Policy Backgrounders

Government Funding: Congress Considers Short-Term Deal

September 18, 2025

This week, the U.S. House of Representatives plans to vote on a short-term continuing resolution (CR) to keep the Federal government open through November 21 as Congress continues to negotiate a full-year funding deal for fiscal year (FY) 2026. Even if it passes, it faces a potentially difficult path in the Senate.

• Congress must pass the 12 appropriations bills funding Federal discretionary spending by the start of FY2026 on October 1 (or some form of CR) to avoid a government shutdown.
• Given the lack of progress in completing the appropriations process, Congressional Republicans unveiled a short-term CR to allow for more time to negotiate a full-year funding deal. The CR includes additional security funding for public officials.
• House Democrats have demanded bipartisan negotiations and made a counter proposal for a short-term CR, including health care policy changes, including a permanent extension of the pandemic-era Affordable Care Act (ACA) enhanced tax credits to assist enrollees with paying their ACA health insurance premiums and a repeal of the Medicaid and other health program spending reductions in the 2025 reconciliation bill.
• The competing visions for a CR and the unwillingness to compromise greatly increase the chances of a government shutdown at the end of the month.

Status Update on FY2026 Appropriations Process

Each year, Congress considers 12 appropriations bills that fund Federal discretionary spending on many government programs, including national defense, infrastructure, transportation, education, housing, and social service programs. The Appropriations Committees in the House and the Senate are responsible for crafting and passing the 12 appropriations bills, and each Committee has 12 subcommittees that align with each appropriations bill. All 12 appropriations bills must be enacted into law by the start of FY2026 on October 1 to avoid a full or partial government shutdown, unless Congress passes some form of CR. Crucially, appropriations bills require 60 votes in the Senate, making bipartisan negotiations key to the process.  

Congress returned from its August recess at the start of September. The House has passed all appropriations bills out of Committee, but only the bills for Defense, Military Construction-Veterans Affairs, and Energy-Water have been approved by the full House. The Senate has passed more than half of the appropriations bills out of Committee and three bills—Agriculture, Legislative Branch, and Military Construction-Veterans Affairs—have passed a full Senate vote as a “minibus” package. To prevent a government shutdown, Congress can pass and the President can sign a CR to provide interim budget authority. This stopgap funding may last for any duration that Congress decides (up to the end of the fiscal year), and a CR is often generally based on a rate of operations funded in the previous year as opposed to a specific amount of funding. CRs have become more common as Congress has failed to complete the budget process in a timely and orderly manner.

Through August and early September, Congressional leadership from both parties did not make much progress on cross-party negotiations. Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Hakeem Jeffries (D-NY) demanded bipartisan negotiations as a condition for Democratic support of any funding deal. Working with the White House, Congressional Republicans debated several options. The leaders of the Appropriations Committees preferred a short-term CR through November or December to allow for further negotiations. Senate appropriators explored the possibility of passing the three-bill minibus as part of the CR. Another path supported by fiscal conservatives was a longer-term CR through early 2026 or even for the entire fiscal year to hold discretionary funding flat.

House Considers Short-Term CR

This week, Republican leadership in Congress and the Administration agreed on a path forward of a short-term, relatively “clean” CR through November 21 to allow for more time to negotiate a comprehensive deal on FY2026 appropriations. The CR extends the current FY2025 funding levels and includes $58 million for security for Executive Branch and Supreme Court officials requested by the Administration and an additional $30 million in security funding for Members of Congress. The CR also contains a funding fix to allow the District of Columbia to spend its approved budget (addressing a $1 billion shortfall in the city’s budget), several budgetary anomalies on defense spending, and extensions of authorizations for various health care and veterans’ affairs programs. Some House Republicans have raised concerns and potential opposition to pursuing the CR, but the House Freedom Caucus (which has opposed some past spending bills) has not come out in strong opposition to the bill, and nearly all House Republicans have eventually supported party-line measures after pressure from the White House and Congressional leadership this year.

As Republicans were finalizing their CR proposal, Democrats began outlining their specific conditions for supporting any deal for funding the Federal government in FY2026. After agreeing to a full-year CR for FY2025 in March, Senator Schumer recently stated that “things have changed” and focused on securing significant health care policy provisions in exchange for Democratic support of any CR. Democrats have honed in on the expiration at the end of 2025 of the ACA enhanced tax credits approved during the COVID-19 pandemic to assist enrollees purchasing health insurance through the ACA marketplace exchanges with paying their premiums. Since 2020, the number of individuals with ACA marketplace coverage has grown by 88%, from 11.4 million to 21.4 million in 2024, and the enhanced subsidies have cut premium payments by an estimated 44% ($705 annually) for enrollees receiving the enhanced credits. Democrats have also consistently criticized the Medicaid and other health care provisions in Public Law 119-21 (H.R. 1, 2025), also referred to as the “One Big Beautiful Bill Act” or OBBBA.

On Tuesday, Senator Schumer and Rep. Jeffries released a joint statement opposing the Republican CR proposal: “The House Republican-only spending bill fails to meet the needs of the American people and does nothing to stop the looming healthcare crisis. At a time when families are already being squeezed by higher costs, Republicans refuse to stop Americans from facing double-digit hikes in their health insurance premiums.” The ranking members of the Appropriations Committees also released a statement urging bipartisan negotiations, including consideration of the three-bill minibus that the Senate has passed. In response, Senate Majority Leader John Thune (R-SD) said, “I think the ACA subsidies will be an issue that will be addressed but I think right now we’ve got to keep the government open so we can do appropriations bills and work on that, with that solution. I don’t think it’s going to be close to ready to go by the shutdown of the government, which would happen Sept. 30.”

On Wednesday night, Democrats released their version of a short-term CR that could attain Democratic support. The alternative CR would extend FY2025 funding levels through October 31 to allow for more time for negotiations. In addition to the typical health care and veterans’ affairs program authorization extensions, the Democratic CR would repeal all of the Medicaid and other health care spending reductions from the OBBBA, which the nonpartisan Congressional Budget Office (CBO) estimates has a deficit impact of $1.1 trillion over 10 years. The proposal would also permanently extend the ACA enhanced tax credits, resulting in a net deficit increase of $350 billion from 2026 to 2035 and an increase in the number of individuals with health insurance by 3.8 million in 2035 (compared to current law) according to CBO. Open enrollment on the ACA marketplace exchanges opens on November 1, and enrollees will begin receiving notices of premium increases over the coming weeks, potentially increasing the political pressure for Congress to arrive at an agreement expeditiously.

Conclusion

Despite the Republican CR proposal and the Democratic counteroffer, both sides of the aisle seem to be digging in, and cross-party negotiations have thus far not materialized, increasing the chances of a government shutdown at the end of the month. The House plans to vote on the Republican CR on Friday to align with a House rule that provides Members 72 hours to review legislation before a floor vote. If Republicans in the House can pass the seven-week CR by a party-line vote, the measure would head to the Senate, and Senate Democrats would face a choice of whether to accept the Republican proposal or continue holding out for further negotiations on their health care priorities. Conversely, the CR’s failure in the House could open bipartisan negotiations in the Senate to craft a CR that can secure sufficient Democratic votes there. Either way, Congressional leadership from each party faces a difficult task to hold their conferences together and also convince the public that the other side is ultimately to blame for any government shutdown.