Virginia Moves to Protect Economy From Federal Workforce Crisis

With the federal government slashing its workforce and attempting to freeze billions in funding, Virginia lawmakers are bracing for impact. House Speaker Don Scott, D-Portsmouth, on Tuesday evening announced the formation of an Emergency Committee on the Impacts of Federal Workforce and Funding Reductions, a bipartisan panel tasked with assessing the economic fallout and crafting solutions to protect the commonwealth.

Speaker Don Scott, D-Portsmouth, on Tuesday announced the creation of a bipartisan emergency committee to shield Virginia jobs and the economy from sweeping federal cuts. (Photo by Markus Schmidt/Virginia Mercury)

“This is not about politics — it’s about protecting Virginia’s workforce, economy, and essential services,” Scott said in a statement. “With nearly 145,000 federal civilian employees and even more federal contractors calling Virginia home, we depend on a strong partnership with the federal government to provide critical services. The federal administration’s announced plans to ‘drain’ the federal workforce and the pause in federal funding raise serious concerns for Virginia’s economy and the ability to maintain essential services.”

The move comes as President Donald Trump, in his second term, accelerates a sweeping federal workforce reduction campaign, cutting thousands of jobs through a deferred resignation program and terminating major federal office leases.

At the same time, the U.S. Office of Management and Budget has put a hold on disbursing federal funds, leaving states scrambling to plug potential budget gaps. However, a federal judge last week temporarily blocked the Trump administration from enforcing the policy, a move that created more uncertainty to an already precarious situation.

The White House has further directed federal agencies to immediately halt the distribution of funds allocated under key federal climate and energy laws enacted during the Biden administration, such as the Inflation Reduction Act and the Bipartisan Infrastructure Law. This decision is likely to put tens of billions of dollars in legally designated federal funding on hold and is expected to face legal challenges.

In Virginia, the stakes are particularly high — the commonwealth ranks as the top state in the nation for federal contract awards, totaling $106 billion in 2023.

Del. David Bulova, D-Fairfax, who will chair the committee, underscored the urgency.

“This is about ensuring that Virginia remains prepared and resilient in the face of federal policy shifts,” he said. “Our state budget must remain structurally sound, and we must take steps to protect our communities from sudden economic disruptions.”

The committee will be bipartisan, with Del. Robert Bloxom, R-Accomack, serving as vice chair. Other members include Dels. Bonita Anthony, D-Norfolk, Ellen Campbell, R-Rockbridge, Joshua Cole, D-Fredericksburg, Michael Feggans, D-Virginia Beach, Hillary Pugh Kent, R-Warsaw, Marcus Simon, D-Fairfax, Anne Ferrell Tata, R-Virginia Beach, Josh Thomas, D-Prince William, Tony Wilt, R-Winchester, and Vivian Watts, D-Fairfax.

Northern Virginia and Hampton Roads — where federal employment and defense contracts drive local economies — could be among the hardest-hit regions. The committee will gather data, consult stakeholders, and provide policy recommendations to mitigate job losses and budget shortfalls.

Economic experts have warned that the federal cutbacks could send shockwaves through Virginia’s economy, especially in industries reliant on government contracts. Defense contractors, IT firms, and research institutions with strong federal ties are expected to feel the effects most acutely.

The uncertainty surrounding federal funding disbursement has also raised concerns among local governments, which rely on federal grants for infrastructure, public safety, and education initiatives.

State officials are particularly concerned about the trickle-down effect on small businesses and service industries. Many local economies in Virginia are sustained by a combination of federal employees, government contractors, and associated industries.

A sharp reduction in federal spending could lead to job losses, reduced consumer spending, and potential declines in state revenue.

Bulova emphasized the need for comprehensive solutions.

“We cannot afford to be caught off guard,” he said. “This committee will ensure that we develop thoughtful strategies to safeguard our economy, help displaced workers, and maintain funding for essential services. This is about the future stability of Virginia.”

Scott echoed these concerns, stating that Virginia’s leadership must be proactive in addressing the potential fallout. “We have a duty to protect Virginia families and businesses from policies that could have devastating consequences. This committee is an important first step in that process.”

The panel is expected to hold its first meeting by May 1 and will issue a final report by Dec. 15. Lawmakers hope the findings will help guide the 2026 General Assembly session in preparing Virginia for a potential economic storm ahead.

by Markus Schmidt, Virginia Mercury

Virginia Mercury is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Virginia Mercury maintains editorial independence. Contact Editor Samantha Willis for questions: info@virginiamercury.com.