Client Alert: What to Know as the Federal Budget Deadline Nears

As we approach the end of the federal fiscal year on September 30, Congress faces a critical deadline to pass 12 appropriations bills to fund the government or risk a government shutdown. With significant implications for businesses across sectors, particularly those relying on federal contracts, grants, or appropriated funds, we want to ensure our clients understand the current landscape and potential outcomes.

The September 30 Deadline: A Hard Stop

Fiscal year (FY) 2025 ends on September 30, and Congress must pass a budget or a continuing resolution by October 1 to keep the federal government operational. This constitutional requirement means that without legislative action, non-essential government functions will cease, federal employees will be furloughed, and new contracts and grants will be suspended. For businesses dependent on federal funding streams, this represents a material risk that requires immediate attention and contingency planning.

The current political reality suggests that reaching consensus on a comprehensive appropriations package before the deadline will be challenging.

Continuing Resolutions: The Likely Path Forward

Given the compressed timeline, Congress will most likely pursue a continuing resolution (CR) rather than a full appropriations bill. A CR maintains government funding at current levels for a specified period, essentially kicking the can down the road while lawmakers negotiate a more comprehensive spending package.

However, continuing resolutions create significant uncertainty for businesses, particularly those with projects dependent on new federal funding or appropriated earmarks. Under a CR, agencies typically cannot initiate new programs or significantly expand existing ones. This means that projects counting on federal dollars — especially those tied to specific congressional earmarks or new initiatives — will likely be relegated to the back burner until a final appropriations bill is enacted.

The Earmark Question: Political Realities

While it’s theoretically possible for Congress to attach specific earmarks or project funding to a continuing resolution, the current political composition makes this outcome unlikely. With Republicans controlling the House and maintaining significant influence in appropriations negotiations, there is little political incentive to prioritize projects in predominantly Democratic states or districts.

Duration and Discretionary Elements

The length of any continuing resolution remains entirely at Congress’ discretion. CRs can range from weeks to months, depending on the complexity of underlying negotiations and political calculations. Historically, Congress has used CRs as stopgap measures lasting anywhere from a few weeks to several months, with some extending well into the following calendar year.

This uncertainty creates planning challenges for businesses. A short-term CR might signal quick resolution of appropriations issues, while a longer-term CR could indicate prolonged negotiations and delayed project implementations. The duration will largely depend on whether lawmakers can find common ground on contentious spending priorities and policy riders.

Pocket Recissions and Impact on Appropriations Negotiations

To further complicate matters, the White House signaled that it wants to cut about 5 billion in foreign aid through a maneuver called the “pocket recission.” The recissions process permits the executive branch to cancel already-appropriated funds approved by Congress; however, the process requires the executive branch to formally submit a request to Congress. Congress typically has 45 days to vote on the recissions request, but given the fiscal year concludes on September 30, there is not enough time for Congress to act.

Members of both parties, including the Government Accountability Office, strongly oppose the “pocket recission” tactic, viewing it as an overreach to strip Congress of its constitutional “power of the purse.” Legal challenges are likely to follow, and the move will surely impact the upcoming budget negotiations.

Strategic Considerations for Your Business

Given these realities, businesses should evaluate their exposure to federal funding delays and develop contingency plans accordingly. Consider diversifying funding sources, adjusting project timelines, and maintaining sufficient working capital to weather potential delays in federal payments or contract awards.

Companies with significant federal contract exposure should also prepare for potential administrative delays even after funding questions are resolved, as agencies will need time to process accumulated backlogs from any shutdown period.

Moving Forward: We’re Monitoring Developments

Croke Fairchild Duarte & Beres’ Government Affairs and Regulatory Law practice continues to closely monitor appropriations developments and maintain regular contact with key congressional staff and agency officials. The situation remains fluid, and we are prepared to provide real-time updates as negotiations progress.

Key Takeaways:

• Congress must pass a budget or a continuing resolution by October 1 to keep the federal government operational.

• Since time is short, it is likely Congress will pass a continuing resolution (CR) in lieu of a full appropriations bill.

• The timeline for CRs can range from weeks to months and is at Congress’ discretion.

• Given these realities, businesses should evaluate their exposure to federal funding delays and develop contingency plans accordingly.

• If your business has ongoing projects that could be impacted by the appropriations process, please reach out to our team.

If your business has ongoing projects that could be impacted by the appropriations process, or if you have questions about potential federal funding delays, please reach out to David Adeleye or another member of our team. Early planning and proactive engagement can help mitigate risks and position your organization for success once funding certainty returns

Key Contact:
David Adeleye
Government Relations Director & Counsel
Point of Difference Strategies/Croke Fairchild Duarte & Beres
dadeleye@podstrategies.com
202.500.2448