Emergency Committee on the Impacts of the Federal Workforce and Funding Reductions
February 23, 2025
I believe we have talked about the Speaker’s initiative to create an Emergency Committee on the Im[acts of the Federal Workforce and Funding Reductions – and not only are we grateful for his initiative and foresight, but we were very pleased yesterday with the attitude and obvious interest/concern of the committee members during their first meeting. Currently the issue front of mind is the chaotic reductions in the federal workforce given the significant number of federal workers who live or work (either in a government job, or for an employer who contracts with the federal government) in the Commonwealth. Two of the presentations are included here:
For this meeting there was a clear focus on the Federal workforce:
- the ripple effect of the economic impact of one lost job (other jobs/industries which can and will be impacted in the retail market, etc.)
- the impact on the housing market – and therefore, on the tax revenue from property tax
- cost of unemployment insurance – in this case likely a high cost because the government does not pay into the unemployment trust fund the way the private sector does, but “reimburses” the Commonwealth for claims paid. We don’t see that going well!
- loss of income tax revenue as individuals take either lower paying jobs or are force to move out of Virginia, etc
The presentation for House Appropriations staff did delve into the funding from the Federal Government, but did not go into the weeds far enough to identify the potential impact of, for example, the loss of Medicaid on not only the individuals we support, but also on the providers and the staff who make those services work! The General Assembly did take some prudent steps this Session to mitigate the immediate impact of some potential Federal policy changes – especially as it relates to our conformity to the Federal Tax Code.
Joe Flores, Director of Fiscal Policy for the Virginia Municipal League and someone who understands our issues very well, presented on the potential impact on local Government. This is an important component of the service delivery system for a number of reasons as we tend to think of the local government (and their Community Services Board component) as being the first level of the safety net. Adding together Federal pass-through and direct Federal funding, 10% of local revenue is Federal dollars.
The next thing to watch is the preliminary vote on the budget in the House of Representatives scheduled for Tuesday. The current figures suggest a cut of $880 billion to Medicaid – this represents approximately 11% of the total Federal Medicaid spending over the proposed time period. I do not have any inkling of how that translates to the impact on Virginia. I’m sure we will hear soon enough.