September 30, 2025
Virginia’s Federal Jobs Landscape Amid a Potential Federal Shutdown
In response to the pending federal shutdown at midnight on September 30, 2025, this adaptation of a March 2025 TCI brief provides information on the role of the federal government in Virginia’s economy.
From seniors receiving assistance to pay for nursing home facilities to parents hoping their child’s food is safe, federal funding impacts everyone in Virginia. Federal initiatives and grants help protect and stabilize our communities, play a critical role in funding the building blocks of our communities, and support the conditions under which innovation and community can propel us into a better future. Virginia is home to many of the people who do that work, whether directly as federal employees or as staff at private-sector federal contractors or grantees.
All of this is thrown into question when federal funding and programs are eliminated without regard to the consequences, whether due to arbitrary orders by executive branch representatives, as poorly considered cost-cutting measures to pay for tax cuts for the wealthy, or because of a government shutdown if Congress does not pass an appropriations act or continuing resolution by September 30.
The most immediate concern for Virginia’s economy is the threat of a government shutdown. Long-term, the federal funding cuts being implemented or considered for federal jobs and spending would mean serious harm to Virginia families and the state budget.
Below, we explain how these threats differ and how they could impact Virginia. Ultimately, the President and Congress should work towards an agreement that will end harmful cuts to Virginia communities and instead make sure that critical resources continue to flow through our communities to support our families and our economies. Closer to home, state legislators are studying the harm from various federal policy decisions on Virginia communities, and should consider steps to protect and boost Virginia families and our economy during the 2026 legislative session.
Importance of Federal Spending for Virginia’s Jobs and Economy
What does all this mean in Virginia? Because Virginia’s economy is deeply intertwined with federal civilian and military spending, Virginia families and communities are at particular risk from federal cuts, whether from a shutdown or arbitrary administrative actions. In turn, this threatens state tax revenue, leaving fewer resources available to maintain the fundamentals of economic success and help Virginia families and communities through hard times.
- Federal spending in the state far exceeds the amount Virginians pay to the federal government in income taxes. Virginia ranks first in net benefits it receives from the federal government, according to a report of 2023 balances of payments by the Rockefeller Institute for Government.
- Federal civilian and military spending accounted for 8.8% of Virginia GDP in 2024, compared to 3.6% in the country as a whole. Virginia ranked fourth of any state in the share of our economy that’s directly due to federal spending.
- Together, the state of Virginia and companies and individuals in Virginia were awarded $189 billion in federal funds in federal fiscal year 2024, which amounts to $22,314 per capita.
- Virginia was the number two state (after Texas) for Department of Defense spending in federal fiscal year 2023, according to internal Department of Defense (DoD) records. Defense spending injected $68.5 billion into Virginia’s economy that year. (DoD will likely release data for FFY 2024 in mid-October 2025.)
- About 350,000 Virginia residents work in civilian federal jobs as of 2024, the 3rd highest of any state. That’s 1 in every 13 civilian workers, the 2nd highest ratio of any state.
- Virginia has 122,254 active-duty military stationed here as of June 2025, the 2nd highest of any state, and 25,569 members of the National Guard and reserves.
- Many of these jobs pay well: Direct federal employment (civilian plus military) accounts for 12.1% of Virginians’ compensation, compared to just 4.5% in the U.S. as a whole, according to 2024 data from the Bureau of Economic Analysis.
What are some specific things federal funding does?
Virginians aren’t only the backbone of the federal civilian and defense workforce, helping to research the next generation of technology and protect our communities. We’re also students, parents, and private-sector workers who benefit from the federal government’s investments in education, health care, and technological progress. What does this mean?
- Education investments by the federal government are equivalent to the salaries of about 8,950 K-12 teachers across the commonwealth and are particularly important for students with disabilities, students in rural areas, and low-income communities.
- Health care investments by the federal government help pay for health coverage and services for nearly 2 million Virginians who access health care through Medicaid/FAMIS. Recent analysis estimates roughly 323,000 people in Virginia will lose Medicaid or ACA marketplace coverage due to provisions in H.R. 1 and the failure to extend the enhanced premium tax credits unless this support is restored by Congress or Virginia policymakers find ways to backfill for federal failures.
- Federal spending touches other parts of life in Virginia and impacts family health, safety, and well-being. Federal spending in Virginia provides essential nutrition services through SNAP, WIC, and school breakfast and lunch programs, provides funds to help keep our air and water clean, helps invest in highway safety and improvement, and does much, much more.
How Would a Federal Shutdown Impact Virginia?
With the September 30 deadline looming, that risk is top of mind for many people. What happens in a shutdown? Some civilian federal workers and military members would be expected to continue working without pay, while others would be furloughed without pay. A few – mostly in the Department of Defense, Department of Homeland Security, and Federal Aviation Authority – would continue to be paid due to special treatment in the reconciliation bill passed over the summer (H.R. 1). Contractors will generally go without pay and, unlike direct federal employees, would be unlikely to receive back pay when a funding bill eventually passes. The last federal shutdown lasted 35 days in late 2018 and early 2019. That shutdown, which was also only partial, cost the U.S. economy $3 billion.
- Unlike direct federal employees, federal contractors will not receive back pay after a shutdown ends unless their employer provides it despite not getting reimbursed by the federal government. In 2019, the Northern Virginia Chamber of Commerce estimated that the region is home to 375,000 federal contractors. While some federal contractors are well paid and may have robust emergency savings, many others, such as custodial staff, may experience significant hardship and need assistance from public and private sources.
- The partial shutdown in 2019 cost the Washington, D.C., region $1.6 billion in the short term, although some of that economic activity likely rebounded when direct federal employees received back pay.
- Additional data by county and metropolitan data is available upon request.
What won’t happen in a shutdown?
Despite the many challenges a shutdown would pose to Virginia families and communities, some federal services would continue. Social security checks would continue to be sent, and mail would continue to be delivered. Air traffic controllers and TSA employees would continue to work. The Supplemental Nutrition Assistance Program (SNAP) should continue to provide benefits at least through the end of October. Benefits could be impacted by a longer shutdown, and program administration could be impacted as well.
Beyond a Shutdown: What Federal Funding Cuts Would Mean for Virginia
While a federal shutdown could do short-term harm to Virginia’s families and economy, long-term cuts to federal jobs and spending would mean serious long-term damage to families and the economy in Virginia. What we experienced during the deep federal cuts in the aftermath of the Great Recession, including across-the-board sequestration cuts, is a period most Virginians would rather not repeat.
- As of early 2010, near the worst point of the Great Recession, the U.S. had lost 6% of all pre-recession jobs, but Virginia had lost just 4%. And for a time, Virginia was recovering from the recession at a similar pace to the U.S. as a whole.
- This changed in early 2013, when the federal government moved into a period of austerity, causing Virginia’s job creation to slow while the U.S. as a whole continued adding jobs. State income tax payments by federal contractors dropped, causing shortfalls in Virginia’s tax revenue.
Categories:
Budget & Revenue, Economic Opportunity
