Few phrases in Washington carry as much anxiety as “funding deadline.” The federal government runs on a fiscal year that begins October 1, and each year Congress is supposed to pass laws that fund agencies for the next twelve months. When it does not, the result can be a lapse in funding that sends workers home and halts some services. How that happens, and how it differs from a related fight over borrowing, is easier to follow once the machinery is laid out.
This article describes the process and does not take a position on any budget proposal.
Where the budget process begins
The President submits a budget request to Congress, usually in early spring or late winter, laying out spending priorities for the next fiscal year. It is a proposal, not a law. Congress writes its own spending legislation, and the House and Senate Budget Committees can draft a budget resolution that sets overall targets, although those are not always adopted.
Under the Constitution, Congress holds the power of the purse: no money may be drawn from the Treasury except by an appropriation made by law. That clause is the legal foundation for everything that follows.
Appropriations bills, twelve of them
The House and Senate Appropriations Committees divide their work among twelve subcommittees, each responsible for a bill covering a group of agencies: defense, homeland security, agriculture, transportation and housing, and so on. These bills set funding levels for discretionary spending, the part of the budget Congress decides each year.
Much of the federal budget does not go through this process. Mandatory spending, which includes Social Security, Medicare and Medicaid, is governed by permanent laws that set eligibility and benefits, not by annual appropriations. Interest on the national debt is also paid automatically. Discretionary spending is a minority of the total, though it covers defense, federal law enforcement, national parks, scientific research, much of the work of the federal government’s workforce and many other functions.
Each of the twelve bills has to pass both chambers and be signed by the President, who can also veto them. In practice, Congress seldom finishes all twelve by October 1.
The continuing resolution
When appropriations bills are not done, Congress commonly passes a continuing resolution, known as a CR, which funds agencies temporarily, usually at the previous year’s levels, to keep the government open while negotiations continue. A CR may last days, weeks or the entire year. Another common solution is to combine several bills into a larger package, called an “omnibus” or, for a smaller group, a “minibus.”
What is a shutdown?
If neither the regular appropriations nor a CR is enacted before funding expires, agencies experience a lapse in appropriations. A federal law known as the Antideficiency Act generally prohibits agencies from spending or obligating money without an appropriation, so they must begin an orderly shutdown of activities that are not covered by an exception.
What stops and what continues varies:
- Excepted employees, whose work involves protecting life and property or is otherwise required by law, keep working, often without immediate pay. Examples typically include air traffic controllers, border and law enforcement personnel and many military duties.
- Furloughed employees are told to stay home. Their agencies suspend many routine services and programs.
- Mandatory programs such as Social Security and Medicare benefit payments generally continue, though some administrative functions can slow down.
- Contractors may be affected depending on their contracts.
- National parks, museums and some public services can be closed or limited.
A 2019 law guarantees that furloughed federal employees receive back pay once funding is restored, and it also requires pay for excepted employees, though checks may be delayed. Past shutdowns have varied in length from a few days to several weeks, and each has differed in which parts of the government were affected, depending on which appropriations bills had been enacted.
How shutdowns end
Congress and the President must agree on legislation that restores funding, whether by passing the appropriations bills or a CR. The disputes that cause shutdowns are about policy or spending levels, and different parties and members describe their causes differently. Resolution requires votes in both chambers, including, in the Senate, the 60-vote cloture threshold for most bills, a rule discussed in how a bill becomes law.
Is a shutdown the same as hitting the debt limit?
No, although the two are often mentioned together. A shutdown concerns whether Congress has passed money to spend. The debt limit, or debt ceiling, is a statutory cap on the total amount the Treasury can borrow to pay obligations that Congress has already approved. If the limit is not raised or suspended, the Treasury can run out of ways to pay bills, which many economists warn could cause serious disruption. The consequences, and the way the two issues are debated, are different.
Why it matters locally
Federal money flows to states and communities for disaster response, education, transportation and other needs. Delays can affect grant payments and programs, and emergency funds depend on the same process, as seen in how federal disaster declarations work. Federal decisions also interact with the economy: shutdowns can delay the release of data used in setting interest rates and in the reports economists watch.
Where to follow it
The Congressional Budget Office publishes cost estimates and analyses, the House and Senate Appropriations Committees post bill text, and the Office of Management and Budget posts guidance to agencies. Each agency usually publishes a contingency plan describing what it will do during a lapse. Knowing the rules makes the news about deadlines easier to follow: the questions to ask are which bills have passed, which have not and when current funding ends.
Sources: U.S. Constitution; Congressional Budget Office; Congressional Research Service; Office of Management and Budget; Government Accountability Office
