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City finance director warns federal funding changes could affect FY2026 budget
Summary
At an April 8 work session, Newport News finance officials told council that recent federal policy shifts and executive actions have injected uncertainty into federal grant streams that support operating and capital projects; staff said the city is monitoring impacts and will prioritize legal obligations if revenues fall.
Newport News officials told city council on April 8 that uncertainty from recent federal policy changes could affect the city’s fiscal year 2026 operating and capital plans.
Virginia Lovell, Director of Finance, briefed council on federal developments and the potential implications for the recommended FY2026 budget. “I will start with just a brief update on some of the changes happening at the federal level,” Lovell said, noting the new federal administration has issued numerous executive orders and an OMB memorandum that briefly proposed a temporary freeze on federal financial awards.
Lovell said the city receives its largest federal operating revenues from 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 help fund programs such as TANF, SNAP, Medicaid and public housing maintenance. She also listed other federal supports: the Department of Justice and FEMA provide public safety purchases and training funding, and the U.S. Department of Transportation supplies the bulk of capital money for streets and bridges.
Lovell said about 300 city positions are partially or fully funded with federal dollars and that a downturn in federal-supported regional employers could reduce consumer-sensitive revenues such as meals and sales taxes, which are “estimated at over $76,000,000 in the recommended budget.”
“If we see impacts, our focus is on meeting our legal obligations,” Lovell said, adding that the city would prioritize paying debt service, funding the pension and maintaining core services. “New positions, salary increases, and other new programs on the 2026 budget will be implemented in a conservative manner to ensure we have a full understanding of impacts as they're coming down.”
Council members asked staff about specific programs and possible timing. Lovell said the situation is fluid and tied to the federal budget development; she said the city already maintains a list of capital projects and their grant status so staff can quickly identify which projects would be affected if grants change. She said projects substantially in construction are expected to continue, while projects still in design might require the city to reprioritize local funding.
Lovell also quantified certain federal-supported programs. She said FEMA and other federal grants provide equipment and training for public safety and that the victim-witness program brings in “a little over about a million dollars per year” to support victims and witnesses.
City staff and council members said they plan continued monitoring and outreach, including planned meetings by municipal leaders and the city’s federal lobbyist with federal agencies and contractors to seek clarity on solicitations and contract extensions.
The briefing was presented as part of the FY2026 operating-budget work session; no formal budget decision was taken at the April 8 session.
