for the FAFSA, the EFC is half if there are 2 in school, 1/3 if there are 3, etc., assuming the assets of the students are roughly equal. For my kids the EFCs were a few hundred $$ difference because one had a small amount in a savings account and the other didn’t.
As stated above, that doesn’t mean you’ll see a lot of difference in FA. If Child 1 had an EFC (FAFSA) of $10k, then the new EFC for each child would be ~$5k and that would get a small Pell grant for each child and probably SEOG, work study, and subsidized loans. If the original EFC was $100k, it would now be $50k and unlikely to see a lot of need based aid off just the FAFSA. That’s up to the school and the school could have another form for FA and ask for more information (ex., NPC income or assets) or it could require CSS
The FAFSA does not ask what the sibling is paying for college, only if the sibling is in a qualifying college. My kids both went to FAFSA only schools and neither asked what the sibling was actually paying for her school, only that the sibling was also in school (as indicated on the FAFSA). One child did have a scholarship which meant she paid $0, yet her sister got full credit (1/2 EFC) because both were in college.
To answer OP’s question, there is not shifting of the sibling’s ‘unused’ EFC to the student for federal aid. If the EFC is below ~$6k, each sibling will get a Pell grant and most likely other federal aid.
CSS is different. It is reported that the schools do expect the siblings to pay 60% (or more) if there is a sibling in school, but that’s the CSS EFC, not the FAFSA EFC.