Risk of Partial Government Shutdown Increases

Action: As the Federal government approaches a January 30 deadline to enact the remaining six appropriations bills for fiscal year (FY) 2026, a debate in the Senate regarding funding for the Department of Homeland Security (DHS) threatens to precipitate a partial government shutdown at the end of the month, though the number of agencies that would be affected by a shutdown remains unclear.

Trusted Insights for What’s Ahead^®

• Lawmakers have spent January working on a bipartisan compromise to fund agencies that were not covered in the “minibus” passed in November. On January 15, Congress passed a minibus to fund three bills: Commerce-Justice-Science, Energy-Water, and Interior-Environment.¹ The House has also approved appropriations bills for two more bills for the Departments of State and Treasury by a bipartisan vote of 341-79.² This addresses eight of the 12 bills.
• On January 20, Congressional leaders released bill text for a $1.2 trillion appropriations package funding the agencies of Defense, Labor, Health and Human Services (HHS), Housing and Urban Development (HUD), Transportation, Education, and Homeland Security.³ The compromise includes health care legislation affecting pharmacy benefit managers and additional funding for community health centers, though not an extension of enhanced Affordable Care Act premium subsidies.⁴ Additionally, the package contains nearly $16 billion in earmarks for local projects, to smooth passage.⁵
• Last week, a three-bill minibus funding Defense, Labor-HHS-Education, and HUD-Transportation passed the House 341-88.⁶ The House held a separate vote for the DHS appropriations bill because of controversy surrounding DHS operations in Minneapolis, with the bill ultimately passing by 220-207 after seven Democrats joined all but one Republican in support.⁷
• The Senate must pass the remaining six appropriations bills by January 30 to avoid a partial shutdown. After another shooting by DHS agents in Minneapolis over the weekend, Democratic Senators, including some who voted to reopen the Federal government back in November, came out in strong opposition to the DHS appropriations bill.⁸ Senate Minority Leader Chuck Schumer (D-NY) said Senate Democrats are “ready to quickly advance the five appropriations bills separately from the DHS funding bill before the January 30th deadline,” suggesting a potential path to avoiding a significant shutdown.⁹
• Thus far, however, Senate Republicans have not suggested they will agree to split the DHS bill from the overall funding package. Any changes to DHS or other appropriations bills would have to go back to the House for approval, which does not return until February 2.¹⁰
• What this means for business: Because the House held a separate vote on the DHS bill, the possibility remains that a shutdown could be limited to DHS, if Senate Republicans are willing to advance a package excluding that bill.
• Otherwise, businesses should prepare for the possibility of at least a temporary partial shutdown on January 31. The sector most likely to be affected is homeland security, though other agencies, including HHS, Labor (including economic data from BLS), Education, HUD, and Transportation (including air traffic control), may be affected if the Senate does not decouple the DHS bill from the others. Impacts on sectors such as air travel may be limited if the shutdown is brief, but government payments to businesses from other agencies such as HHS could be delayed as well.