Politicians won't kill the federal budget though because of the job losses. Neither party will. All you gotta do is span your work across a couple of agencies and you're largely insulated.
The worst part of federal contacting is running the business. The accounting, the contacting, etc, and almost all revenue is based on butts in seats. If you can sell a product instead of time then you are much better off.
However, the idea that federal is somehow a step up from state is a bit odd to me. There are 50 states, and 1 country. Targeting the federal entities is putting all your eggs in one basket. Sure, it is a big basket... but a federal budget change could crush you.