When headlines warn of a federal government shutdown, panic can ripple through the nonprofit sector. According to a 2024 study from Candid, over 30% of U.S. nonprofits receive government grants, and for 35,000 organizations, those grants make up more than half of their annual revenue. Organizations rely on federal grants for core operations and uncertainty about payments or deadlines can feel like an existential threat.
This guide breaks down what really happens to federal grants during a government shutdown, what emergency options are available, and how AI grant writing platforms can help you stay agile, efficient, and “grant ready.”
How does a government shutdown happen?
A government shutdown occurs when Congress fails to pass the required funding legislation or continuing resolution before the new fiscal year begins (typically October 1). Without appropriations in place, federal agencies must cease all “non-essential” operations and either furlough or place employees on unpaid status under the Antideficiency Act. The current 2025 shutdown began on October 1 after the House and Senate could not agree on a full-year appropriations bill, triggering wide-scale furloughs in dozens of agencies. This marks the 15th lapse in federal appropriations since 1980.
What’s changed since the 1980s are the frequency and duration of shutdowns: modern shutdowns have grown longer and more disruptive, such as the 35-day lapse in 2018–2019, which the Congressional Budget Office estimated caused $3 billion in permanent economic losses.
As shutdowns become increasingly common in the U.S., this means the landscape is shifting for grant writers: while some grant applications may still post, agency review, payment processing, and discretionary funding become less predictable. As a result, teams must build flexibility, monitor funder portals continuously, and brace for delays or gaps in federal support.
The systems stay on — but nobody’s home
During a shutdown, portals like Grants.gov and Research.gov typically remain online and technically functional. But without agency staff to review, approve, or communicate, the systems become “ghost towns.”
Program officers and reviewers are furloughed, meaning:
- Proposal reviews and award decisions are delayed.
- Questions and clarifications go unanswered.
- Reporting deadlines may remain open — but no one is there to confirm receipt or compliance.
However, during October 2025, federal agencies like the Federal Railroad Administration, Department of Energy, Health Resources and Services Administration, and Center for Disease Control posted dozens of new grant opportunities on the federal portal, grants.gov.
During shutdowns, some grants continue to appear on Grants.gov because they are pre-scheduled, funded by prior appropriations, or part of “excepted” essential programs. Grants may also be listed “Forecasted”, meaning the agency plans to release the grant soon but hasn’t officially opened it for applications yet. Agencies release the opportunity to give organizations an early heads-up to prepare.
While new awards usually can’t be finalized until appropriations resume, the federal grant infrastructure remains online, meaning nonprofits must stay alert for openings even when the government isn’t fully operational.
Pro tip: You can easily set up grant alerts on Grants.gov by saving your searches and turning on email notifications in your account. This way, you’ll automatically get updates when new or forecasted opportunities match your criteria.
The work continues, even if the payments don’t
If your organization has an active federal award, the typical guidance is: keep working unless you receive a formal stop-work notice. But here’s the catch: payments are paused during the funding lapse.
This gap between service delivery and reimbursement puts nonprofits under immense pressure. The Urban Institute found that during early 2025:
- 27% of nonprofits experienced funding delays or freezes
- 21% lost some portion of their government funding
- For some organizations, government grants account for over 40% of total revenue
That’s why it’s critical to have a shutdown contingency plan that includes:
- Drawing on endowments or cash reserves
- Accessing short-term lines of credit
- Seeking bridge funding or emergency grants
- Reducing discretionary costs and prioritizing essential programs
Under the Antideficiency Act, agencies can’t obligate new funds during a lapse in appropriations. However, there are limited exceptions for activities that “imminently threaten the safety of human life or the protection of property.”
In practice, most new grant awards are paused, but funding continues for a small number of legally “excepted” activities that protect life and safety. For example, during the 2018–2019 government shutdown, critical programs like veteran housing, disease prevention, and food assistance continued operating under “excepted” funding.
If your organization believes its federally funded work qualifies as “excepted” under the Antideficiency Act, the first step is to confirm your status with the awarding agency. Reach out to your grants management or program officer, if they are reachable during the shutdown, to verify whether your activities are authorized to continue. If agency staff are furloughed, retain evidence of past communications or official guidance supporting your decision. However, remember you can continue grant-funded work only to the extent necessary to protect life or property. Delay or scale down nonessential activities until normal funding resumes.
Many agencies publicly post contingency plans that outline which programs are exempt from suspension. For example, the HHS Contingency Staffing Plan (2025) details which public health operations may proceed, while the HUD Contingency Plan for Operations During a Lapse in Appropriations explains how critical housing and community development programs remain active to protect life and property.
Competition rises for private funding
According to the National Council of Nonprofits, nearly one-third of U.S. nonprofits reported disruptions in government funding even before the most recent shutdown began. When federal dollars pause, nonprofits shift toward private philanthropy and foundation grants, all competing for a smaller pool of funds.
This surge has created a “double blow” for small and mid-sized organizations. As noted in The Chronicle of Philanthropy, competition for emergency and bridge funding has “dramatically increased pressure on smaller organizations already operating at the margins.” Further research indicates that foundations often concentrate resources among larger, better-resourced nonprofits as a risk-management strategy (see, for example, the Center for Effective Philanthropy’s State of Nonprofits 2024, which highlights how higher foundation revenue frequently correlates with larger organizations).
In this environment, AI tools like Grant Assistant help level the playing field for smaller teams by making grant writing more approachable. They support folks who have great ideas but may lack the bandwidth or proposal-writing expertise, enabling high-quality proposal drafting and compliance guidance without needing a full grant writing department.
By automating the hardest parts of grant research and proposal preparation, AI empowers smaller organizations to compete on stronger footing in a tougher funding environment.
Emergency funds and rapid-response options
The good news is philanthropy tends to step up when government funding stops. During the last shutdown, multiple national and regional funders launched rapid-response or emergency grant programs to keep nonprofits afloat.
For a comprehensive list of emergency and rapid response funds that fit your mission and location, we recommend reviewing this article from Chronicle of Philanthropy.
Building resilience in a new funding reality
Shutdowns are no longer rare; they’re part of a new normal marked by volatility and unpredictability. Nonprofits are adapting by:
- Exploring collaborations or mergers to share resources.
- Diversifying revenue models beyond government dependence.
- Leveraging technology to streamline funding operations.
AI isn’t a replacement for expertise — it’s an amplifier. With AI-driven grant writing, nonprofits can:
- Automate repetitive research tasks.
- Generate compliant drafts in minutes.
- Model grant success probabilities.
- Predict upcoming funding cycles using machine learning.
Tools like Grant Assistant enable teams to shift from reactive to strategic — preparing not just for shutdowns, but for the broader changes transforming the funding landscape.
A government shutdown doesn’t have to mean a shutdown of your mission. The organizations that thrive through uncertainty are those that plan ahead, combining strong financial management with AI-powered tools that enhance their capacity and insight. Tools like Grant Assistant enable teams to shift from reactive to strategic — preparing not just for shutdowns, but for the broader changes transforming the funding landscape.
Learn more about Grant Assistant or request a demo of the platform. Or, keep exploring with additional resources about how to use AI to boost your productivity and impact:
- Can you use AI for grant writing? What you need to know
- Five steps to diversify your nonprofit's funding in uncertain times
- Emergency Funding Takes on New Urgency Amid Government Shutdown
- How Government Funding Disruptions Affected Nonprofits Early 2025
- Meeting This Moment: Helping Nonprofits Navigate Federal Funding Loss
