The federal government officially shut down at 12:01 a.m. ET on October 1, 2025, when Congress failed to pass the full set of annual appropriations bills or a temporary continuing resolution (CR) that would have extended current levels of funding for a set period of time while they negotiated the annual appropriations bills. Now more than three weeks in, lawmakers remain divided: House Republicans passed a CR extending current funding levels for seven weeks, while the Senate has not been able to reach the 60-vote threshold as Democrats seek an extension of expiring health insurance subsidies. The Senate has voted multiple times on various proposals but has repeatedly fallen short of the 60-vote threshold needed to advance any measure, and there is still no agreement with the Administration.

Additionally, with much of the federal government shut down, except for programs deemed essential, agencies have begun implementing layoffs and furloughs. For example, the Community Development Financial Institutions (CDFI) Fund within the U.S. Department of the Treasury has paused operations and issued staff termination notices due to the lapse in funding. Across the federal government, thousands of employees have received reduction-in-force notices or been placed on unpaid leave as departments scale back non-essential activities until appropriations are restored. In response, several lawsuits have been filed challenging aspects of the staff terminations.

Several potential paths exist to resolve the shutdown, but none have yet gained sufficient traction. Lawmakers continue to discuss procedural, bipartisan, and leadership-level options to reopen the government, though major policy differences remain. Until a clear agreement emerges, federal operations will continue under limited capacity.

What is a government shutdown?

A U.S. federal government shutdown—technically referred to as a “lapse in appropriations”—occurs when Congress fails to pass the legislation needed to fund government operations and agencies. The U.S. Constitution prohibits spending money from the U.S. Treasury Department without congressional approval. To meet this requirement, Congress must pass 12 annual appropriations bills or adopt a temporary spending bill (called a “Continuing Resolution”).

If neither happens by the start of the new fiscal year on October 1, federal agencies lose authority to spend money, and a shutdown takes effect. During this period, many federal activities and programs are paused. Some federal employees are furloughed without pay, while those deemed to be in “essential” roles—such as public safety, air traffic control, or Social Security operations—continue to work, sometimes without immediate compensation.

Potential Impacts on Economic Developers and Organizations

A prolonged shutdown directly affects economic development programs and projects:

• Delays in federal funding: Programs administered by EDA, USDA, HUD, SBA, DOT, and others are forced to pause new awards, drawdowns, or approvals.
• Project disruptions: Communities waiting on federal permits, technical assistance, or reimbursements experience delays, impacting local projects and putting organizations in the position of having to continue the work without clarity on how long it may take to be reimbursed.
• Partnership strain: Communication with federal agency staff is limited, complicating collaboration at a time when guidance is most needed.

What IEDC Members Can Do 

• Stay informed: Monitor updates from Congress and federal agencies. 
• Engage with members of Congress: Share how the shutdown affects your projects, organizations, and communities.
• Reach out to federal agency contacts: Ask for guidance on active projects, grants, or partnerships to plan for any delays, but understand that your contacts may not be working or have access to their email.
• Prepare locally: Review projects and funding streams dependent on federal action and anticipate potential disruptions.

IEDC will continue to monitor the situation and provide updates as developments occur.