Authored by Mary Ellen Wiederwohl, Bruce Katz, Chanell Hasty, Benjamin Weiser, Anne Bovaird Nevins, and Erica Henderson

The country is in a moment where the distribution of responsibilities and resources between local communities and the federal government is shifting. The last four years have been defined by large federal investments, while the current moment can best be defined as rapid retrenchment, with budget cuts being discussed at an unprecedented scale.

With the flurry of executive orders, administrative actions, layoffs, and broad pronouncements of budget cuts to come, the question of the day is less one of whether we are entering a period of devolution, but rather what will the scale of that retrenchment be and how can local governments, alongside broader networks of corporate, civic and community leaders, respond?

As local leaders continue to advocate against funding reductions, cities and counties cannot afford to “wait and see” what may come from the federal government. Simply put, local leaders need to prepare now for more executive actions, current year budget cuts, and the threat of significant changes for the upcoming fiscal year 2026 budget and beyond.

What Can Local Leaders Do Now?

Local leaders must act with urgency. We recommend that local leaders conduct a “stress test” to (a) evaluate the flow of federal funds to their communities, (b) assess the impacts of executive orders to date, (c) identify funding at risk from future executive actions and legislation, and (d) assess the impacts on local governments, regional economies, and broader community priorities.

A stress test provides leaders with a detailed assessment of how federal funding factors into municipal and organizational budgets, while also drilling down to the programmatic-level impact. For example, if a local university loses research funding, what is the impact on their activity as an anchor institution, large employer, and economic development driver? If hospitals lose Medicaid funding, what is the impact on their ability to serve indigent populations? If public housing vouchers and Community Development Block Grant dollars are reduced, how does that affect local housing challenges?

In New York City, as two of us wrote in a previous newsletter, Comptroller Brad Lander began to assess the risks posed by possible federal retrenchment shortly after the election. In short, over a series of reports, his office has illustrated the far reach of federal funding in supporting the city’s operating and capital budgets and those of municipally affiliated entities, as well as the real impact of those programs on people. As an example, the Comptroller connects the $80+ billion in entitlements to the number of individuals on the receiving end within the City – translating raw numbers into impact.

Cities and counties shouldn’t do this work or hold these conversations in a vacuum. The stress test must go beyond an analysis by the city or county Chief Financial Officer of those federal dollars that flow into local government. It ought to account for the local and regional economy writ large; this requires engagement with transit agencies, universities, school districts, etc.

Earlier this month in a presentation to Accelerator for America’s Economic Opportunity Accelerators network, Erica Henderson of Key Strategic Partners outlined her approach to evaluating funding vulnerabilities in St. Louis, MO. She emphasized the importance of comprehensive data collection and proactive planning around federal investments flowing into communities, including:

• Aggregating funding data by sector and geography;

• Categorizing funding by risk level based on legislative trends and executive actions:

• Conducting assessments of potential disruptions and community impact; and

• Engaging key stakeholders in data collection and validation.

In that same session, Benjamin Weiser, of the Nowak Metro Finance Lab, discussed Comptroller Lander’s approach and illustrated how other localities can learn from and replicate the approach with a conceptual framework that delineates federal funding into entitlements and programmatic investments, while also expanding consideration beyond just local government budgets to capture a holistic view of the role of federal funding in the broader local economy.

Both Henderson and Weiser emphasized the importance of stakeholder engagement throughout the process. A collaborative approach not only improves the quality of data collection but also strengthens the network of partners who can respond collectively to funding changes.

This kind of “stress testing” isn’t new to communities – in fact, several states and jurisdictions have fiscal stress monitoring systems in place as a tool to support fiscal resilience. Much like preparation for severe weather events, local leaders must assess the possibilities, understand the potential impacts, and plan their response. This is just “emergency preparedness” with a different set of variables.

Performing a stress test gives leaders the information needed to contemplate the tough questions ahead. If federal cuts impact public safety investments, will you pull funding from another local service to cover the difference or lessen the impact? How will you continue to make progress to reduce and eliminate homelessness with less federal funding? How can you ensure that your community maximizes its share and impact of the federal funding that will remain? How can you partner effectively with state leaders to channel federal and state resources to local priorities? How can you engage local philanthropy, foundations, and other potential local funders who can be part of the solution? Will you consider raising local taxes to continue programming or simply stop providing a service? How will you communicate with your constituents and bring residents together to get input on these difficult decisions?

This moment requires local and national leaders to do many things in parallel: advocate for local needs before federal actions are taken while also organizing at the local level to adapt and mitigate the effects of potential federal cuts. By taking this multi-faceted approach, we can reimagine strategies for promoting economic mobility that align with the opportunities and barriers in the months and years to come.

How Can Local Leaders Perform a Stress Test?

Step 1: Organize Around Potential Funding Challenges

Mayors, County Executives, and other senior local leaders have the power to convene key institutions and stakeholders that, together, can solve big challenges, push innovative solutions, and drive transformative projects.

Local leaders should first identify internal (local government) and external (community) stakeholders who should be seated around their “big table” to inventory the federal funding streams coming into all local groups – government and otherwise. This group should understand the federal funding streams and programs supporting the community, define the implications of potential cuts, measure impact, and begin to prioritize and problem-solve as a community.

To do this, local leaders should form cross-functional teams and multi-disciplinary advisory committees, with local government, school districts, higher education institutions, nonprofits, housing providers, community leaders, healthcare networks, and other large employers as a first step. Together, they can brainstorm possible response strategies and look more broadly at all the federal funding that flows into local communities.

Step 2: Perform a Landscape Analysis

In parallel with early organizing moves, local government leaders should undertake, if they have not already, a landscape analysis of federal funds flowing to the community. The landscape analysis might be led by the local CFO or Comptroller, but other city offices and outside partners should be engaged as well. This local landscape analysis will include a quantification of federal funding, alongside an assessment of the key risks (unreleased funds) and threats (funds potentially impacted by executive orders and/or Congressional budgets).

While many local CFOs, Treasurers, Comptrollers, and Budget Directors have spent the last several weeks analyzing the known and unknown threats, it is imperative that this be done with a pragmatic, interdepartmental and multi-sectoral approach.

Building from this, the assessment will drill down further, evaluating current and projected federal funding resources at a programmatic level. In getting into more specifics, the assessment should expand to consider other local institutions not captured in the city’s budget and that provide essential community services and/or impact your economic competitiveness, as well as entitlements that flow directly to residents.

This chart includes a list of online resources where groups can identify federal funding flowing into their communities. Access a PDF version with clickable links by visiting this link.

Not all funding flows in the same way or to the same recipients. Entitlements and people focused funding largely go to individuals and households, or provide benefits to them through intermediaries (i.e., in the case of workforce development funding). Alternatively, place and innovation funds flow through an array of grants, tax incentives, financing, and go to or through a set of recipients that make up the local economy. Funding also flows at varying paces and based on different criteria – disaster relief and recovery is predicated on requisite declarations from a Governor and/or President and will cut across both people and place.

The following segmentation, into three constituent components, can be replicated to match the ubiquity of federal funding, while also accounting for distinct impacts:

• Entitlements: Focused on income and food security, as well as healthcare;

• Programmatic Funding: Broken down into people, place, and innovation buckets; and

• Comparative Advantages: Distinct assets, or federal funding for anchor institutions, federal facilities, and production facilities, that are unique to your community or region (including that related to federal procurement).

After analyzing the federal funds at risk, local leaders can aggregate data to anticipate funding gaps and community needs, alongside a dashboard of risk levels and capital types.

Step 3: Develop and Simulate Funding Scenarios

After you have a view of your threat level and impact landscape, local leaders and their community teams must begin developing realistic “what if” scenarios based on the identified risks and threats at various levels of severity. Local leaders can set up dashboards that calculate and communicate in real-time the specific local effects of federal changes – e.g., how does $100 million in federal funding translate locally? How many people and what services are impacted? Or, more specifically, what happens if funding for local Head Start or Title I funding is reduced?

In the case of some funding streams, local leaders will need to assess the financial and operational consequences of each funding scenario for immediate short-term cash needs (i.e., 30-60 days), the mid-term impacts on the current fiscal year budget, and how future fiscal year budgets can be adjusted to account for structural shifts at the federal level. These scenarios could be assessed qualitatively through extensive table-top exercises and/or quantitatively using financial modeling tools.

In simulating various scenarios, localities may look at options for tapping into the areas of federal funding that are not being cut, working with state partners to access additional resources, or utilizing alternative investment options such as innovative capital stacks that can leverage ballot measure approved tools like tax or bond measures.

*This includes funding to NYC Dept of Education, CUNY for Federal Aid, and for NYC Department of Housing Preservation and Development Section 8 Voucher portfolio; **federal funding for NYC’s current Capital Budget; *** federal funding to MTA’s 2020-2024 Capital Plan 

Step 4: Evaluate and Communicate Impact

In addition to working extensively with community teams and advisory committees, local leaders must be transparent and thoughtful in how they share information with and engage their constituents. By sharing data and findings in an accessible manner, local leaders can help residents begin to understand the role of federal funding in their own context; this can also enable leaders to mobilize their constituents to demonstrate their support for specific programs to their federal delegation.

This can be done through public-facing dashboards, community meetings, and feedback loops like focus groups and surveys. In New York City, Comptroller Brad Lander spoke to the specifics of how programmatic reductions impact local residents. Similarly, case story examples that can show the federal government’s role in funding local police, housing, infrastructure, or more can convey the same messages.

Simply put, local residents should get an unvarnished view from their local leaders of the local impact of federal funding, the scale of the risk, and the difficult decisions that the City Council or County Commission will face if federal funding cuts are made. A relationship built in trust and transparency can position local residents to be allies in the effort.

Step 5: Mitigation and Adaptation Plan

The last step involves something localities do well: planning. After organizing, analyzing, simulating, evaluating, and communicating, it’s time to create mitigation and adaptation plans to prepare for potential federal funding cuts. Just like emergency preparedness and local sustainability plans, these plans will make communities more resilient to future storms and shocks coming from Washington and protect goals for fostering economic opportunity for residents. These plans should put forth strategies for adapting current budgets to existing and future changes that come out of Washington, as well as long-term strategies for building fiscal resiliency.

After the Stress Test: What Lies Ahead

The stress test process is not static; it is a dynamic and iterative tool. As new information comes from Washington, local leaders will need to rerun scenarios and recalculate impact. New executive orders and administrative actions between now and September 30 could have vast effects on local planning and budget processes before the next federal fiscal year begins.

The Fiscal Year 2026 federal budget process will play out alongside the reauthorization of the 2017 Tax Cuts and Jobs Act and the Farm Bill. The House and Senate have laid out different plans for their processes, and it’s unclear when final answers will be known. What is clear is that our federal leaders are on a mission to radically restructure the size and scope of the federal government. Local leaders must be ready for any scenario. Now is the time to prepare.

Mary Ellen Wiederwohl is the President and CEO of Accelerator for America and its sister 501(c)(4), Accelerator for America Action. Bruce Katz is the Founding Director of the Nowak Metro Finance Lab at Drexel University. Chanell Hasty is Senior Manager at Accelerator for America. Benjamin Weiser is a Research Officer at the Nowak Lab. Anne Bovaird Nevins is Chief of Economic & Community Impact at Accelerator for America. Erica Henderson is Principal and CEO of Key Strategic Group.