The longest federal government shutdown in history ended on November 12 after the Senate voted 60-40 and the House voted 222-209 to pass P.L. 119-37 (H.R. 5371), an appropriations measure providing:
- Full FY26 appropriations for Military Construction-VA, Agriculture, and the Legislative Branch;
- A continuing resolution (CR) for the rest of government through January 30, 2026; and
- Reforms ensuring that all federal workers would receive full pay during the shutdown, that the reductions-in-force (RIFs) initiated during the shutdown were reversed, and that the Administration would be barred from initiating new RIFs for the remainder of the CR period.
In addition to the reforms requested by the eight Senate Democrats that voted to end the shutdown, Senate Majority Leader Thune (R-SD) committed to a Senate vote on a Democratic proposal to extend temporary Affordable Care Act subsidies that expire at the end of this year. Speaker Johnson (R-LA) has signaled his reluctance to take up the measure in the House if the Senate measure passes.
Last week, Senate Majority Leader Thune (R-SD) reminded his Senate colleagues, “We have a lot of work left to do – starting with the need to fund the government for the remainder of the fiscal year beyond January 30.”
That’s no small task.
This report includes a status report on the nine remaining FY26 appropriations bills and details on both the FY26 Military Construction funding and approved FY26 and advance FY27 appropriations for the Veterans Administration approved in P.L. 119-37.
The Senate Democrats’ shutdown strategy certainly elevated the health care subsidies issue that has emerged as a priority for progressives. But it did so with a cost.
Shutdown risk for the remainder of this Congress has increased. Over the past 30 years, CRs have been the norm for federal agency managers with agencies typically operating under a CR for most of the first quarter (Oct-Dec) of each fiscal year. In FY25, all federal agencies ended up operating under CRs for the full fiscal year. That decision meant that the Department of Defense operated under a full-year CR for the first time in history.
At the end of the fiscal year (midnight on September 30), and the conclusion of each subsequent CR, shutdown risk is typically below 5%. For the remainder of this Congress, shutdown risk on January 30 and any subsequent deadline starts at 20%.
More Obstacles for Regular Appropriations. Congress has few must-do tasks each year. One of them has been action on appropriations. The Trump transition and a combination of 2025 decisions including the full year CR, adoption of the One Big Beautiful Bill Act (OBBBA), the Department of Government Efficiency (DOGE), Impoundments and other actions initiated by Office of Management and Budget (OMB) Director Vought to assert greater executive branch control over agency spending, and the record-setting 43-day shutdown have elevated the influence of the White House, OMB, and Congressional leadership at the expense of the House and Senate Appropriations Committees.
On the initial FY26 CR, House and Senate Republicans were urged to avoid pushing their policy and funding priorities in favor of a clean CR. Because that strategy failed, expect Republicans, especially in the House, to be more aggressive in pursuing their policy and funding priorities in future negotiations making FY26 and FY27 appropriations deliberations more contentious.
Increased Pressure to End the Legislative Filibuster. During the shutdown, President Trump urged Senate Majority Leader Thune (R-SD) to limit filibusters on legislation. Thune refused. If another shutdown occurs, expect pressure from the White House, the House, and more Senate Republicans to mount.
WHAT DOES THIS MEAN FOR FEDERAL CONTRACTORS?
A full-year CR at levels well above President Trump’s FY26 Budget is good news for several civilian agencies that will receive billions more than Trump proposed in his FY26 Budget. At this point, the leading candidates for a full-year CR appear to be those agencies funded under the Department of Homeland Security, State-Foreign Operations, and Financial Services and General Government Appropriations Bills.
Forecast
75%
Agencies funded in three or more of the nine remaining FY26 regular appropriations bills will ultimately operate under what is effectively a full-year CR in FY26.
In the FY25 full-year CR, Congress gave agencies broad flexibility over spending allocations and required that agencies provide Congress detailed spending plans by April 29. OMB Director Vought pushed the limits of that flexibility and essentially ignored the Congressional spending plan requirement. Expect a pushback from the House and Senate Appropriations Committees in any FY26 spending agreement.
Forecast
90%
Whether agencies are funded through regular appropriations or CRs for the remainder of FY26, expect more explicit Congressional direction on FY26 spending priorities that we saw in FY25.
As we mentioned in our October report, the largest new addressable market opportunity for federal contractors is outlined in billions in 5-year spending approved in the One Big Beautiful Bill Act for the Department of Defense ($152.2 billion), the Department of Homeland Security (at least $191 billion), and the Federal Aviation Administration ($12.5 billion). At this point, no federal department, agency, or military service has an approved complete spending plan for that money. One of the reasons is that many of the agency officials charged with developing those plans were not working during the shutdown.
While discussions have begun for the Department of Defense, approved plans are likely still months away and remain operationally contingent on FY26 appropriations decisions that may not be finalized before February. As a result, don’t expect agencies to ramp up these spending initiatives before mid-March 2026.