Gov. Affairs | Issue 20 | September 30, 2025
September 30, 2025 - This is an evolving situation and we will continue to monitor and report out as appropriate.
This edition includes:
WHAT IS A GOVERNMENT SHUTDOWN AND WHAT DOES IT MEAN?
A shutdown of the US Government occurs when Congress fails to pass legislation to fund the federal government's operations for a new fiscal year or through a short-term Continuing Resolution (CR). Without authorized funding, federal agencies must cease all "non-essential" activities and services, leading to a temporary suspension of various government functions.
A shutdown is essentially a lapse in funding for what is known as discretionary spending, which covers about 30% of federal spending and is subject to annual appropriation by Congress. Most mandatory spending programs, such as Social Security and Medicare benefits, are funded outside of this annual process and typically continue.
During a shutdown:
Non-essential federal employees are temporarily sent home on furlough without pay.
Essential personnel, whose jobs are necessary to protect life and property (e.g., air traffic control, federal law enforcement, the military), are required to continue working without immediate pay.
Once funding is restored, federal employees generally receive back pay for the time they were unpaid. However, federal contractors typically do not receive back pay.
Significant Effects on the Public
The most significant effects of a government shutdown on the public often stem from the disruption of services and the financial strain placed on federal workers, which can ripple through the economy.
1. Disruptions to Federal Services
The closure or scaling back of "non-essential" services directly impacts the public:
National parks and monuments may close entirely or operate with significantly limited services (e.g., closed visitor centers, no trash collection), disrupting tourism and travel.
Routine functions like food safety inspections by the Food and Drug Administration (FDA) and environmental inspections may be suspended or reduced, potentially raising public health and safety risks. This can also cause delays in permits for new construction or development which need prior environmental approval.
Applications for benefits, permits, passports, and federal loans (e.g., for small businesses or housing) often face significant backlogs and delays.
Federal scientific research projects are often suspended, leading to delays and potential damage to long-term studies.
2. Financial Strain on Workers and the Economy
The stoppage of paychecks for federal employees and contractors causes direct and indirect economic harm:
Hundreds of thousands of federal workers and their families face financial stress from missed or delayed paychecks, which can lead to difficulty paying mortgages, rent, and bills.
The reduction in spending by unpaid federal workers, as well as the halting of government contracts, can reduce economic activity. Prolonged shutdowns can slow the growth of the Gross Domestic Product (GDP).
Air travel can be severely affected as essential personnel, like Transportation Security Administration (TSA) agents and air traffic controllers, are forced to work without pay. This can lead to increased employee absences, causing longer security lines and flight delays or cancellations.
3. Impact on Social Safety Net Programs
While benefits like Social Security and Medicare payments generally continue, other vital assistance programs can be threatened or disrupted:
The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), which provides food assistance to low-income families, can quickly run out of federal funding, impacting vulnerable populations.
Administrative Services: Even programs that continue benefit payments, such as the Social Security Administration, may reduce staff at field offices, leading to delays in service for new enrollees, lost cards, or changing benefit details.
READ MORE:
What is a Government Shutdown - Brookings Institution
A Government Shutdown Could Start Wednesday. Here’s How It Could Affect Your Life - Time Magazine
HOW NONPROFITS ARE IMPACTED
A government shutdown places significant strain on nonprofit organizations, which are often called upon to serve as a safety net for communities during crises. Nonprofits that rely on federal contracts and grants face an immediate cash flow crisis, as funding reimbursements and new grant awards can be frozen or delayed due to the furlough of agency personnel. This funding interruption forces many organizations, which typically operate with small cash reserves, to either use emergency funds, lay off employees, or pause critical services. Simultaneously, the demand for services increases sharply, as furloughed federal workers and members of the public who lose access to government support programs turn to nonprofits for help with food, housing, and other essential needs.
What Should Nonprofits Do Now?
Whether a shutdown occurs this week or in the future, the possibility exists and nonprofits who rely on government funding should have a plan in place for sustaining their organization through an eventual shutdown.
To prepare for a shutdown, nonprofits should immediately:
Attempt to contact your federal grant and contract administrators before they are furloughed to submit any pending reimbursement requests and ask about extensions for upcoming reports or any special instructions for the shutdown period.
Immediately update financial forecasts to determine your organization's "days cash on hand" and how long you can sustain operations with zero federal revenue. This will guide decisions on which services are mission-critical.
Review and discuss contingency plans with your board, focusing on how to cover a lack of grant payments (e.g., lines of credit, reserves) and how to manage potential staffing changes (e.g., furloughs, pay reductions).
Proactively inform major funders and donors about the shutdown's potential impact on your services and the increased community need. This is a critical moment to seek out bridge funding from private sources.
Ensure all current activities and expenses related to federal awards are meticulously documented, as communication channels will go dark and questions may arise after the shutdown ends.
The National Council of Nonprofits has shared a helpful checklist and guidance for nonprofits.
IF/WHEN A SHUTDOWN HAS STARTED - NOW WHAT?
The government shutdown has begun, and nonprofits must act swiftly to manage the immediate impact.
As federal grant systems are now dark and staff furloughed, immediately halt all attempts to request new reimbursements. Nonprofits should assume communication with federal program officers is impossible and should instead communicate with other stakeholders.
Rely on the cash flow models and contingency plans created in the lead-up to the shutdown. This is the time to implement pre-approved strategies, such as tapping lines of credit or using reserves, to cover payroll and other essential operating costs.
Focus resources on core services, as demand for support will likely increase. Communicate transparently with staff, clients, and private donors about the service adjustments and financial challenges caused by the shutdown. This is a crucial time to rally community support and demonstrate the organization’s value.
FREE WEBINAR:
What Nonprofits Need to Know About the Government Shutdown and Current Federal Grant Landscape - National Council on Nonprofit
October 6, 2026 3pm EST*Note, this webinar will not be recorded
MY NONPROFIT RELIES ON $$ FROM A SPECIFIC DEPARTMENT - WHAT IS THE AGENCY’S PLAN?
Historically, a week prior to a shutdown, federal agencies publish contingency plans for how they will operate in the event of a lapse of appropriations. These plans traditionally were posted together on the OMB website, but the current OMB site states each agency's website will exclusively host the contingency plan for the agency. Contingency plans lay out what functions will continue to be provided and which federal workers must report to work because they are deemed "essential." OMB directed agencies to update their contingency plans in August 2025, noting that plans would be published once approved by OMB.
As of 9/29/25 date, a few updated agency contingency plans have been published, although more are expected in the coming days:
U.S. Department of Defense (also referred to as the U.S. Department of War)
Several agencies, such as the U.S. Environmental Protection Agency (EPA) and U.S. Department of Transportation (DOT), still have their guidance memos from the prior FY 2025 impasse in March 2025. For illustrative purposes only, this Holland & Knight document provides details of prior contingency plans for 13 key departments and agencies
