US federal government had a 43-day partial shutdown from October 1 to November 12 last year, as appropriations legislation for the 2026 fiscal year failed to pass. Congress then passed legislation to provide full-year funding for agriculture, military construction, veteran affairs, and the legislative branch. A continuing resolution extended flat funding for the remaining agencies through January 30, 2026. There are six major appropriations bills that have not been passed and the following departments remain unfunded for the remainder of the fiscal year:
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- Defense
- Homeland Security
- Labor
- Health and Human Services
- Education
- Transportation
- Housing and Urban Development
- Financial Services and General Government
- State Department
- National Security programs
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After the House passed a $1.2 trillion spending bill that included the Department of Homeland Security, Senate Democrats are demanding that DHS-related agencies – Immigration and Customs Enforcement (ICE), Customs and Border Protection (CBP), and Border Patrol – be reformed or separated from the broader funding package before they approve anything. There are several obstacles to quick resolution:
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- The House of Representatives is in recess until February 2, so any revisions to their version of the spending bills will be delayed.
- A major winter storm is delaying Senate negotiations and voting.
- Republicans hold a majority of Senate seats (53-47), but 60 votes are required to overcome a filibuster by Democrats.
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The obvious catalyst for Senate Democrat opposition was the shooting of Alex Pretti in Minneapolis, but opposition had already been building rapidly to the actions of ICE in Minneapolis and other cities. Now, Senate Democrats want to use their legislative leverage to change immigration enforcement policies.
The partial shutdown of federal agencies will result in the furlough of approximately 480,000 federal employees in affected agencies. Another 500,000+ federal employees are expected to work without pay as they are considered essential. All employees are likely to receive backpay after the situation is resolved. The partial shutdown will also result in the disruption of some services and affect federal contractors.
Deficit spending is not an issue for the two political parties at this point. The US government debt ceiling was raised to $41.1 trillion when the One Big Beautiful Bill Act was passed in July 2025. The current federal debt outstanding is $38.5 trillion, and the Congressional Budget Office (CBO) is currently projecting a budget deficit of $1.7 trillion for the current fiscal year ending September 30, 2026. If there is one thing that Republicans and Democrats can agree on, it is that they should borrow more money rather than raise taxes and reduce spending.
If you have any questions or comments, please contact me.
Robert G. Kahl
CFA, CPA, MBA