Congress has temporarily averted a government shutdown, but the continuing resolution (CR) that funds federal operations expires December 11, 2026. With the November elections approaching and FY2027 appropriations unresolved, agencies, contractors, and state and local governments should prepare for additional funding extensions, a final appropriations agreement, or a lapse in funding (government shutdown).

The key questions are when Congress will enact the FY2027 appropriations bills, what funding levels and policy conditions they will include, and how quickly the Office of Management and Budget (OMB) will make funds available for obligation and agencies will award grants and contracts. Enactment alone does not guarantee immediate access to funding.

Four scenarios deserve attention as Congress returns after the elections. These outcomes are not mutually exclusive: Congress could face a shutdown, a full year CR, pass all 12 bills, or a hybrid of the above.

First, Congress could complete some or all FY2027 appropriations during the lame-duck session. Enacting all 12 bills would provide the greatest operating certainty, activate earmarks and new program authorities, and allow agencies to finalize hiring, grants, and procurements as the calendar year begins. A partial package would reduce uncertainty for the federal agencies it covers while leaving others under a continuing resolution, creating uneven funding and implementation timelines. Once several bills and lawmakers’ priority earmarks are enacted, however, momentum to complete the remaining bills could diminish, leaving some agencies under a continuing resolution for the rest of the fiscal year.

Second, lawmakers could extend the continuing resolution into early 2027 to finish the bills. This would avoid an immediate shutdown but continue most programs at FY2026 rates and generally restrict new starts unless Congress provides specific exceptions, commonly called “anomalies.” Defense programs could also face restrictions on production increases. Agencies could slow awards, hiring, travel, and long-term commitments; contractors could face delayed solicitations or stop-and-start work; and local governments could see grant notices, reimbursements, and project schedules slip. An extension beyond January 3 would shift negotiations to a new Congress, potentially reopening funding levels and policy provisions, particularly if control of either chamber changes. It would also compress the time agencies have to execute FY2027 funding and overlap with work on the FY2028 budget.

Third, Congress could fail to act before the December 11 deadline, producing a partial or full government shutdown. A funding lapse would begin December 12 for activities without another source of available funding. Agencies would execute contingency plans, furlough some employees, retain personnel performing excepted activities, and pause affected grants, permits, inspections, technical-assistance functions, and routine contract actions. Work may continue on contracts with available funding, but invoicing, modifications, and approvals could still be disrupted. The effects would vary by agency and program: activities supported by available multiyear, no-year, or other funding may continue. State and local governments may need to carry costs temporarily, delay federally supported services, or use reserves while awaiting federal action and reimbursement. Under this scenario, they would need to confirm whether costs incurred during a lapse are allowable and reimbursable before committing local funds.

Fourth, Congress could enact a full-year continuing resolution. This would eliminate further deadlines but largely preserve FY2026 funding priorities through the remainder of FY2027. Without specific exceptions, new programs, funding increases, and earmarks would not take effect. Agencies would gain budget certainty but have less flexibility to address current needs; contractors could see planned competitions, production advancements, and modernization efforts deferred; and local governments could lose anticipated project funding while absorbing higher costs with flat federal support.

For state and local governments, prolonged funding uncertainty can strain budgets, delay reimbursements, disrupt services, and postpone federally supported projects. For industry, it can delay solicitations and awards, complicate hiring and investment decisions, and disrupt supply-chain planning and advancement that spur the economy. Communities and businesses alike are watching closely as Congress determines the path forward.