What Really Happens During a Government Shutdown — And Why It Matters

A caution sign at the US Capitol building in Washington, D.C

A government shutdown could begin on Wednesday.

Every time a potential government shutdown makes the news, confusion follows. What does it mean for federal programs? Who feels the impact first? And how could this play out differently this time around?

What is a Shutdown?

A shutdown happens when Congress fails to pass annual spending bills (or a temporary stopgap) to fund federal agencies. Without that authority, many parts of the government simply cannot operate.

Some services continue — for example, air traffic control, TSA, and military operations — but hundreds of thousands of other federal workers are furloughed (sent home without pay).

🚨 Public Services Affected 🚨 

National Parks & Museums

• Many close entirely or operate with reduced staff.

• Trash collection, visitor services, and restrooms may shut down.

  
  

Passport & Visa Processing

• Application backlogs grow as staff are furloughed.

• Urgent/emergency travel services may continue, but delays are common.

• Families planning international travel may have to postpone trips due to processing delays.

  
  

Federal Grants & Reimbursements

• Housing assistance, education, health programs, and child/family services like Head Start, CAPTA, IV-B, Chafee ETVs, and Child Care Block Grants pause until appropriations resume.

• States might need to cover Medicaid and IV-E expenses temporarily until federal reimbursement begins again. 

• Universities relying on federal research grants may be forced to pause projects midstream.

  
  

Federal Call Centers & Public Hotlines

• IRS helplines close or scale back, leaving taxpayers without guidance.

• Social Security and Medicare lines may slow down, making it harder for seniors to resolve benefit issues.

  
  

Community Programs & Nonprofits

• Fall is a common renewal period for grants; if October payments are delayed, nonprofits serving children and families may face cash flow crises.

• Some Head Start classrooms have had to close their doors during past shutdowns, leaving working parents scrambling for child care.

  
  

Regulatory & Licensing Services

• Reviews and approvals for things like environmental permits, aviation certifications, and certain healthcare authorizations slow or stop.

• Businesses waiting for EPA or FDA approvals can face stalled product launches or compliance challenges.

  
  

Research & Data Collection

• Agencies like the Census Bureau, NIH, or USDA suspend or delay data reporting, studies, and surveys.

  
  

Small Business & Contractor Payments

• Federal contractors may not be paid on time, forcing them to dip into reserves or furlough staff.

• Small businesses relying on SBA loans or procurement contracts may be unable to access financing or fulfill contracts.

  
  

Customer-Facing Services at Agencies

• Benefits like Social Security, Medicare, and veterans’ payments continue.

• But customer service, appeals, and claims processing often slow to a crawl, frustrating families who need timely assistance.

  
  

Meanwhile, essential services — such as military operations, law enforcement, air traffic control, and emergency medical care — continue during a shutdown, though workers may go unpaid until funding is restored.

What’s Different This Time: OMB’s Guidance

The Office of Management and Budget (OMB) has recently gone further than past shutdown playbooks. Agencies are being told to:

• Prepare Reduction-in-Force (RIF) notices — permanent layoffs — for programs that lose funding, not just temporary furloughs. *In practice, this could mean certain community programs, grant streams, or administrative offices could lose staff entirely, not just temporarily.
  

• Classify programs as “non-essential” if their discretionary funding lapses, they lack alternative funding, and they are not aligned with the President’s priorities. *Once cut, these programs may only be restored if Congress and the Administration agree to bring them back — turning them into bargaining chips in budget negotiations.
  

• All agencies are required to maintain “shutdown contingency plans.” OMB is requiring agencies to update and resubmit these plans now, reflecting the more aggressive posture. These plans detail:

  • Which employees are “excepted” (must keep working),

  • Which programs will continue or pause,

  • How agencies will communicate with the public during a shutdown.
    

• In prior shutdowns, some agencies tried to shift leftover funds, use fee-based accounts, or lean on reserves to keep programs afloat temporarily. OMB’s new instruction is clear: don’t do it without explicit OMB approval. That means less flexibility for agencies to protect vulnerable programs or smooth over funding gaps.

Risks & Uncertainties Ahead

The road ahead is filled with risks that stretch well beyond a temporary disruption. One of the most concerning is the possibility of program elimination. Under OMB’s new guidance, programs labeled as “discretionary” — or those viewed as politically disfavored, such as certain DEI or LGBTQ+ initiatives — could be suspended and potentially cut altogether. Unlike furloughs, these aren’t temporary pauses; they could represent permanent losses if Congress and the Administration don’t act to restore them.

Even once funding is restored, the challenges don’t end there. Agencies that lose staff during a shutdown may find it difficult to quickly restart operations. The result could be longer delays in disbursing funds and processing grants, leaving states, nonprofits, and families waiting weeks or months for money they depend on.

Some legal experts have already raised red flags, noting that tying permanent staff reductions directly to a funding lapse could invite lawsuits. If courts intervene, it could complicate how agencies implement shutdown-related cuts and create even more uncertainty.

For states and local communities, the risks are especially pressing. October is a critical month when many child and family programs renew their grants. If a shutdown delays those payments, community organizations could be forced to cut services or scale back staff just when families need them most.

In short, this shutdown carries risks that go far beyond inconvenience. It could reshape programs, weaken community supports, and leave states and nonprofits scrambling to fill gaps that Washington creates.

Why Awareness Matters

A shutdown is not just a political showdown in Washington — it has real consequences for families, nonprofits, small businesses, and state agencies. Being prepared means:

• Planning for delayed reimbursements and payments.

• Knowing which programs are most vulnerable.

• Staying connected with federal contacts to get the latest guidance.

  
  

As someone who’s worked directly on appropriations, federal grants, and community advocacy, I know how important it is to prepare before the funding spigot turns off. If your organization wants to understand how a shutdown could affect you — and how to prepare — let’s connect.

Kristen Torres

Founder, Torres Consulting