Almost everyone understands that budget fluctuations have an impact on software development, but it is difficult to estimate the magnitude of the impact and all the causes. This paper examines government sponsored software development with a focus on how funding gaps affect productivity and product delivery delay. A system dynamics model is developed and the results generated from that model are presented. The results provide decision makers with further considerations for the negative impacts of budget fluctuations. Two key insights include the “ramp up tax” that slows development and the “gap tax” due to the loss of project-related skill and familiarity when employees are not working on those projects. This discussion also analyzes many elements within the process that can produce a change in budgets from year to year and notes the different impacts of temporarily stopping a project versus reducing the funding level on the project.