When Congress has not enacted appropriations by the start of a fiscal period, agencies cannot spend money. What follows is governed by a legal framework and by plans each agency has prepared in advance.
An old statute does the work
Federal law bars agencies from obligating funds that have not been appropriated and from accepting voluntary services, subject to narrow exceptions.
That prohibition is why activity stops rather than continuing on credit, and why officials cannot simply promise to pay later.
Legal interpretations issued over the years established that agencies must cease most operations rather than proceed on the assumption funding will arrive.
Those opinions turned a technical spending restriction into the shutdown procedure familiar today, which is why practice changed without the statute itself being rewritten.
Excepted activities continue
Work necessary for the safety of human life or the protection of property continues, and each agency identifies those functions in a contingency plan.
Air traffic control, law enforcement, border operations, medical care for patients already admitted and similar functions fall in this category.
Employees performing that work stay on duty without pay during the lapse and are paid afterward under a law providing back pay.
Funding source determines who is affected
Programs financed by mandatory spending rather than annual appropriations continue, which is why benefit payments generally keep flowing.
Agencies funded by fees, or carrying multi-year balances, can operate until those resources run out, so effects appear on staggered timelines.
This patchwork is why one agency closes its public services immediately while another appears unaffected for weeks.
It also means the practical severity of a lapse depends heavily on which appropriations bills have already been enacted when the deadline arrives.
The visible effects are indirect
Permit reviews, grant processing, economic data releases, inspections and public facilities are among the first activities to pause.
Contractors are affected differently from federal employees, since their compensation depends on contract terms and back pay laws do not reach them.
State and local programs administered with federal funds can continue on balances already received, then face the same constraint.
Resolution comes through appropriations
A lapse ends when Congress enacts full-year appropriations or a continuing resolution extending prior funding levels for a defined period.
Continuing resolutions have become a common instrument, and they carry their own complications for agencies planning multi-year work.
Restarting is not instantaneous, since backlogs accumulate during a lapse and systems and schedules must be brought back into sequence.