice of the authors of this publication, your Holland & Knight consultant or different competent authorized counsel.