The Virginia localities most dependent on federal funding are generally in Southwest Virginia

Tens of millions of dollars flow from the federal government into the Southwest and Southside regions of Virginia every year. 

That includes $13 million to Lee County, $3.4 million to the city of Norton, $10.9 million to Buchanan County, and $10.8 million to Scott County in fiscal year 2020, to name a few. Money from federal COVID relief initiatives ballooned the amount of federal dollars received by localities in the years following 2020. 

Federal money can go toward programs like Medicaid, support for public education, food assistance, access to child care, highway improvements, emergency preparedness, clean drinking water and other social services. 

In Smyth County, millions of dollars in federal funds support programs in K-12 schools. In Tazewell County, federal money has helped pay for sewer system upkeep. Wise County received money to support law enforcement, and money from the U.S. Department of Housing and Urban Development. 

It isn’t clear yet how federal funding and workforce cuts would affect funding for programs like these, as those cuts continue to play out on the national stage. President Donald Trump and his administration launched a sweeping effort that began on inauguration day to cut the federal workforce along with spending in a number of different agencies. 

One thing is certain, however: Congress will need to pass a spending bill by Friday to avoid a federal shutdown. 

The U.S. House of Representatives took its first step in that process in late February when the Republican-controlled body adopted a framework for the spending bill in a narrow vote. That framework instructed the House Energy and Labor Committee to find $880 billion in federal spending cuts. 

So how could this affect Virginia? 

Federal grants are factored into Virginia’s yearly spending through its non-general fund budget. The non-general fund budget is a portion of the state’s spending that is dedicated to specific programs, initiatives or services, like health care, transportation infrastructure, or schools. Local governments and schools also receive grants from the federal government through programs administered by state agencies, like the Virginia Department of Housing and Community Development and the state Department of Education.

More than a quarter of Virginia’s total expected revenue for fiscal year 2026 in Gov. Glenn Youngkin’s proposed budget amendments package comes from federal grants. That breaks down to 27.7% of expected revenue or $25.5 billion, according to analysis by the Commonwealth Institute. The Commonwealth Institute is a Richmond-based nonprofit organization that focuses on advancing racial and economic justice. 

That $25.5 billion number includes $16.7 billion for Medicaid, $1.5 billion for K-12 education assistance programs, $1.3 billion for higher education, $1.1 billion for highway construction programs, $131.5 million for child care, $463 million for social services $95.2 million for drinking water improvements, $59.5 million for emergency preparedness and $4.4 million for veterans benefit services. 

The federal government currently pays 90% of the cost of Medicaid expansion in Virginia. Funding cuts could trigger a state law that would reverse Virginia’s 2019 expansion of the insurance program if federal funding drops by even 1%, leaving hundreds of thousands of Virginians without health insurance. 

The General Assembly adjourned at the end of February with a provision to reconvene and attempt to tackle the issue, should federal funding to social programs like Medicaid see significant cuts. 

Federal funds to localities: From manhole covers to education programs

Smyth County Administrator Shawn Utt said a large portion of the federal money his locality received in fiscal year 2020 went toward K-12 education programs. Smyth County received about $10.3 million from the federal government that year, according to data from the Virginia Auditor of Public Accounts. 

About $5.7 million of that went toward schools, he said, and included a 21st Century Learning Centers Grant, funding for food services, a fresh fruit and vegetable grant, pre-K special education funds, and six different Title programs, among other initiatives. The total budget for Smyth County Schools in fiscal year 2023 was around $63 million. 

Eric Young, Tazewell County’s administrator, said that schools in his county also received a large amount of federal money, along with the sheriff's office and the commonwealth’s attorney office. Tazewell County received about $12.5 million in federal funds in 2020. 

“If you’re talking about FY 20, that’s probably broken up into a hundred different little grants,” he said. “Our public service authority gets EPA [Environmental Protection Agency] money to maintain their sewer. There’s all kinds of different avenues that money comes in.”

Many of the awards are one-time grants. For example, Young said Tazewell had applied for a grant through the federal Department of Labor in 2020 to build a welding training center to support career and technical training at the local high school. 

“There’s a block grant for water quality, and it goes from the federal government to the commonwealth, and then we apply to the commonwealth and they give us a grant to replace our manhole covers and sewer lines, stuff like that,” Young said. “We probably get a pretty healthy dose of federal money every year.”

COVID relief increased federal money to localities

Federal funding made up 20% or more of the total revenue for at least 10 localities in Southwest and Southside Virginia during fiscal year 2023, though that data represents a snapshot in time when local governments received an influx of money attributable to COVID pandemic relief efforts. 

That data came to light during the first meeting of an emergency committee tasked with exploring the effect of federal funding and workforce cuts on Virginia. The bipartisan committee, called the Emergency Committee on the Impacts of Federal Workforce and Funding Reductions, met for the first time at the end of February. 

Those localities are Marion, which received 36.9% of its total revenue from the federal government; Bluefield, which received 34.5%; the town of Bedford, 28.4%; Wise, 23.2%; the town of Tazewell, 23.1%; the town of Pulaski, 22.4%; Wise County which received 21.5%; Bristol, 21.4%; Martinsville, 20.4%; and Galax, 20.2% according to a report by the state Auditor of Public Accounts.

Aaron Rawls, former vice mayor of Martinsville, noted that the amount of federal money his city received during fiscal year 2023 was unusually high, and he attributed that increase to COVID relief. 

According to Martinsville’s fiscal year 2023 audit, the city received about $6.6 million in federal money. About $5.7 million of that was COVID relief, he said. That left the city with about $900,000 in federal funds not tied to COVID — significantly lower than the 20.4% presented during the special committee meeting.

“A lot of it covers our social services department,” said Michael Hatfield, Wise County’s administrator, on what federal money goes towards in his locality. “We do get some federal grants and we do have federal funding for our schools and social services.” 

Other federal money to Wise County comes from the U.S. Department of Housing and Urban Development, through grants to support different law enforcement programs, and payment in lieu of taxes, Hatfield said. 

“Until we know what those cuts are, we really don’t have much in the way of concerns,” Hatfield said, when asked if potential federal funding decreases explored by the Trump administration could affect Wise County’s budget. 

Correction 11:10 a.m. March 17: A previous version of this story included the incorrect title for Aaron Rawls. Rawls is the former vice mayor of Martinsville.