The General Assembly’s special committees that are working to understand and address potential impacts of federal funding reductions on the state budget continued their work this month, with the House Emergency Committee on the Impacts of Federal Workforce and Funding Reductions meeting on May 12 in Wytheville and the Senate Finance and Appropriations Committee’s Special Subcommittee on Federal Impacts to Resources convening on May 20 in Alexandria.
House Emergency Committee on the Impacts of Federal Workforce and Funding Reductions
The House Emergency Committee’s May 12 meeting focused on health care and the needs of rural areas, featuring presentations on potential changes to Medicaid, challenges facing rural hospitals, the state’s economic development efforts, and the importance of tourism and agriculture and forestry to Virginia’s economy.
Department of Medical Assistance Director Cheryl Roberts and her staff provided an overview of Virginia’s Medicaid program and the potential impacts of proposals under consideration in federal budget reconciliation discussions. A version of the reconciliation bill had been released the night before the Emergency Committee meeting, and revisions have continued in the intervening days, with additional changes possible as the bill moves to Senate consideration (a summary provided to the Committee by KFF’s Deputy Director Jennifer Tolbert of proposed changes to Medicaid being discussed at the federal level may be found at this link) .
Enacted in 2018, Virginia’s Medicaid expansion coverage (which covers individuals with incomes up to 138 percent of the federal poverty level) includes language in the state budget that would trigger disenrollment of individuals covered by the expansion in the event the federal government reduces its enhanced match for this population. Virginia funds the state share of expansion costs through a tax on private hospitals. These provider assessments and other similar mechanisms have recently come under scrutiny, and any proposals to set caps on these funding methods below Virginia’s current 6 percent rate would affect Virginia’s funding structure for expansion coverage, which also uses revenue generated by a separate provider assessment to make supplemental rate payments to private acute care hospitals. Work requirements for Medicaid recipients are also under consideration, as well as more frequent redeterminations of eligibility.
Carilion Clinic Executive Vice President and Chief Financial Officer Don Halliwill outlined investments in access to care that have been funded by hospitals, and shared concerns that reductions to Medicaid will create service disruptions, require higher costs to be passed along to commercial insurance, and reduce access to care, a particular concern in rural areas, which tend to have higher rates of chronic illness.
Jason El Koubi, President and CEO of the Virginia Economic Development Partnership, discussed the importance of job creation and diversification in responding to federal actions, to include VEDP’s aspirations to position Virginia as a top state for talent – a goal that requires retaining and attracting workers, developing talent and aligning workforce skills with employer needs, and reducing barriers to employment, such as child care and transportation. He highlighted key challenges, including major changes in the commercial real estate market, technological disruption associated with artificial intelligence, and increased volatility in trade relations, and cited several areas for state action, to include continuing efforts to enhance site and infrastructure readiness, as well as reviewing the overall competitiveness of Virginia’s tax structure, and enhancing “regulatory agility” in permitting, land use, and workforce credentialing.
The Committee also received updates on the importance of tourism to the state economy and programs at the Virginia Tourism Corporation that assist with financing certain tourism-related community assets and market Virginia as a tourism destination, as well as community development programs administered by the Department of Housing and Community Development. Committee members also received briefings on the contributions of agriculture and forestry to the state economy and the federal programs that support these industries; the potential effects of tariffs on Virginia agriculture, and challenges facing programs that address food insecurity in southwest Virginia (presentations available at this link and this link).
The House Emergency Committee’s next meeting is scheduled for June 20 at Norfolk State University.
Senate Finance and Appropriations Special Subcommittee on Federal Impacts to Resources
The Senate Special Subcommittee’s May 20 meeting featured an economic update, a report from the National Conference of State Legislatures (NCSL) on the status of federal budget reconciliation, and a presentation from Senate Finance and Appropriations Committee staff on potential impacts of federal actions on Virginia.
Professor Robert M. McNab painted a concerning portrait in his presentation on economic conditions at the national and state level, noting that although economic indicators have been positive in recent months, these measures lag policy decisions by three to six months. He pointed to several worrisome data points that are more current, including significant declines in consumer sentiment since January, paired with a spike in consumers’ inflation expectations in 2025. Tariff impacts may include layoffs and supply chain disruptions, and businesses are reporting that the uncertainty surrounding trade policy is increasing costs and causing investments to be deferred. As has been discussed in other presentations, Virginia is particularly vulnerable to federal workforce actions, given the state’s large share of federal civilian employees and their concentration in areas that generate most of the state’s gross domestic product.
NCSL Federal Affairs Advisor Austin Reid explained the process of federal budget reconciliation, underscoring the fluid and changing status of the bill under consideration this week in the House of Representatives. He also reported on recent federal actions related to education, including action in March to cancel previously-granted approvals of extensions to spend remaining pandemic education relief funds. Virginia had $49 million remaining to be expended as of March 2025. After litigation, the Department has reversed course; however, approvals have been slow and have apparently been narrow in scope.
To conclude the meeting, Senior Legislative Fiscal Analyst Mike Tweedy outlined potential impacts of federal actions on Virginia, pointing out that federal funding represents 25 percent of Virginia’s budget, with the lion’s share of these dollars concentrated in health and human resources. Mr. Tweedy highlighted proposed changes to the structure of the Supplemental Nutrition Assistance Program (SNAP) and their potential effects on the state budget; these proposals would require the state to assume a higher level of administrative costs as well as sharing a portion of benefit costs, which have historically been funded entirely by the federal government. The 2025 Appropriation Act includes several provisions intended to guard against major federal policy changes, including a pause on automatic conformity to certain changes to federal income tax policy, and language setting aside any FY 2025 surplus revenues (after $20 million for the Virginia Military Survivors and Dependents Education Program, and required Revenue Reserve Fund and Water Quality Improvement Fund deposits) for use in responding to federal actions in a 2025 special session or the 2026 regular session. The Governor’s May 2 vetoes, paired with previous unappropriated balances, also establish an unappropriated balance of approximately $884 million as a cushion against near-term economic dislocation.
VACo Contact: Katie Boyle