Barring any unexpected action by Congress on Thursday, the across-the-board federal spending cuts known as sequestration will technically be in effect starting March 1.
While many of the most direct effects won’t be felt for a month or more, reaching this deadline has many in Northern Virginia concerned about what the cuts will mean for the region’s economy.
“It’s going to be a different world around here,” said U.S. Rep. Jim Moran (D-8th).
Thousands of local residents who work for the federal government could begin experiencing furloughs, reducing their spending power, and the many local businesses that rely on federal government contracts for their bread and butter are expected to lose business.
“You’re already seeing a chilling effect in terms of the awarding of contracts,” said U.S. Rep. Gerry Connolly (D-11th), due to the uncertainty created by months of congressional inaction.
This affects other decisions that businesses make, like whether to lease office space or hire new employees.
“The ripple effect in our economy is going to be substantial,” Connolly said.
A 2012 analysis of the Budget Control Act, the legislation enacting the sequestration, found that the federal cuts would lead to a loss of more than 200,000 jobs in Virginia, including indirect job losses as a result of slower economic growth.
The very large contractors like Northrop Grumman and Lockheed Martin will still have multimillion-dollar contracts, said Anthony Anikeeff, co-chair of the government contracting section of the law firm Williams Mullen. It is the smaller companies that are getting nervous about their future, he said.
“The littler companies are scared because the big companies will pull in work,” Anikeeff said. “Competition is fierce; it’s going to be the nimble ones who will survive.”
Furloughs of government employees could also have a significant impact across the state, given the large number of federal employees who reside here.
Because of the design of the legislation enacting the sequestration, many federal departments are saying they will have no choice but to furlough employees, which could affect everything from air travel to food inspections.
Federal policies require that employees receive at least 30 days notice of a potential furlough, so the furloughs would not be implemented until April.
About 90,000 civilian Department of Defense employees would be furloughed statewide in Virginia, according to a White House report released this week, representing a pay reduction of about $648 million.
According to the White House report, the budget cuts would have wide-ranging impact across the state, cutting millions in state funding for education, environmental and social services programs.
Some Republicans have suggested that the president and federal agency heads are exaggerating the magnitude of the impacts as a political maneuver.
The report states that Virginia would lose about $28 million for K-12 education starting next school year, about half of which would come out of funding for educating children with disabilities. Enrollment in the Head Start preschool program would have to be reduced by about 1,000 students statewide.
Fairfax County would lose about $2 million in Title I funding, according to an analysis by the Department of Education released Wednesday. Title I funding is supposed to help support low-income students.
At the college level, about 2,100 students would not be able to get financial aid in the next school year and 840 students would not get work-study jobs, according to the White House report.
The state would lose about $3.8 million in environmental protection funding.
Public health programs would also take a hit, with projected funding cuts to vaccine services, HIV testing programs, substance abuse treatment, and preparedness for public health emergencies.
Reductions in law enforcement grants, nutrition assistance for seniors and subsidized child care are among the other items the White House says will affect Virginians.
All of this uncertainty has put a shadow over the county budget. However, County Executive Ed Long said he doesn’t believe the county will feel the bulk of the economic impacts until fiscal 2015.
The county has set aside $8 million in reserve to deal with potential short-term impacts of budget cuts and Long said he lowered his revenue projections for fiscal 2015 as a result.
What the county and local businesses need most is certainty, Long said, so everyone can adjust their expectations and move forward.
“To think businesses could lose another year waiting to see what the government is going to do,” Long said, referencing the suggestion that big decisions could again be postponed to January. “Our philosophy is, the sooner the better.”