Federal Workforce Reductions: Impacts for State and Local Grantees
The recently inaugurated Trump Administration, via the Department of Government Efficiency (DOGE), has focused on reducing the federal workforce, leading to notable cuts to agencies, including the Department of Housing and Urban Development (HUD), Department of Health and Human Services (HHS), Department of Transportation (DOT), and Federal Emergency Management Agency (FEMA). These cuts in federal manpower, first reported in February 2025, are expected to continue through March and beyond, with profound impacts on federal operations, private sector jobs, and social services, impacting grantees at the state and local levels of government and their sub-recipients across the United States.
The Department of Education is losing approximately 2,000 employees through a combination of cuts and acceptance of the federal buyout. Trump officials have signaled a desire to shift student aid programs to the Treasury Department and reduce oversight of schools, effectively diminishing the federal government’s footprint in education policy. Similarly, HUD is facing a proposed 50 percent workforce reduction, potentially dropping from 8,300 to 4,000 employees. HHS has shed 5,200 probationary employees, including 1,300 at the Centers for Disease Control and Prevention (CDC), and 1,200 at the National Institutes for Health. Although a limited number of staff have been re-hired at the United States Department of Agriculture (USDA), the Food and Drug Administration (FDA), and the CDC, these reductions, totaling over 10,000 federal jobs lost in February, are set to persist. The Trump Administration has stated ambitions to reduce the size of the overall federal workforce by at least 10 percent. These reductions align with a broader effort to reshape the federal government’s role.
Federal job cuts have a ripple effect on the private sector. When federal contracts are canceled, or funds are frozen, private companies relying on government work lay off employees, exacerbating job losses. This dual impact increases claims for unemployment benefits and other social services, putting additional pressure on governments who provide safety net services, such as supplemental nutrition assistances, workforce development and job training, and safety net clinical care services. However, when the agencies providing these services, such as HHS and HUD, face budget cuts and workforce reductions themselves, it may lead to longer processing times, reduced program availability, and an overall decline in the effectiveness of services. State agencies that administer unemployment benefits may face heightened workloads without a corresponding increase in resources.
DOGE-driven layoffs and budget cuts reverberate beyond federal agencies, putting strain on state, local, and special purpose governments as well. States agencies rely on grants from their federal counterparts, such as HUD and DOT. Layoffs within these agencies and proposed cuts to programs, such as Medicaid, may lead to states receiving reduced federal support, forcing them to seek alternative revenue or cut services for citizens. Private-sector layoffs from canceled federal contracts may shrink local tax bases, jeopardizing city and county budgets as demand for social services increases due to increased unemployment. States and localities may need to offset these losses with additional fees or taxes to reshape local priorities amid economic uncertainty.
As the changing federal landscape presents new challenges to state and local grantees, BRONNER offers tailored solutions to navigate this uncertainty. With decades of experience serving state, local, and special purpose government clients, BRONNER excels in risk assessment, strategic planning, financial optimization, and operational efficiency. BRONNER can assist organizations in adapting to reduced federal funding through alternative revenue sourcing and streamlined operations, leveraging its expertise to support continued service delivery despite resource constraints.