Navigating the Impact of DOGE’s Cuts to Local Economies and Communities
Summary
The Department of Government Efficiency (DOGE) has a mandate to cut at least $1 trillion from the federal government’s $7 trillion budget, with Social Security alone accounting for about $1.6 trillion. While these cuts aim to streamline government operations, the impact on agencies and departments' ability to fulfill their mission is significant, as is their impact on local economies. Additionally, the General Services Administration (GSA) has been directed to terminate leases on approximately 7,500 federal office buildings, compounding a shifting office market that was already impacted by the pandemic.
Though no official tally is available currently, agencies are being affected broadly by layoffs and deferred resignations. The federal government is the largest employer in the country, employing more individuals than any other entity in the United States. Compounding the federal layoffs are the layoffs facing federal contractors as their contracts are canceled by DOGE. Recent data from the Brookings Institution highlights the growing reliance on contractors (outnumbering federal employees two to one). These contractors fill critical roles, especially as the government workforce has remained largely stagnant for over 50 years. During his first term, Trump ballooned the federal workforce by adding 2 million contracting jobs—his reversal of course has likely caused all of these contractors to now lose their jobs.
It’s worth noting that lawsuits are cropping up against DOGE and Elon Musk in an attempt to stop the gutting of federal agencies and nonprofits, and the constitutionality of DOGE’s actions is being challenged with every new move. As of March 3rd, several dozen employees fired from the National Science Foundation are being reinstated to their jobs following a court ruling and guidance from the U.S. Office of Personnel Management. There’s potential for this trend to continue as federal courts challenge DOGE’s moves.
Who Has Been Affected
While DOGE initially targeted agencies whose work is ideologically different than the Trump Administration (USAID, Education, IRS), virtually every agency has been affected by DOGE’s actions, including:
Government Agencies:
Department of Veterans Affairs
Defense Department
Education Department
Energy Department
Department of Health and Human Services
Department of Homeland Security
Internal Revenue Service
National Park Service
Consumer Financial Protection Bureau
Agriculture Department
U.S Agency for International Development
Inspectors General
Department of Justice
State Department
To understand more in-depth how each of these agencies have been affected, we recommend reading this article by AP.
What Should Change
Nonprofits Adjusting Their Models:
As government funding becomes more uncertain, nonprofits may seek alternative funding sources, such as private donations, corporate partnerships, or state and local government assistance. This could shift the focus of nonprofit operations and potentially lead to more collaborative efforts across sectors to fill the gaps left by federal cuts. However, without sustained support, smaller organizations may struggle to stay afloat.
A Change in Federal Contracting:
Although many contractors are currently facing layoffs, the restructuring could open up opportunities in other sectors. Contractors with expertise in technology, infrastructure, or specialized services may find new roles with private companies, other levels of government, or emerging industries. Demand for these services could rise as the private sector looks to compensate for cuts in public spending.
Increased State and Local Government Responsibility:
As federal funding dwindles, states and local governments may be forced to pick up the slack, leading to increased pressure on budgets at these levels. The demand for local solutions to federal programs could prompt significant shifts in how services are delivered, especially in areas like healthcare, social services, and public safety. Pennsylvania’s nonprofit sector, for example, could see more collaboration with state agencies to maintain critical services in the absence of federal funds.
Increased Advocacy for Government Programs:
As more people are affected by the cuts, there may be a growing movement to protect or restore funding for critical programs, particularly in areas like healthcare, Social Security, and public welfare. As communities face widespread disruption from these cuts, local and national advocacy efforts could push for a reevaluation of DOGE’s budget reductions, especially if public opinion continues to grow against the administration’s approach.
In Context
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The layoffs and contract cancellations create a domino effect across local economies. Affected businesses are seeing delays or cancellations of contracts, which creates uncertainty for industries relying on these funds. Local economies are also seeing job losses in sectors that may not directly connect to federal work, making the cuts a broader issue than initially anticipated.
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While the immediate effects of layoffs and service cuts are already visible, the long-term economic impact could be much deeper. Disruptions to local economies, particularly in regions with a high dependency on government contracts and federal employment, may lead to a slow economic recovery. Small businesses, contractors, and nonprofits may continue to face challenges for months or even years as they adjust to a new economic reality. The full effects of these layoffs won’t be evident in federal data for some time, but the immediate impact can already be seen in places like Washington, D.C., where unemployment claims spiked by 36% in February 2025. The uncertainty surrounding these job losses is affecting the broader economy as well, with many workers facing layoffs or reduced hours in the wake of canceled contracts.
The Effect on Pennsylvania & Philadelphia
Pennsylvania is already feeling the effects of these cuts. As of December 2024, the state’s job market showed positive growth, but the ongoing cuts pose a threat to that stability. The Social Security Administration’s Philadelphia office alone has laid off 6,000 employees. In December 2024, Pennsylvania's nonfarm jobs reached a record high of 6,229,800, while the unemployment rate was 3.6%, according to the Pennsylvania Department of Labor & Industry (L&I). These cuts are not only affecting federal employees but are rippling out to contractors and businesses that depend on federal funding, leading to a broader economic impact. Additionally, two employees at Independence National Historical Park in Philadelphia were fired, and if the trend continues, it could pose problems for the influx of tourists expected in 2026.
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One of the local consequences of DOGE’s cuts is the effect on local real estate around the country. The termination of federal leases, particularly those for SSA offices, has added to the already difficult office market. Philadelphia’s increasing vacancy rates, which now stand at 19%, reflect a growing trend. The loss of government tenants is contributing to a broader real estate slump, affecting property owners and local businesses that depend on the presence of federal offices.
In Pennsylvania’s rural areas, who historically have a smaller taxpayer base that generates local revenue and will see the impact of DOGE’s cuts in the closing of federal offices, commissions like The Rural Population Revitalization Commission will be vital. Established by lawmakers last year to brainstorm solutions to curb population decline, the Commission is one of many that could help to address the broader impact of potential economic downturn in rural areas of states.
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The layoffs are causing a ripple effect throughout the economy. Businesses that rely on federal contracts face uncertainty and are also experiencing financial strain. Economist Ernie Tedeschi notes that the economic consequences extend far beyond the government sector, affecting industries that may seem disconnected from federal funding. Layoffs aren’t likely to show up in federal data for another month, and not until September for those who take the severance deal, according to Piper Sandler. Contractors, who outnumber federal employees, are facing widespread job losses, further compounding the negative economic impact.
Bellevue’s Experience
We spoke to Andrew Wisniewski, one of our senior associates who works with several nonprofits in and around Philadelphia on funding projects and grant proposals, about how our clients are feeling about DOGE's impacts. One of the main challenges nonprofits are facing is uncertainty around federal funding. Those trying to access grants or awaiting earmark decisions are grappling with questions about availability and capacity—particularly around the issue of whether they’ll need to cover additional costs if funds come through at reduced levels, such as for construction projects.
An ongoing concern, especially for organizations working in this volatile environment, is the difficulty of navigating federal agencies like DOGE or ICE, with some nonprofits even choosing to temporarily shut down operations due to the strain.
There’s a lot of uncertainty about what funding will actually be allocated versus what might just be promised but never delivered. With ongoing legal challenges and constant shifts in information, many organizations find it hard to keep up with changes that can happen on a daily or even hourly basis.
To help manage the constant flux, Andrew recommends staying focused on core missions. “I tell my clients all the time: there’s a lot of information to parse through in order to get the kernels of truth about how these changes will impact them, and a lot of the time, much of it doesn’t come to fruition before it gets challenged legally. When you’re working on the ground for a root-cause issue, you don’t have the bandwidth to absorb everything happening on the federal level with this administration—you have to stay as calm as possible. This will be a long four years; your energy is best spent continuing to do the work that you do.”
Looking Ahead
The impact of these cuts will continue to unfold over the coming months. While unemployment data may not fully reflect the scope of the layoffs until later in the year, the economic effects are already being felt. The termination of leases and the loss of contractors will continue to affect local businesses, with Pennsylvania facing potential reductions in funding for essential services like health care and public safety. As the government hopes to achieve significant savings, the long-term costs of DOGE’s actions to local economies and communities could be far greater than anticipated. We’ll keep you apprised of the latest news as the situation continues to shift.
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