In the final week of the fiscal year, the White House’s Office of Management and Budget (OMB) sent a memo to agencies directing them to prepare for layoffs in the event of a government shutdown on October 1.
Congress is considering budget legislation to continue to fund the federal government into fiscal year 2026. Without another continuing resolution, the current resolution will expire, shutting down the government.
What is Congress debating?
House Republicans and Democrats have each proposed budget resolutions, both of which have been voted down in the Senate.
The Republican-sponsored bill would fund the government until November 21, keeping most program spending at 2025 levels while extending some health and veterans services programs.
The Democratic-sponsored bill features healthcare provisions, including an extension of the premium tax credit, that would raise both the number of people with insurance and the federal deficit. It also includes provisions limiting the White House’s control over appropriated funding.
Both bills would increase funding for security for government officials.
Premium tax credits
The premium tax credit allows eligible taxpayers to claim credits to cover health insurance marketplace premiums. The Congressional Budget Office (CBO) estimates that extending the credits would, by 2035, increase the number of people in the nation with health insurance by 3.8 million and raise the deficit by $350 billion. The CBO also projects that it would lower overall premiums.
Around 8% of Americans are uninsured.
The share of Americans with health insurance has been above 90% since 2015.
Percent of people covered by public or private health insurance, 1987–2024
Repealing One Big Beautiful Bill Act provisions
The bill proposed by the Democrats would reverse provisions made in July 2025’s One Big Beautiful Bill Act that reduced Medicaid funding.
Medicaid provides low-income Americans with health insurance and covered over one quarter of the US population at some point in fiscal year 2024. The federal government, which shares Medicaid costs with states, spent $638 billion on the program that year.
This summer’s bill had over 30 Medicaid provisions, including changes to eligibility, enrollment, and funding. The CBO estimated that these provisions would cut $840 billion from Medicaid spending over the next 10 years.
One provision, which restricts eligibility to people who are working, training, or volunteering for at least 80 hours a month, would cut $344 billion. The same report estimates that the number of uninsured people would increase by 7.8 million.
“Pocket rescissions”
The Democratic proposal also limits the OMB’s (and, thus, a presidential administration’s) ability to withhold funds that Congress has allotted for spending. It also would establish an inspector general in the OMB for oversight.
In July, Congress passed a rescissions package — a type of legislation that cancels previously approved funding. This year’s bill cut $9 billion in funding for the State Department, USAID, the Corporation for Public Broadcasting, and more.
These rescissions were made possible by the Impoundment Control Act, under which the president can propose delaying or canceling funds Congress has already approved. When proposed, Congress has 45 continuous legislative days to enact or reject the rescissions.
On August 29, the Trump administration announced a “pocket rescission” package designed to cut more from USAID and the State Department. Pocket rescissions refer to when a rescissions proposal from the president comes too close to the end of the fiscal year to give Congress the required 45 days to consider the request.
The Government Accountability Office says that pocket rescissions are illegal because they circumvent Congress’s control over the budget.
Possible federal workforce reductions
The OMB memo from the final week in September instructed agencies to lay off employees of programs if funding lapses. These layoffs are different from shutdown furloughs, which are temporary, unpaid leaves of absence until Congress restores funding.
Federal layoffs would continue a trend of reduction in the size of the federal workforce. The workforce has decreased by about 3.2% from a recent peak of 3.06 million in January to a preliminary figure of 2.92 million in August. Federal government jobs comprise about 1.8% of the nation’s nonfarm jobs.
As of August 2025, there were 2.9 million federal government jobs.
Civilian federal government employees, January 1939 to August 2025
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