This story was reported and written by VPM News.
Spending reductions, mass layoffs and other federal changes from President Donald Trump's administration have already cut into Virginia's economy — but the true impact on the state's finances and programs like Medicaid remains unknown.
With so much still up in the air, staff with the Virginia House of Delegates' Appropriations Committee on Thursday urged a legislative panel tasked with reviewing the federal government's changes to be cautious on the spending priorities in the next biennial budget.
"The only thing I'm certain of is that uncertainty remains," Kim McKay, a House Appropriations staffer, told the Emergency Committee on the Impacts of Federal Workforce and Funding Reductions.
The emergency committee — a bipartisan group of 12 delegates formed by House Speaker Don Scott (D–Portsmouth) — heard presentations on both the immediate impacts of actions like federal layoffs and grant cancellations, as well as upcoming changes to the Supplemental Nutrition Assistance Program and Medicaid.
It met after Republican Gov. Glenn Youngkin and his administration touted the state's finances as strong to the General Assembly's money committees, highlighting a $1.7 billion "cash cushion" for the state's fiscal year 2026. (Virginia's fiscal year runs July 1–June 30; the federal fiscal year is from Oct. 1–Sept. 30.)
Youngkin added: "We are in a stronger position today because we have more money and less uncertainty than we did six months ago."
"I think the big difference that we need to be cognizant of is not mistaking that we do have some unappropriated balances and we do have a little bit of a temporary cushion for small bumps in the road," Committee Chair David Bulova, a Fairfax Democrat who also sits on the House Appropriations Committee, told VPM News.
"But the simple fact is these are systemic changes that will impact the commonwealth for years and years and years."
Virginia's economy and workforce
Nearly one-quarter (24%) of Virginia's economy relies on federal spending, staffers told the panel Thursday.
Virginia is the top state for total federal contract spending per capita — about $1 in every $7 of federal contract money is spent in the commonwealth — making it particularly vulnerable to private-sector layoffs due to federal spending reductions.
In 2023, the federal government spent $109 billion with Virginia employers primarily through US Department of Defense and Department of Veterans Affairs contracts. As of July 26, 2025, 2,114 Virginians from the top 100 companies doing business with the federal government have filed for unemployment, according to the presentation.
Virginia's unemployment rate is 3.5% and has steadily risen since the start of 2025 — even though it remains lower than the national average of 4.2%. Employment growth is also slowing, with the commonwealth losing 8,400 jobs between May and June, staff presented to the committee.
The University of Virginia's Weldon Cooper Center predicts that as job losses accumulate, the commonwealth's unemployment rate will hit 4.2% by the end of the year and rise to 4.6% in 2026. That would be the highest rate since 2021.
"Despite the labor market strain, Virginia's GDP will remain in positive territory, but growth will slow, and the outlook for 2026 is now increasingly unfavorable," the Weldon Cooper Center wrote in a quarterly report released Thursday.
Medicaid and SNAP costs
A major focus of Trump's domestic policy has been provisions changing Medicaid, the government-backed health care coverage for eligible low-income adults, families, children, pregnant people and people with disabilities.
The federal law sheds more than $1 trillion in federal Medicaid spending over the next decade. And in that same span of time, the nonpartisan Congressional Budget Office estimates 10 million people will lose their Medicaid coverage.
Almost 1.9 million Virginians are covered by Medicaid, including more than 570,000 who are part of the state expansion population.
In 2027, the new federal law will require "able-bodied" Medicaid expansion recipients to engage in 80 hours a month of work, community service, education or a combination thereof.
The cost of this change and how many people might be affected is unknown as Virginia's Department of Medical Assistance Services awaits guidance from the federal government on implementation, DMAS Director Cheryl Roberts told the panel Thursday.
Earlier, Youngkin told the Legislature's money committees that "not a single Virginian is losing access to Medicaid or getting kicked off the program."
Youngkin added that the program was designed for certain people, not "for permanent health care for able-bodied people who are capable of working, going to school or volunteering in their communities."
An Urban Institute study from June found 69% of Medicaid expansion enrollees do work or go to school, with only 2% reporting a lack of interest in a job as their reason for not working.
Critics of such requirements have pointed to estimates and reports finding they don't lead to an increase in employment, arguing they instead create barriers that will increase the number of uninsured people.
Del. Marcus Simon (D–Fairfax), one of the committee members, asked Roberts about Youngkin's comments and pointed to federal asylum-seekers and other people who might not qualify for Medicaid under the law.
"We don't have the guidance yet from CMS [The Centers for Medicare & Medicaid Services] on how that's all going to work out," Roberts said. "I did not hear the governor, but I'm sure the governor said those who are eligible, because again, CMS is defining the eligibility here."
The new federal law also establishes a SNAP state matching requirement based on error rates. This change, which takes effect in 2027, would annually cost the commonwealth $270 million in general fund money per year starting in the state fiscal year 2028 based on Virginia's 11.5% error rate.
Virginia will also need to pay $90 million per year starting in fiscal year 2027 because the One Big, Beautiful Bill Act increases all states' administrative costs for the food benefits program by 25%.
Apart from those figures, staff told the committee that the price tag to implement other upcoming SNAP changes such as expanded work requirements are unknown.
Prepping for an uncertain future
McKay, the Virginia House Appropriations staffer told the emergency committee on Thursday that it's "going to be a marathon and not a sprint." According to her, legislators will have multiple chances to consider budgetary or regulative changes to adapt to potential ripple effects.
But the various ways the Trump administration is cutting federal spending — through executive orders, layoffs, regulations, grant cancellations and more — makes it "difficult" to assess the impact to states and future planning, according to the presentation given to the committee.
General Assembly staffers made some early recommendations to the committee, including to direct the Virginia Department of Planning and Budget to collect and share data on federal grants that have been canceled, eliminated or rescinded.
Federal grants to Virginia agencies that have been paused equals roughly $420 million. During his earlier presentation to the money committees, Youngkin said roughly $300 million was COVID-related funding already set to expire.
Legislature staff also suggested adding provisions to ensure housing security for laid-off workers, including allowing them to end leases early, money for the state's eviction reduction program and creating a rental or mortgage assistance program.
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