Gaithersburg official warns federal job cuts could outpace local capacity to absorb displaced workers

Sharon Disk, Gaithersburg’s economic development manager, told the mayor and city council at a June 30 work session that federal workforce reductions and related budget cuts could sharply reduce local federal employment and contract spending and that regional job growth likely cannot absorb the displaced workers.

Disk said the risk stems not just from layoffs but from unfilled vacancies and reduced federal contracting, which together shrink payroll and local demand. "It's what happens to our local economy when Federal spending shrinks here," she said, adding later, "We are facing a tsunami when it comes to our economy. We don't know how big it is."

The presentation focused on regional data and federal guidance. Disk said Gaithersburg had 3,748 federal workers in 2023, about 13.6% of local employment, while Montgomery County had 68,848 federal workers (about 16.8%). She described Office of Management and Budget and Office of Personnel Management guidance that outlined an initial phase of cuts beginning March 17, agency reorganization plans due April 14, and a larger implementation phase starting Oct. 1. Disk told the council that reported nationwide federal departure counts varied by source, noting examples such as roughly 61,000 and about 171,800 reported by different outlets and agencies; she emphasized the numbers were not fixed.

Disk used federal spending data to show the scale of exposure: she cited usaspending.gov extracts showing calendar-year 2024 federal outlays in Gaithersburg led by the Department of Health and Human Services (about $276.45 million) and significant contract recipients such as Emergent and Leidos. She also pointed to budget documents that, in the example of NIST, showed a projected payroll decrease (she cited a budget line showing a net reduction of 465 direct civilian full-time-equivalent positions at NIST in the proposed budget figures she reviewed).

Disk said the city receives Community Development Block Grant (CDBG) funding as an entitlement community — typically under $300,000 annually — and warned that the CDBG funnel is also the channel for disaster relief dollars; she said the president's proposed budget showed no allocation for CDBG for the next year. She said that reduction would affect programs the city uses for down-payment and rental assistance.

Council members and the mayor discussed coordination and response options. The mayor (presiding) said he had been on regular calls with the state Department of Labor and county leaders and that Montgomery County and municipalities had shared resources such as a Mobilize Montgomery website listing hiring resources. He said, "there's no way to overstate, just how top of mind all of this is." Councilmembers urged broader, region-wide strategic planning that would involve state and county leadership and economic development directors.

Speakers at the meeting described several practical priorities if the region pursues an economic diversification strategy: improve infrastructure (utilities, water, sewer, permitting speed), increase the inventory of ready sites for employers, and forge stronger leadership coordination among elected officials and business leaders. Disk and several councilmembers emphasized that site selection for large employers now excludes regions that lack reliable utilities, workforce skills, or rapid permitting; Disk listed utilities, workforce skills, land availability, permitting ease, transportation and workforce development among top site-selection criteria.

Several councilmembers discussed incubators and support for startups as one avenue for local growth but warned incubators must offer more than subsidized office space. "That's not incubation. That's just four walls that are subsidized by the taxpayer," one councilmember said, urging wraparound services, mentorship and specialized facilities for life-science startups as examples of effective incubator models. Councilmembers also noted county-level initiatives including a proposed artificial intelligence center of excellence in North Bethesda and expressed interest in aligning Gaithersburg with county incubator planning.

Disk and attendees repeatedly stressed that private-sector job growth alone, at current rates, is unlikely to replace large-scale federal job losses. Disk noted Montgomery County's job growth of roughly 1% (about 4,600 jobs) from September 2023 to September 2024 and said that, by contrast, a 20% reduction in federal employment could amount to more than 13,000 displaced federal positions in the county — a magnitude the county would need to triple its recent job-growth rate to absorb. She cautioned that lost federal payroll would ripple through consumer spending, retail, and real estate, and could put pressure on local budgets as federal assistance and contracting decline.

The mayor closed by thanking Disk and saying the council will rely on her analysis in coming months and may invite her back to present updates. The next regular meeting was announced for July 7.