City finance director warns federal funding shifts could force budget reprioritization

Virginia Lovell, director of finance for the City of Newport News, told the City Council on April 8 that recent federal policy changes could affect the city's fiscal 2026 budget and that staff will monitor developments and prioritize legally required payments.

Lovell said, "there was an executive order and an OMB memo that proposed a temporary freeze on all federal financial awards" and that although that order was challenged and rescinded, the administration continued to signal an intent to pause or eliminate funding that does not align with federal priorities.

The nut of Lovell's presentation was that federal dollars fund many of the city's operating and capital programs. She listed major federal revenue sources for the operating budget as the U.S. Department of Health and Human Services, the U.S. Department of Agriculture and the U.S. Department of Housing and Urban Development, which support programs including TANF, SNAP, Medicaid, foster care and public housing. She added that the Department of Justice and FEMA provide funding for equipment, training and victim-witness services.

Lovell said more than 300 city positions are partially or fully funded by federal dollars and noted indirect risks when federal policy affects large local employers such as Jefferson Lab, the Hampton VA and NASA, because any decline in employment could reduce consumer-sensitive revenues such as meals and sales taxes. "It is not possible for federal dollars to cover all the direct and indirect impacts," she said, and staff will focus on paying debt service, pensions and core services first.

Council members asked for timing and contingency plans if federal awards are reduced or rescinded. Lovell said the city has catalogued its capital projects that rely on federal grants and is tracking each project's design or construction status so staff can identify which projects could continue under city funding if federal funds are cut. A city attorney present said remedies or liabilities would be case-specific and depend on grant agreements and applicable legislation.

Lovell also flagged public safety grants tied to FEMA and victim-witness funding, saying the victim-witness grants amount to "a little over about a million dollars per year" and fund staffing in the Commonwealth's attorney's office. She said if those grants were lost, council would need to decide how to prioritize operating funds to cover the loss.

Ending: Lovell said the situation remains fluid while the federal budget is developed and that the city will implement new positions and salary increases conservatively to allow reallocation of resources if necessary.