Government Shutdown

How It Works

A government shutdown occurs when a funding gap develops, the moment appropriations and any continuing resolution lapse without new funding enacted. Under the Antideficiency Act (31 U.S.C. 1341), agencies cannot obligate funds in the absence of appropriations, so they must cease operations except for functions involving "the safety of human life or the protection of property" (the Feres-Dombeck exception) and activities funded by permanent appropriations or user fees. "Essential" or "excepted" employees (law enforcement, active-duty military, air traffic control, Border Patrol, VA medical providers) continue working but do not receive paychecks until the shutdown ends, the Government Employee Fair Treatment Act of 2019 now guarantees retroactive pay to both furloughed and excepted federal workers. "Non-essential" employees (roughly 40-50% of the federal workforce in a typical shutdown) are furloughed. Federal contractors are affected unevenly: those funded from lapsed appropriations face stop-work orders and are generally not eligible for retroactive payment, while those under multi-year contracts with already-obligated funds can continue. The longest shutdown in U.S. history ran 35 days from December 22, 2018 to January 25, 2019, affecting 9 of the 15 cabinet departments and costing the Congressional Budget Office an estimated $11 billion in lost GDP ($3 billion permanently). Other notable shutdowns: October 2013 (16 days, full government) cost an estimated $24 billion in lost output, November 1995 and December 1995-January 1996 (combined 26 days) during the Clinton-Gingrich budget standoff. Shutdowns shorter than a weekend are common and often go unnoticed because most functions continue or are quickly restored. For federal contractors, shutdowns produce a predictable pattern: stop-work orders on affected contracts, suspended invoicing (agencies cannot approve payments without appropriations staff), delayed award decisions, and retroactive obligation surges once funding resumes. Unlike federal employees, contractor employees have no statutory right to back pay for lost work time, which is why contractor layoffs and hiring freezes often follow shutdown threats.

Related Terms

• Continuing Resolution (CR), A temporary funding measure passed by Congress when it fails to complete the annual appropriations process, keeping the government funded at prior-year levels.
• Appropriation, A law passed by Congress that authorizes federal agencies to spend a specific amount of money for a specific purpose during a defined period.