Reduced defense spending could put California jobs on chopping block

By Yousur Alhlou

WASHINGTON D.C. – Tens of thousands of California jobs are at stake as the Pentagon rolls out plans to reduce its budget for the first time since the 1990s.

Though California is far less dependent on defense dollars than it was two decades ago when drastic cuts cost the state nearly half a million jobs, communities from Los Angeles to the Bay Area will feel the pinch.

Nearly 126,000 California jobs could be affected if defense spending shrinks by $1 trillion as anticipated by the Pentagon, according to an economic analysis by the Aerospace Industries Association.

The Defense Department recently announced plans to trim spending by $487 billion over the next 10 years. In addition, a stalemate over how to reduce the debt will trigger up to an additional $600 billion in cuts unless Congress finds a way to circumvent procedures it agreed to last summer.

The reductions come at a time when over 2 million Californians are already of work.

“In the 1990s the military shed more men and women in uniform, but they shed them into a healthy and growing economy,” said Rep. Howard “Buck” McKeon, R-Santa Clarita, chairman of the House Armed Services Committee. “(Today) they will be competing in a much tougher jobs market, one where the unemployment rate for veterans is much higher than the rest of the population.”

More than one in 10 federal defense dollars – nearly $57 billion – is spent in California, the second largest beneficiary behind only Virginia, according to a study by Bloomberg Government.

Measuring actual impact state-to-state is speculative until the federal budget is released Monday. But California installations, like Edwards Air Force Base, are susceptible as the Pentagon shrinks ground forces and delays large-scale military purchases.

Edwards, the second largest U.S. Air Force base, home to nearly 28,000 active duty and civilian personnel, is a key aircraft testing and research center, potentially making it vulnerable as the Defense Department trims fighter and cargo aircraft.

Far-reaching impact

The Pentagon announced recently that it would seek congressional approval for another round of base closures, but it has not indicated that Edwards – or any California military installation – will be targeted.

However, the impact of reduced spending could reverberate in the form of reduced spending and employment in communities across the state.

“We aren’t just talking about direct uniform jobs or jobs in the defense industry,” McKeon said.

The call for reduced defense spending comes in response to rising budget woes and the recent withdrawal from Iraq. Defense Secretary Leon Panetta indicated the largest savings could come from cuts to major weapons systems and reducing ground forces with heightened attention to Asia.

While California could lose lucrative contracts, it could benefit if troops are repositioned on the West Coast.

Military spending is key to California, where the 11 percent unemployment rate is the second highest in the nation. Nearly 237,000 defense personnel are spread among 348 military facilities, accounting for nearly $62 billion in annual tax revenue, according to the Census Bureau.

“Make no mistake,” Panetta said at a news conference at the Pentagon on Jan. 26. “The savings that we are proposing will impact all 50 states and many congressional districts across America.”

Unlike the mid-1990s, when California absorbed half of total defense personnel cuts from base closures, downsizing is more likely to have a severe impact on heavily defense-dependent states including Virginia, Hawaii and Alaska.

Disproportionate cuts

Defense was once California’s largest industry constituting 14 percent of the state’s GDP at the height of the Vietnam War and 10 percent during the Cold War. Today it is only 3 percent.

No state was hit harder than California when it lost as many as 375,000 defense-related jobs in the early 1990s, according to a report by the RAND Corp.

The state has lost at least 28 major bases since Congress approved the first round of closures in 1988 costing the state billions of dollars in annual revenue.

“The cuts disproportionately hit California,” said H.D. Palmer, spokesman for the state Department of Finance. “The state’s economy has been more diversified since then.”

Defense spending boosts California’s economy in a variety of ways, creating jobs in technology, construction, manufacturing, alternative energy and cyber security.

“There’s a recognition on part of government that base closures can have major impact on communities,” said Christopher Hellman, a defense analyst for the National Priorities Project, adding that the state is too “cash strapped” to offer tax incentives or benefits to keep jobs at home.

Increased investment in remote warfare – including cyber security programs and unmanned aircraft – where California has a technological edge, could soften the fiscal impact. Southern California could also benefit from increased federal spending in renewable energy programs, according to recent study by the Department of Defense that highlights new ways cultivate solar energy around California’s Mojave Desert.

Firms already cutting

But California’s top private contractors – particularly aerospace industries – are already cutting jobs and relocating from the expensive coast in anticipation of reduced military spending.

Boeing Co. announced plans last January to cut 900 jobs in Long Beach and both Northrop Grumman Corp. and Lockheed Martin have announced plans to cut jobs across the U.S. and Southern California, in a huge blow to the region’s aerospace industry.

The cuts could also trickle down to research universities, many of which rely on federal grants to sustain competitive programs.

“Research programs have huge societal benefits,” said Dr. Shankar Sastry, dean of the College of Engineering at the University of California at Berkeley. “But the pot of money that we compete for is reduced.”

Panetta announced broad plans for absorbing nearly half a trillion in cuts last month with more details expected when the budget is released Feb. 13.

The California News Service is a journalism project of the University of California Washington Center and the UC Berkeley School of Journalism. Email:

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