Which federal agencies are exempt from a government shutdown and why?
Executive summary
During a lapse in appropriations federal work continues for employees in three legal categories: excepted (essential) employees work without immediate pay, exempt employees continue because their programs are funded outside annual appropriations, and agencies with mandatory or separately-authorized funding streams (like Medicare/Medicaid and parts of Defense) keep running [1] [2] [3]. Which agencies and workers remain active is decided by OMB guidance and agency contingency plans; agencies have broad discretion and routinely classify staff as excepted, furloughed or exempt [2] [4].
1. How the law divides the workforce: excepted, furloughed, exempt
Federal agencies classify employees into three buckets when appropriations lapse: "excepted" staff who must work to protect life or property and therefore often work without pay during the shutdown; "furloughed" staff who are sent home; and "exempt" employees who keep working and being paid because their programs are financed by authorities other than annual appropriations [1] [2]. The Office of Management and Budget provides implementing categories in A‑11, but agencies retain substantial discretion in drawing the lines [2].
2. Which agencies are typically spared, and why
Agencies that operate programs funded by mandatory or separate law, or that provide functions judged necessary to protect life/property, are usually spared from furloughs. Examples reported from recent shutdowns include Medicare and Medicaid continuing to operate, and large parts of the Department of Defense and Transportation Security Administration remaining on duty [3]. Departments such as Veterans Affairs, Homeland Security and Justice tend to send home fewer employees because many roles there are deemed necessary to protect life or property [5].
3. “Exempt” vs “excepted”: funding source matters
Exempt employees are distinct because their pay streams do not come from the annual appropriations that lapse; those programs continue to be funded and employees continue to be paid during a lapse [6]. By contrast, excepted employees work without immediate pay because the Anti‑Deficiency Act forbids spending absent appropriations, but the Government Employee Fair Treatment Act of 2019 requires retroactive pay after the shutdown ends [1].
4. Who decides who stays and the political stakes
The director of OMB has authority to direct what continues, and the president and agencies exercise broad discretion in classifying functions and personnel [3]. That discretion creates political stakes: decisions about who works—and who is furloughed—can shift service delivery and fuel partisan narratives, as seen in recent public disputes over which grants or benefits were frozen during the 2025 lapse [3] [7].
5. Real‑world consequences: numbers and services
Shutdowns materially affect payrolls and services. Analysis after the 2025 lapse estimated roughly 900,000 furloughed workers and about two million working without pay; separate estimates put withheld paychecks in the billions, and nearly 730,000 federal employees worked without pay during the shutdown period [3] [8]. Statistical and economic data flows from agencies were also interrupted until funding was restored [7].
6. Contingency plans are legally required but often opaque
Agencies typically publish contingency plans detailing who is excepted, but in 2025 many contingency plans were unavailable publicly and agency breakdowns remained unclear—leaving states, service providers and staff guessing about what would continue [6] [5]. That opacity intensifies the practical harm of funding lapses and invites political scrutiny over agency choices.
7. Disagreements and legal limits: enforcement and past disputes
The Government Accountability Office enforces the Anti‑Deficiency Act and has found unlawful actions in past shutdowns; disputes over who should be excepted or how authorities are interpreted have produced litigation and congressional oversight requests [5]. Sources show both legal constraints and room for administrative judgment—meaning outcomes can vary sharply by administration and by agency [2].
8. What reporting does not say (limits of current sources)
Available sources do not enumerate a definitive, static list of “agencies exempt from shutdown” because exemptions depend on funding source, statutory exceptions, and agency contingency classifications; instead reporting and OMB guidance show patterns and examples [2] [3]. Specific, up‑to‑date lists must come from agency contingency plans or OMB at each lapse, neither of which were comprehensively published in the recent episode [5] [6].
Bottom line: no categorical roster of exempt agencies exists in the statute; exemptions flow from funding vehicles and essential‑function determinations made under OMB direction and agency contingency plans, producing predictable patterns (defense, veterans, health safety net, TSA) but variable outcomes and political conflict each time Congress fails to pass appropriations [2] [3] [5].