SBLC Update - What a Government Shutdown Will Look Like

Status of FY 2026 Funding: Government funding ends on Tuesday at midnight.

Republican and Democratic House and Senate leaders will meet with President Trump today.  Expectations are low that it will result in a deal.

Senate Majority Leader John Thune (R-SD) will bring the House-passed continuing resolution (CR) to the floor for another vote, probably tomorrow.

House Republicans are not scheduled to return to Washington until October 7 (although that could change).  Minority Leader Hakeem Jeffries (D-NY) told House Democrats to return today – a move intended to highlight the optics of House Republicans staying out of town as the government closes. 

What a Shutdown Might Look Like: Should the federal government shut down this week it will impact all agencies and programs that rely on annual appropriations because Congress has not yet enacted any of the twelve FY 2026 spending bills.

During a shutdown, federal agencies must discontinue all non-essential discretionary functions paid for by annual appropriations until new legislation is enacted to provide funding.  Government services essential to protecting life and property (e.g., military operations, law enforcement, and air traffic control), mandatory spending programs (e.g., Social Security, Medicare, and Medicaid benefits), and programs funded outside of annual appropriations (e.g., the Federal Reserve, Amtrak, and the U.S. Postal Service) continue.

The president must continue to perform his constitutional responsibilities.  High ranking administration officials also continue to work.  Members of Congress continue to receive pay under the 27th Amendment to the Constitution.  

Congressional office decide which of thier staffers to furlough.

Each federal agency develops its own lapse in funding plan, following guidance released in previous shutdowns and coordinated by the White House Office of Management and Budget (OMB).  Those plans identify the agency’s essential activities.  Government employees necessary to such activities will continue to work; all other employees are furloughed.  

No federal government employee receives a paycheck during the shutdown, even those required to work.  But legislation enacted in 2019 mandates that all government employees will receive back pay once the government reopens (whether they worked or were furloughed).  Historically, federal contractors are not compensated for payments not made to them by the government during a shutdown.  

Last week, OMB issued a memorandum regarding this possible shutdown.  The document orders agencies to submit their lapse plans to OMB, and urges that they should consider including plans to permanently fire (rather than just furlough) government employees working in support of programs, projects, or activities (PPA) that satisfy all three of the following conditions: (1) discretionary funding lapses on October 1; (2) another source of funding (e.g., funding included in the recently-passed One Big Beautiful Bill Act) is not currently available; and (3) the PPA is not consistent with President Trump’s priorities.  The memorandum suggests that when the government reopens, the administration will hire back the smallest number of statutorily required employees at programs it does not support.

In response, Senate Democrats, including Minority Leader Chuck Schumer (D-NY), and senators from states with high numbers of federal employees, pledged not to waiver from their commitment to force bipartisan negotiations on government funding, arguing that President Trump has shown that he would do something like what the OMB directive threatens regardless of whether or not the government shuts down.

With regard to one specific agency:the IRS has not posted a funding lapse plan, although it could do so before tomorrow night.  Its plan in advance of the potential shutdown in March was to keep all IRS employees on the job by using remaining funds appropriated to the agency by the Inflation Reduction Act of 2022 (IRA) (the multiyear appropriations provided for in the IRA fall outside the annual appropriations process).  Even if the IRS did not have access to those funds, employees performing activities expressly authorized by law or implied by law, such as issuing regulations and administering tax changes related to the One Big Beautiful Bill Act (OBBBA), are exempt from furloughs.  And IRS workers needed to process tax forms due on October 15 could be deemed essential.  If the agency does take a different approach now as compared to its March plan, its parameters and impact likely will depend on the duration of the shutdown.

How it Might End: House Minority Leader Jeffries has stuck firmly to a hard position, saying that any deal to fund the government must be ironclad and in legislation.  Senate Minority Leader Schumer has not gone that far.  Senate Majority Leader Thune said late last week that there is a way out of a shutdown if Democrats “dial back” their demands, and Senate Democrats have responded that they are not holding firm on every provision included in the Democratic CR.

One new point of leverage that might help Democrats relates to President Trump’s announcement last Thursday that he wants to use some tariff revenue for a farm bailout.  This cannot happen without congressional authorization.  The administration wants that authorization to be part of an omnibus spending package enacted before the November 21 deadline set in the House-passed CR.

New House Party Ratios: Last week, Adelita Grijalva was elected to the seat previously held by her father, former-Rep.Raul Grijalva (D-AZ), who died earlier this year.  Once she is sworn in, party ratios in the House will be 219 Republicans and 214 Democrats.  Speaker Mike Johnson (R-LA) will continue to have a two-vote majority.

Epstein Discharge Petition: Although the special election of Grijalva does not change the Speaker’s vote margin, it does tip the balance on another issue – she has said that she will provide the 218th vote on a discharge petition relating to the late, disgraced financier Jeffrey Epstein.

When Congress returned from its August recess, Rep. Thomas Massie (R-KY) filed a discharge petition to attempt to force a House vote on the bipartisan Epstein Files Transparency Act, which would require the Department of Justice to publish all government files related to Epstein (with limited exceptions to protect victims).  House Republican leadership and the White House object to public release of the Epstein files.  To date, 213 Democrats, Rep. Massie, and three other Republican House members (Reps. Majorie Taylor Greene (R-GA), Nancy Mace (R-SC), and Lauren Boebert (R-CO)) have signed the discharge petition.  

A discharge petition is a procedural tool for bypassing leadership’s control over the floor schedule.  Seven legislative days after Rep. Massie’s petition is signed by 218 members (a majority of the chamber), any member who signed the petition may call up a special rule for a floor vote.  The Speaker must schedule that vote within two legislative days.  If the House passes the special rule, that automatically brings the underlying bill to the floor for debate and a vote.

If none of the Republicans who have signed the discharge petition remove their name, Speaker Johnson could try to block the discharge effort in the Rules Committee, but it seems unlikely that he would find sufficient support on the Committee to intervene, and he said recently that he will not try.  If the underlying bill goes to the floor, it is expected to pass, after which the House will send it to the Senate.  Senate Majority Leader Thune has not indicated what he would do.

House: The Speaker canceled votes previously scheduled for today and tomorrow.  The House is scheduled to return to session next Tuesday.

Senate: The Senate returns today, with votes possible into Wednesday.  On Wednesday afternoon, the chamber recesses for the rest of the week for the Yom Kippur holiday.  In addition to a vote on the House-passed CR, leadership plans to bring up the confirmation of an administration nominee and a Republican bill (S. 2806) that would prevent government shutdowns by automatically continuing appropriations from the prior year if Congress fails to pass spending measures.  Senate action on the National Defense Authorization Act remains in limbo pending an agreement on amendments.

Notable committee action this week includes:

Tuesday, September 30, 2:30 pm

Senate Judiciary Antitrust, Competition Policy and Consumer Rights Subcommittee

Hearing: “Examining Competition in America’s Skies”

Wednesday, October 1, 10:00 am*

Senate Finance Committee

Hearing: “Examining the Taxation of Digital Assets”

*Leadership has not yet announced whether hearings would be held in the event of a government shutdown.