The House Emergency Committee on the Impacts of Federal Workforce and Funding Reductions met on August 14, following the Governor’s presentation to the “money committee” on FY 2025 revenues and the outlook for the next biennium. Committee members received briefings on the recently-enacted reconciliation bill’s changes to Medicaid, the expected effects of the expiration of extended health insurance premium tax credits on Virginia’s insurance market, and the effects of recent federal actions in higher education. As a step toward preparing the Committee’s report, which is due in December, House Appropriations Committee staff summarized the Committee’s activities thus far, and provided an overview of what is known about key provisions of the reconciliation bill and their anticipated effects on Virginia. Staff also provided some suggested policy recommendations for Committee consideration, as well as areas for continued monitoring and analysis.
Staff stressed that the extensive policy changes contained in the reconciliation legislation (HR 1) are still under evaluation by state agencies, and that federal agency rulemaking will be essential in understanding the full impact of the bill as its provisions are implemented. Some additional costs to the state are known, such as the increased state share of administrative costs for the SNAP program, while other provisions that may place pressure on the state budget, such as the reduction in the state’s ability to use provider taxes to provide enhanced payments for hospitals in the Medicaid program, are still being evaluated. The effect of certain tax policy changes in HR 1 will depend on decisions at the state level, as the General Assembly will need to weigh whether to mirror these provisions in Virginia’s income tax laws.
Staff also underscored uncertainty about the state’s overall economic outlook, including the impacts of federal workforce restructuring and layoffs (some of which have been subject to litigation); the potential effects of tariffs; and the effects of various federal grant rescissions or eliminations. State and local capacity to backfill declining federal revenues will be limited, and could be stretched further if economic conditions deteriorate.
Staff offered several potential recommendations for Committee consideration, including:
- Directing the Department of Planning and Budget to compile and share information on rescissions or cancellations of federal grants that support state agencies or local governments, as well as grants supporting nonprofits.
- Continuing to work with state agencies and subject matter experts to determine the effects of policy changes embedded in HR 1; monitoring the federal appropriations process for federal Fiscal Year 2026; and monitoring economic conditions in the state.
- Providing additional assistance for the Virginia Eviction Reduction Program and establishing a rental or mortgage assistance program for displaced federal workers.
- Enhancing unemployment insurance benefits.
- Investing in workforce retraining programs and taking steps to retain displaced workers in Virginia.
- Providing incentives for redevelopment of underutilized office space.
- Enhancing incentives for new business investment and continuing to cultivate new industries, such as pharmaceutical manufacturing
The Committee’s next meeting will be held jointly with the House Appropriations Committee and is scheduled for September 11.
VACo Contact: Katie Boyle