Potential impact of sequestration:
JOBS
Estimates vary widely on how many jobs could be lost if budget sequestration occurs in January. The Aerospace Industries Association estimates 2 million jobs in the defense and civilian sectors, including 40,000 in Ohio, could be eliminated. The Brookings Institution, however, has called that estimate “deeply flawed.”
U.S. Rep. Mike Turner, R-Centerville, has estimated the cuts could mean a loss of 4,000 to 5,000 civilian jobs in the Dayton region and a $1.5 billion hit to Ohio’s economy.
WRIGHT-PATTERSON AIR FORCE BASE
One of the Air Force’s key installations, Wright-Patterson Air Force Base is home to the Air Force Materiel Command, an acquisition headquarters, and the Air Force Research Laboratory, among other major units.
Air Force officials have said they cannot predict with specificity how the cuts might impact the base without knowing more budget details.
MILITARY PERSONNEL AND WEAPON SYSTEMS
President Obama has said he would avoid cuts to military personnel. Military leaders have said that could mean more cuts to civilian workers and other programs.
DEFENSE CONTRACTORS
Major defense contractors have warned they could layoff thousands of workers if budget sequestration happens. The U.S. Department of Labor has determined, however, the contractors are not required to send out layoff notices 60 days before the cuts would take effect Jan. 2. A federal law, known as the WARN Act, requires the notice if plant closings or mass layoffs are expected, with some exceptions.
Some defense contractors might not be impacted for years, but others could feel the effects more immeidately, such as base security, maintenance services and commissary activities, according to Loren B. Thompson, a defense analyst with the Lexington Institute in Arlington, Va.
HOW DID THIS HAPPEN
A bipartisan congressional deficit reduction committee failed to reach agreement on a $1.2 trillion deficit reduction plan which put into motion automatic cuts in both defense and domestic spending programs beginning Jan. 2. If the reductions happen, they are in addition to $487 billion the Defense Department will absorb over a decade.
Congressional and defense industry leaders worry impending automatic budget cuts — known as sequestration — could cost thousands of jobs and mean deep cuts to weapon systems and operations, and some observers don’t expect a solution before the November election.
“There is a broad feeling that implementation in this fashion would cause chaos,” said Michael Gessel, vice president of the Dayton Development Coalition’s Washington, D.C. office. “That this is a catastrophic way to deal with government spending.”
The federal government should spell out within a month where defense cuts could fall after President Barack Obama signed the Sequestration Transparency Act last week.
“Even with the transparency, which is helpful, it’s not the complete answer,” said Dale J. Kirby, president of Dayton Area Defense Contractors Association. “There are hundreds of thousands of contracts that are going to be touched one way or another by this should sequestration happen.”
If Congress and the White House do not act, budget sequestration would begin Jan. 2, and impose an across-the-board $55 billion cut, to the defense budget in year one of a $500 billion reduction over the next decade. The cuts would be in addition to the $487 billion the defense budget will absorb within the next 10 years.
A bipartisan supercommittee’s failure to reach a deficit reduction deal set in motion the automatic cuts as a way to pressure federal lawmakers to act to find a solution.
A strong push back from Congress on Air Force plans to cut Air National Guard ranks and retire aircraft and other questions about spending priorities has left unanswered where the service will absorb all of those cuts in the next fiscal year that begins Oct. 1.
Defense Secretary Leon Panetta has warned sequestration could hollow out national defense.
‘Unknown territory’
The Aerospace Industries Association has projected two million job losses nationwide, including 40,000 in Ohio, but a study from the Brookings Institution in Washington, D.C., has called those estimates “deeply flawed.”
“We’re in unknown territory here,” said Loren B. Thompson, a defense analyst with the Lexington Institute in Arlington, Va. “Sequestration as it’s written into the law hasn’t happened before and people really don’t know what to expect.
“There is a deep divide here between Republicans and Democrats over how the government should operate and that extends to the question of reducing expenditures” and raising taxes, he said.
What’s known so far is this: The president has said across-the-board cuts would avoid military uniform personnel, but military leaders have said additional cuts could hit Defense Department civilian ranks, among other places. If military personnel cuts remain off the table, the expected 10 percent mandatory sequestration reduction could reach up to 14 percent elsewhere, Thompson said.
The U.S. Department of Labor has determined defense contractors don’t have to send out warning notices of potential layoffs of hundreds or thousands of workers at their companies to comply with a 60-day federal notice requirement days before the Nov. 6 general election.
Defense jobs in Dayton
The stakes are high in Dayton, home to Wright-Patterson Air Force Base which has more than 27,000 military and civilian employees and is the largest single site employer in Ohio with a $5 billion impact on the local economy. Outside the gate, Wright-Patterson has estimated the base indirectly supports about 35,800 jobs, according to a spokesman. Gessel has estimated the number of direct defense contractor jobs off the base could reach about 10,000.
U.S. Rep. Mike Turner, R-Centerville and a member of the House Armed Services Committee, has projected cuts of 4,000 to 5,000 civilian job losses in the Miami Valley region tied to Wright-Patterson and a $1.5 billion toll to Ohio’s economy. Turner has set a forum with defense-related speakers at 10:30 a.m. to noon Aug. 14 at Sinclair Community College, 444 W. Third St. in downtown Dayton on the potential impact of sequestration to the region.
House Armed Services Committee previous estimates showed defense cuts in Ohio would mean 1,377 fewer active-duty service members out of 8,261 in Ohio and the loss of 6,250 Defense Department civilian personnel out of 25,000 in the state, according to the nonprofit and nonpartisan Center for Security Policy in Washington, D.C.
“These jobs go right to the heart of being able to maintain our national defense,” Turner said.
A continuing resolution to fund the federal government for another six months does not offset sequestration, and could make it more likely because congressional leaders would be content to stay with the status quo, he said.
A spokesman for Turner’s Democratic opponent, Sharen Neuhardt of Yellow Springs, has said actions need to be taken to avoid the cuts taking effect.
House Republicans have passed a budget they say would avoid the defense sequestration cuts, but Democrats said the legislation would fall too heavily on entitlement programs and extend tax cuts for the wealthy. U.S. Rep. Steve Austria, R-Beavercreek, said he’s waiting for the Senate and the White House to act.
The Obama administration has said it doesn’t favor sequestration either and has offered a $4 trillion budget reduction and spending alternative.
A leader of one Dayton area defense contractor said the changes could mean the Pentagon would have to renegotiate contracts with the defense industry and cut into programs and procurement for the defense industry .
Across-the-board sequestration would mean “very arbitrary” reductions without the flexibility to prioritize what’s most important, said G. Scott Coale, director of Dayton operations at Modern Technology Solutions Inc., and immediate past president of Dayton Defense.
“I just think there’s a huge amount of uncertainty because it’s just not clear how this will play out,” said Coale, a retired Air Force vice commander of the Air Force Research Laboratory at Wright-Patterson.
The continued uncertainty has concerned Science Applications International Corp., a defense contractor with 450 employees in Beavercreek, said Dennis J. Andersh, SAIC senior vice president and Dayton regional executive.
“We’re still trying to get smart as to what it all means,” he said.
Some defense contractors may not feel the effects immediately, however.
“The bottom line here is even after Congress makes the cuts it takes years before the companies that would have gotten the money feel the full impact of the reductions,” Thompson said.
Richard D. Stock, director of the University of Dayton Business Research Group, said he didn’t expect immediate effects locally in many cases.
“Most of the contracts are long-term contracts so the prospect of immediate layoffs are suspect and not likely,” he said. Even with immediate deep cuts, Stock said he expected defense spending will rise in the years ahead.
Thompson said services or activities that need a constant stream of money, such as security, base maintenance and commissary activities, could experience more immediate impact as well as the ranks of civilian workers.
Gessel said based on past budget cuts, science and technology research programs, and education could most be at risk. Wright-Patterson is home to directorates of the Air Force Research Laboratory and the Air Force Institute of Technology, the service’s post-graduate school.
Vikram Sethi, director of the Wright State University Institute of Defense Studies and Education, said besides “worrying a lot,” his department has tried to predict what might be the future of Air Force research priorities to guess how the fallout could impact the institute.
“When you speak to education officials and those who control the programs, our hands are tied,” he said. “If you knew what was coming you could prepare for it but the uncertainty is almost worse because you don’t know what’s going to happen.”
Critics have cast doubt on the inability of the Defense Department to take sequestration cuts.
“The problem is not whether they can absorb the cuts, because we believe they can,” said Laura Peterson, senior policy analyst with the nonpartisan Taxpayers for Common Sense in Washington, D.C. “The larger problem with sequestration is how those cuts are instituted.”
Across-the-board cuts would be damaging, but more selective cuts wouldn’t be, she said.
The organization has recommended $688 billion in cuts to “fat” such as putting a cap on the number of civilian service contracts, eliminating the Navy version of the F-35 carrier-based Joint Strike Fighter, and requiring military retirees enrolled in the Tri-Care health insurance program to use other employer-paid health insurance, if available, she said.
Staff Writer Andrew Tobias contributed to this story.
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