Critical Questions by Seamus P. Daniels

Published September 30, 2025

Fiscal year (FY) 2026 begins on Wednesday, October 1, and unless Congress passes full-year appropriations for a continuing resolution (CR) before then, a government shutdown will occur. With the House of Representatives and Senate having only made limited progress in advancing full-year appropriations bills, a CR is the likeliest option for preventing or (after October 1) ending a shutdown. However, both political parties in Congress and the White House appear unwilling to compromise to find a solution at present.

As the federal government and Department of Defense (DOD) approach a shutdown to begin FY 2026, below are six questions on defense funding and the impact of a potential government shutdown.

Q1: What's the current status of defense funding for FY 2026?

A1: In May, the Trump administration outlined its topline defense budget request for FY 2026. It proposed a $892.6 billion budget for discretionary national defense funding, including $848.3 billion for DOD. That topline is level with enacted discretionary spending for FY 2025 provided by P.L. 119-4, passed in March, which funded the government under a full-year CR-the first in DOD's history. The administration specified that it also intended to use $119.3 billion in reconciliation funding under consideration in Congress at the time for defense activities, in addition to its annual discretionary request.

Since DOD released more details of its full budget request later in the summer, the House has passed its defense appropriations bill, while the Senate has not yet voted on its version, although the bill was reported out of committee. The full House and Senate have both passed military construction-veterans affairs appropriations bills, but differences still have to be resolved in conference. Consequently, Congress will not be able to pass discretionary funding for defense before October 1 and must instead pass a CR to fund DOD and other defense activities.

In July, Congress passed H.R. 1 (P.L. 119-21) as part of its reconciliation process. That law provided $156 billion in mandatory funding for defense-related programs that remains available between FY 2025 and FY 2029. As stated above, the Trump administration planned to spend $119.3 billion in FY 2026, including $113.3 billion for DOD, but has yet to provide an implementation plan to Congress as requested by the chairs of the House and Senate Armed Services Committees.

Q2: What options have been presented to prevent a government shutdown?

A2: Progress in passing a CR to prevent a government shutdown has been slowed by political divisions over including additional measures with a funding extension. Debate primarily centers on Democrats' efforts to include an extension of tax credits associated with the Affordable Care Act and reversal of cuts to Medicaid and other health programs from the reconciliation bill, which Republicans oppose packaging with a CR.

The House narrowly passed a CR in H.R. 5371 proposed by Republicans in a party-line vote to extend government funding through November 21 (in addition to providing more funding for security for members of Congress, Supreme Court justices, and executive branch officials and extending some expiring programs and authorities, but not the tax credits). However, the vote failed in the Senate.

A Democratic-led bill in the Senate to pass a CR through October 31, make the tax credits permanent, and reverse the healthcare cuts from reconciliation also did not pass.

Senate Majority Leader John Thune (R-SD) plans to bring the House-passed bill up for another vote on Tuesday.

Q3: What would happen to DOD and defense activities in the event of a government shutdown?

A3: During a shutdown, DOD would continue to carry out missions and functions to "defend the nation and conduct ongoing military operations." However, all activities funded by accounts where appropriations have lapsed with the end of the fiscal year must cease-unless they have been designated as "excepted" activities.

Other activities "funded with any available budgetary resources that have not lapsed" and remain unobligated and unexpired may continue to be conducted. Some defense accounts may have unobligated balances that "carry over from prior year" appropriations, including some procurement, research, development, test and evaluation, and military construction accounts, and working capital funds and revolving and management funds.

Activities where funds have lapsed but are "necessary for the safety of human life and the protection of property" may continue if determined to be excepted by the secretary of the military departments and heads of DOD components, including the combatant commanders. The secretary of defense may also determine whether additional activities are excepted.

DOD issued standard guidance this month for specifying the activities that may continue or must cease during a shutdown, including medical and dental care, acquisition and logistic support, education and training, and financial management functions, among other areas. In a departure from the last biennial shutdown plan, the September 2025 guidance outlined "Departmental Priorities," which include:

• Operations to secure the U.S. Southern Border
• Middle East operations
• Golden Dome for America
• Depot Maintenance
• Shipbuilding
• Critical Munitions

Standard shutdown guidance applies to activities under these priorities.

As noted in the lead-up to the last potential shutdown in March 2025 (which did not occur), these planning efforts are "disruptive" because they force DOD officials to dedicate time to identifying excepted missions and functions and communicate that to the workforce instead of carrying out regular activities.

Q4: How does a shutdown apply to military personnel and DOD civilian personnel?

A4: In the event of a shutdown, active-duty military personnel, as well as reserve component personnel on federal active duty, must continue to report and carry out assigned duties. These include both excepted activities and non-excepted activities that can be performed without incurring additional costs. Military personnel will not receive pay during a shutdown, unless Congress passes legislation to pay servicemembers as it did during the last shutdown in 2013.

Civilian personnel will be furloughed during a government shutdown, unless they are funded by accounts where budgetary resources remain available or they perform excepted activities. Civilians carrying out excepted activities will not be paid, while those funded by accounts with unobligated balances may continue to receive compensation. However, all government employees will receive back pay after a shutdown ends under the Government Employee Fair Treatment Act of 2019.

DOD's September 2025 guidance estimates that the department would retain approximately 183,000 civilian personnel who receive compensation from a resource other than annual appropriations and almost 224,000 civilian personnel "necessary to protect life and property" during a shutdown, out of a total civilian workforce of 741,000. This is higher than the number of civilians DOD expected to retain from the last shutdown guidance, which was out of a larger civilian workforce of 804,000.

Q5: What would happen to defense activities funded by resources provided by reconciliation?

A5: Activities funded by the $156 billion in resources made available by the reconciliation act passed in July 2025 (P.L. 119-21) may continue, as noted in the shutdown guidance. This is because the resources provided by reconciliation are mandatory funding, not subject to the annual appropriations process, and remain available between FY 2025 and FY 2029. As with other accounts with remaining budgetary balances or available appropriations, those activities will continue "subject to prior apportionment and allotment of funds." The availability of additional reconciliation resources may provide one explanation for the higher number of civilian personnel DOD expects to retain in its most recent guidance compared to the previous estimates.

However, some Democratic lawmakers have expressed concern that DOD might use reconciliation resources to fund activities Congress did not intend during a shutdown.

Q6: When did DOD last experience a government shutdown?

A6: In October 2013, DOD started FY 2014 under a shutdown for 16 days. As noted above-and in a previous analysis on the potential FY 2025 shutdown-active duty servicemembers and DOD and Department of Homeland Security civilian employees who "[provided] support to such members of the Armed Forces," were paid as Congress passed the Pay Our Military Act before the shutdown. However, the furlough of civilian employees during that shutdown harmed DOD's mission, although wartime activities were "fully supported," according to then-DOD Comptroller Robert Hale. A White House report on the impact of the shutdown found that DOD civilian and military personnel "spent thousands of hours developing and implementing plans for managing a shutdown, implementing the Pay Our Military Act, and restarting full operations." If a government shutdown occurs to begin FY 2026, DOD personnel would similarly have to dedicate a significant amount of time to develop and implement plans to manage it and ongoing functions.

Seamus P. Daniels is a fellow for Defense Budget Analysis in the Defense and Security Department at the Center for Strategic and International Studies in Washington, D.C.

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