Arlington County officials have asked state legislators for financial assistance in the face of federal workforce reductions and funding cuts, but Virginia leaders say the state doesn’t have the funds to give.
During a May 19 briefing with members of the Virginia General Assembly, county leaders reported that Arlington is already feeling the effects of slashed federal funding, rising unemployment and a reduction in tourism dollars.
One in five adult Arlington residents is employed by the federal government, Ryan Touhill, director of Arlington Economic Development (AED), noted during the briefing, and the federal government leases 12% of the county’s office space. Officials are now bracing for potential fallout from continued job losses and declining tax revenue.
When asked whether Virginia’s budget surplus might be tapped to help Arlington weather the economic storm, state lawmakers said the Commonwealth is grappling with equally challenging economic headwinds at the state level.
“There’s no surplus,” Virginia Del. Alfonso Lopez said, surmising that Virginia will likely need to tap the surplus in its recently-passed budget to offset cuts in Medicare, Medicaid, veterans benefits and education funding.
“What that means is that we are going to have to come back in September and probably redo what was an outstanding budget that had the surplus,” Lopez said. “Virginia is in a better position than most, but the idea that we have a vault of significant amounts of funds available” is eroding amid continued cuts to federal agencies and programs.
The exchange came after Touhill offered a somewhat dismal assessment of local economic indicators. Arlington’s current unemployment rate (3.2%) is 60% higher than the same time last year, with the prospect of more job losses on the horizon.
“We know that [the current] data doesn’t tell the full story,” Touhill added. Many laid-off workers have not yet filed for unemployment, including some who took federal buyout packages. AED estimates that as many as 87,000 local jobs could be at risk.
Arlington’s tourism sector, which bounced back after Covid, is also seeing a reverse trend, Touhill said. Hotel occupancy fell 8% in March and April, with the greatest losses coming from a decline in international and government business travelers.
“Visitors come and they spend money at hotels, they spend money in our restaurants and our retail establishments, and so we expect to see secondary effects of those declines,” he explained.
AED is also closely monitoring the commercial real estate market. Arlington’s office vacancy rate currently stands at 24%, and the General Services Administration (GSA), which procures and manages real estate for the federal government, leases 5.3 million square feet of office space in the county. A reduction in government agency leases would mean a further reduction in tax revenue the county relies on to fund essential services.
All of this is a significant concern at the state level, given that Northern Virginia’s economy makes up 42% of the Commonwealth’s total GDP.
Touhill said that AED is responding with targeted efforts to attract businesses that could bring new jobs to Arlington. It’s also organizing pitch competitions and entrepreneurial workshops for small business start-ups, and rehiring events for federal workers. He said AED is working on creative ways to bolster tourism and strengthen the hospitality sector.
Local nonprofits are also feeling the effects. Federal funding cuts stand to impact housing, food and health care resources for Arlington’s most vulnerable populations, according to Anita Friedman, director of Arlington’s Department of Human Services (DHS).
Friedman noted that DHS received $42.3 million in federal funds in FY 2024—money that supported housing vouchers, grants and homeless shelters; medical care, including Medicaid, immunizations and substance use treatment; and programs tackling food insecurity, including WIC (Women Infants and Children), SNAP benefits and the Arlington Food Assistance Center. The number of county residents seeking food assistance has increased 54% in the past two years.
“The numbers are staggering and its very concerning,” she said.
County leaders have asked state lawmakers to go to bat for additional investments in the Virginia Economic Development Partnership to attract new businesses; a statewide center for technology, research and development; the conversion of office buildings for new uses; and support for entrepreneurs and small business start-ups.
The County Board also made funding pleas for housing assistance; eviction diversion programs; initiatives aimed at retaining highly skilled workers; and childcare support. Arlington has some of the highest childcare costs in the nation.
“A lot of your recommendations, which no doubt would all be valuable and helpful, say, ‘provide additional funding, fund the creation of programs,’” State Sen. Adam Ebbin observed, “but I think the state’s revenue is going to be down as well. I think the federal funds we get from some important social service programs may, in fact, be threatened as well.”
Ebbin encouraged county leaders to “think creatively” about strategies that could spur the economy at little to no cost, such as changing regulations, cutting fees and eliminating red tape to spur business growth and tourism. He pointed to zero-cost initiatives put forth by the county board during Covid that helped the ailing restaurant industry.
“We need to be realistic about where the priorities are going to have to be in terms of the social safety net programs that are going to be hurt,” Lopez said. “And they are going to be hurt.”
County Board Chair Takis Karantonis, an economist and urban planner, characterized Arlington’s rising food insecurity as a “canary in the coal mine,” a bellwether of economic pain, calling for Gov. Glenn Youngkin to intervene.
“We are losing the crème of the crème—the top workforce here,” he added. “These are not people I can send tomorrow to the community college to be retooled or reskilled. If they go, they go from Virginia—not only from Arlington or Northern Virginia, they go from the Commonwealth. It’s a loss of muscle, of economic tissue that the entire Commonwealth will very much regret not having stemmed.”