Federal Update: Government Shutdown Looms as Fiscal Year Ends 

With only a few days left in the current fiscal year, Congress remains deadlocked on how to keep the government funded beyond September 30. Without a last-minute spending deal, the likelihood of a shutdown is growing by the day. 

Last week, the House narrowly approved a Continuing Resolution (H.R. 5371) by a vote of 217–212 to extend funding through November 21. The measure, billed as a “clean” extension, also includes $30 million for enhanced security for federal officials following heightened safety concerns. The Senate quickly rejected the bill in a 48–44 vote, falling well short of the 60 votes needed to advance. 

Senate Democrats countered with their own proposal to keep the government open until October 31, but that effort also failed to clear the 60-vote threshold. Their plan would also permanently extend the Affordable Care Act’s (ACA) enhanced premium tax credits, which are set to expire at the end of 2025. The subsidies – which are available to those who pay more than 8.5 percent of their income on health insurance premiums – were enacted during the COVID-19 pandemic so that individuals could maintain their coverage. If they lapse, out-of-pocket premiums could rise sharply for individuals and families buying coverage through the ACA marketplace. While some Republicans have expressed interest in extending the subsidies, GOP leaders have ruled out making major policy changes in a short-term CR. 

In addition, the Democratic plan calls for repealing nearly $1 trillion in Medicaid cuts that were included in this summer’s budget reconciliation package, as well as reversing the administration’s efforts to rescind or withhold previously approved federal funds. It also proposes significantly higher security funding for federal officials. 

With both proposals stalled, House Speaker Mike Johnson (R-LA) has canceled votes scheduled for September 29 and 30, leaving the Senate under pressure to act alone in the final hours. For his part, Senate Majority Leader John Thune (R-SD) has suggested the House bill could be reconsidered, but without bipartisan agreement its prospects remain slim. 

Meanwhile, the White House is raising the stakes. The Office of Management and Budget (OMB) recently instructed agencies to prepare not only for standard furloughs, but also for permanent layoffs through “reduction in force” (RIF) notices. Agencies were told to identify programs whose funding will lapse on October 1 and that are not “consistent with the president’s priorities,” with RIF plans to eliminate those positions outright. However, essential programs – such as Social Security, Medicare, veterans’ benefits, military operations, law enforcement, border protection, and air traffic control – would continue, but many other programs face uncertainty. 

In the event of a government shutdown, the immediate impact on county operations is expected to be limited. Federal employees would feel the most direct effects, as most would be furloughed or, in this case, potentially fired. 

Over time, however, a prolonged shutdown could strain county services if local demand rises or if state reserves used to backfill delayed federal funding begin to run low. It should be noted that key safety-net programs – including Medicaid (Medi-Cal), SNAP (CalFresh), Title IV-E foster care, child support, and TANF (CalWORKs) – are either exempt from shutdowns or have reserve funding to continue for at least several weeks. Still, reduced federal staffing during a shutdown could delay reimbursements and slow down new program enrollments. 

DOE Launches “Speed to Power” Initiative
The U.S. Department of Energy (DOE) has launched a new initiative aimed at accelerating the development of large-scale generation, transmission, and grid infrastructure projects. The effort is designed to ensure the nation can meet rapidly growing electricity demand, particularly from the expansion of advanced technologies such as artificial intelligence and data centers, while maintaining reliable and affordable energy access. 

As part of the rollout, DOE issued a Request for Information (RFI) seeking input on near-term investment opportunities, project readiness, load growth expectations, and infrastructure constraints. The initiative reflects DOE’s conclusion that the current pace of project development is insufficient to keep up with manufacturing expansion, reindustrialization, and broader economic needs. 

DOE is encouraging utilities, state and local governments, grid operators, and private sector partners to provide feedback on how federal resources and authorities can be used most effectively to expand grid capacity and strengthen national energy security. 

Proposed Bill to Expand Medicaid Coverage for Mental Health and Substance Use Services
Last week, a bipartisan group of lawmakers reintroduced legislation – the Michelle Alyssa Go Act (H.R. 5462) – that would raise the federal cap on Medicaid-eligible in-patient psychiatric beds from 16 to 36. The current cap – known as the Institution for Mental Disease (IMD) exclusion – has long been cited as a barrier to care, limiting the number of patients facilities can serve while still receiving Medicaid reimbursement. 

Supporters argue that increasing the cap is a critical step toward addressing the nation’s ongoing mental health and substance use disorder crisis, which have been exacerbated by rising demand for behavioral health services. While an identical measure was introduced in the last two Congresses, it did not advance. 

If enacted, the legislation could help expand access to treatment options in communities across the country, particularly in areas where bed shortages have strained local hospitals, first responders, and public health systems. 

Sens. Padilla, Sheehy Introduce Bipartisan Bill on Forest Conservation and Wildfire Resilience 
Senators Alex Padilla (D-CA) and Tim Sheehy (R-MT) recently introduced bipartisan legislation – the Forest Legacy Management Flexibility Act (S. 2566) – that aims to strengthen forest conservation and reduce wildfire risks. Specifically, S. 2566 would allow states to designate accredited nonprofit land trusts to manage conservation easements purchased with federal funding through the U.S. Forest Service’s Forest Legacy Program (FLP).  

The FLP is the nation’s largest source of federal funding for private forest conservation. Under current law, only government entities may hold conservation easements acquired through the program. Expanding this authority to nonprofit land trusts would provide landowners with more options to conserve their property, especially those hesitant to sell easements directly to federal or state governments. 

A companion bill has been introduced in the House by Representatives John Garamendi (D-CA) and Ken Calvert (R-CA). 

A one-pager on the Forest Legacy Management Flexibility Act is available here.