Government shutdowns in the United States (“U.S.”) are creatures of both constitutional and statutory law. The Constitution states that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law,” meaning that federal agencies cannot spend funds to operate without the approval of Congress. Under the Antideficiency Act, agencies may not “make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation” or “ involve either government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law.” In other words, Congress must determine how the government will spend its funds, and a government shutdown ensues if the parties cannot agree on a budget. 

The current government shutdown occurred on October 1, 2025, as a result of Congress’s failure to reach an agreement for funding federal agencies and programs for the 2026 fiscal year. The previous budget expired on September 30, 2025, and without a new budget or continuing resolution, the government was forced to shut down. One of the biggest hurdles in reaching an agreement has to do with the demands by the Senate democrats. In order to vote for a continuing resolution or extension of the 2025 fiscal budget, the Senate Democrats are demanding in part that Congress resume Medicaid, Medicare and Affordable Care Act premium subsidy policies that open the door for illegal aliens to receive government benefits. Those benefits were terminated when the One Big Beautiful Bill Act (OBBBA)was approved. OBBBA provides eligibility for health benefits only to U.S. citizens, lawful permanent residents, Cuban and Haitian entrants, and lawful residents under the Compact of Free Association. The Senate Democrats’ continuing resolution would repeal changes made by OBBBA. 

What are the impacts of this shutdown? Members of Congress still get paid during this shutdown. Lawmakers' pay has been funded by a permanent appropriation since 1983, according to a recent Congressional Research Service report, meaning funding for their pay doesn't need to be renewed annually. Other government employees and contractors are not afforded the same luxury. Federal employees, whether they remain on the job or are furloughed do not get paid while the government is shut down. They are also at risk of permanently losing their jobs. For those federal employees who still have their job, they will receive back pay once funding to their agency is restored. But for now, those same federal employees have to work without collecting a paycheck if they choose to keep their job. Government Contractors (1099 contractors, not W2 Employees), those who carried out about $755 billion worth of government work in the last fiscal year, are not guaranteed back pay. They should have a written contract which outlines their pay, and should eventually hold up in a court of law; but how long they have to wait for payment of said contract would remain uncertain. 

During a government shutdown, the administration retains limited spending flexibility by prioritizing funding for programs that the president deems essential for public safety or national security, such as military operations or emergency services. Agencies may also reallocate available funds to maintain critical operations, provided those actions comply with the Antideficiency Act and other legal constraints. 

For most companies, one of the biggest hurdles will be navigating a complex regulatory scheme that relies on federal agencies to function. As the shutdowns disrupt these agencies’ operations, businesses and federal employees will be adversely affected. How much individuals will be affected will be largely determined by the duration of the shutdown.  The longer government workers and contractors go without paychecks, the more likely they are to start looking for new jobs. A longer shutdown, in addition to possible layoffs and unclear guidance regarding back pay, may leave the government with a substantially smaller workforce post-shutdown. 

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