Government Agency Funding and the New Shutdown Risk

Key Takeaways

• The risk of another government shutdown increased over the weekend as Senate Democrats withdrew support for a bipartisan appropriations deal.

• Democrats are now insisting that Homeland Security be dropped from the package until reforms are made.

• Senate Republican Leadership is proceeding with the original bill as they seek a deal.

• Republican senators support ICE funding but they are not enthusiastic about another shutdown.

• The Homeland Security bill could be removed and fought over separately while the agency continues to operate.

• A bipartisan agreement on an investigation into ICE practices could materialize. 

• Other issues, like emergency disaster funding, could be added to garner votes.

• President Trump’s position on the strategy will be watched closely on the Hill. 

• Barring White House intervention, we believe that Senate Republicans will drop the Homeland Security bill in order to avoid a larger shutdown. 

The shooting death of Alex Pretti by federal immigration officers in Minnesota on Saturday, January 24, has launched a political debate in Washington that could result in another government shutdown. Senate Democrats now oppose funding for Immigration and Customs Enforcement (ICE) contained in the final appropriations agreement that passed in the House last week. If a path forward cannot be reached by Friday at midnight, it will result in a partial but significant government shutdown. 

Legislative Background

Federal agencies are funded by Congress annually through 12 separate appropriations bills. If those bills are not passed or if previous funding is not extended, agencies are forced to shut down all non-essential functions as occurred for 43 days last year. Congress has passed and the President has signed six full-year bills already. The final six bills were agreed to last week by Republicans and Democrats in Congress and passed in the House. All of these bills need 60 votes in the Senate, which requires Democratic support. 

The final six appropriations bills were passed in the House and sent to the Senate for approval. Funding for ICE, under the Department of Homeland Security (DHS), was combined with spending for other agencies, including Defense, Health and Human Services, and Transportation. Since these appropriations were sent to the Senate together as one piece of legislation, the Senate must pass the exact same text before it goes to the President. If the Senate removes DHS appropriations or otherwise alters the language, the new bill must go back to the House for a vote. This complicates matters because the House is out of session this week and does not return until next Monday, two days after funding expires. 

Senate Democrats stated over the weekend that they will oppose passage of the DHS appropriations bill until significant – though unspecified – reforms are enacted to “rein in the abuses of ICE.” The withdrawal of Democratic support is a reversal from their position last week when Vice Chair of the Senate Appropriations Committee Patty Murray (D-WA) endorsed a funding package that included the DHS bill. Senate Democrats met formally yesterday and reiterated their united commitment to a shutdown if DHS spending is retained in the bill. 

Republicans are procedurally moving forward with the House bill including DHS funding, which would lead to a confrontation and likely shutdown. It will take until at least Wednesday to bring the bill to the floor, so there is still time to negotiate an agreement to move forward. Senate Republicans are very adverse to another government shutdown. While removing the DHS portion of the bill would require another House vote and leave Homeland Security funding orphaned, it might be the only viable path forward if Republicans truly want to avoid a shutdown. That is yet to be seen and will be heavily influenced by President Trump’s guidance. 

DHS and ICE Funding and Operations Under a Lapse

Minority Leader Chuck Schumer’s (D-NY) demand for the removal of DHS funding from the current minibus would orphan the Homeland Security spending and make it very difficult to pass this year. Most Democrats are vehemently opposed to any funding for ICE. The agency has become so politically heated that it has little chance to garner bipartisan support without being attached to other, more popular bills. A stand-alone DHS appropriations bill will be an ongoing proxy fight over President Trump’s immigration policies. This is a reason some lawmakers do not want to break off the bill.

Highly important to note in this debate as well is the fact that a lapse in funding for the Department of Homeland Security and ICE will not substantially curtail the ability of the Administration to carry out its current enforcement activities. 

During a shutdown, essential agency operations are maintained under law. Since DHS is a security agency, virtually all of its operations, including ICE, continue under a shutdown. As this table at the end of this update shows, 95% of DHS employees were retained and still carrying out their duties during the previous funding lapse. This will not change. ICE operations in Minnesota and around the country will continue in the immediate aftermath of DHS shutdown. 

A DHS shutdown would not be without disruptions. DHS employees would not receive the regularly scheduled salary under a normal shutdown, which could result in workforce attrition that could conceivably curtail some ICE operations. This issue, however, can be potentially mitigated using other available funding resources.

Last year, the President signed the One Big Beautiful Bill Act (OB3), which most notably extended expiring individual tax rates indefinitely. The bill included dozens of other GOP priorities including $132 billion in new funding for DHS. The availability of this funding does not expire at a date certain and was distributed broadly throughout the agency. 

In addition to these resources for DHS, the Judiciary title of OB3 included $29.8 billion in funding directly appropriated to ICE through 2029 specifically for the purposes of “Hiring and training additional U.S. Immigration and Customs Enforcement personnel.” Given the availability of all these financial resources, even in the event of a shutdown it is likely that ICE could maintain staffing, operations, and pay for interior immigration enforcement for the foreseeable future. Most budget experts agree that potential legal challenges against using these funds for current operations would be unsuccessful.

Given this fact, technically shutting down DHS for a time would only be a Pyrrhic victory for Democrats. If the bills are not split and Democrats choose to block the entire appropriations package, it is very likely that government assistance programs, defense contracts, and air traffic control staff would see hardships long before ICE operations were impacted. 

Political Calculations

President Trump is clearly not backing down from his ICE enforcement policy in Minnesota. Just today, he sent Border Czar Tom Homan to Minnesota to oversee ICE operations. The question is whether the President would bless the decoupling of DHS from other spending bills in order to avoid a much more detrimental shutdown. On one hand, the White House certainly does not want another economically damaging shutdown. On the other, President Trump and his team would feel much more comfortable having a national debate over immigration than health care, even with the backlash following the killing of Mr. Pretti. Look for indications of whether the White House will take a hard stance against separating ICE during daily press briefings or gaggles. If the President demands that DHS funding is included in this week’s appropriations, the likelihood of a shutdown increases. 

Senate Majority Leader Thune (R-SD) and House Speaker Mike Johnson (R-LA) likely lament the deteriorating legislative situation more than any other lawmakers. The leaders were on the precipice of a major victory by passing all 12 appropriations following a pointless political shutdown last fall. It is our firm belief that Senator Thune especially does not want a repeat shutdown exercise. Most Republican Senators are not excited to defend ICE enforcement tactics, but have shown strong support for funding ICE and DHS. These lawmakers will look to the President for guidance. But if they are given the green light, they would much prefer to make a deal or drop the DHS portion of the bill and fund the government while excoriating Democrats for putting politics over security. 

Senate Minority Leader Chuck Schumer (D-NY) is once again being controlled by his left flank. The difference in this circumstance is that the public opposition to ICE enforcement is broad. Every Democrat supports putting more restrictions on ICE and raising awareness about the shooting in Minnesota. Senator Schumer cannot, at this point, support the original spending vehicle without immediate backlash from Democrats and the media alike. He may be working behind the scenes to define a reform or compromise that could appease his caucus, but reports suggest there are few specifics about what the Democrats want. There must also be some concern among Democrats about whether shutting down the Department of Health and Human Services (HHS) and the Pentagon to fight ICE is a long-term winning strategy in the midterms. If Republicans, led by the President, call Schumer's bluff and refuse to remove DHS funding or make reforms, we could be in for another shutdown where winners and losers would be decided by public opinion.