State Could Lose Over $900M In Defense Funds Without Sequestration Deal
By Keith M. Phaneuf
The Connecticut Mirror
March 13, 2013
Connecticut could lose more than $900 million in federal defense spending this year, according to a new analysis, though a compromise measure pending on Capitol Hill could mitigate some of that pain.
The state legislature's nonpartisan Office of Fiscal Analysis also projected that most of the pain from the so-called sequestration cuts tied to the blown March 1 deadline for reducing federal spending would fall on Connecticut's defense industries.
That report came just two weeks after analysts projected state and municipal governments and various private entities in Connecticut, also could lose a combined $52.6 million in non-defense programs, particularly in education, social services and housing.
Both the defense and non-defense cuts would be phased in over the remainder of the year, and many might not come to pass if Congress reaches a bipartisan compromise that cleared the Republican-controlled House of Representatives last week.
"We've got our fingers crossed that we are going to work things through," U.S. Rep. Joseph Courtney, D-2nd District, said Wednesday. "But I don't want to overstate the positive news. The Navy still has to find some savings, all (service branches) still have to find some savings."
At issue is the game of federal budgetary brinksmanship that has come to be known as "sequestration" and has dominated news headlines in recent months.
A mechanism designed to limit the size of the federal budget, sequestration places a hard cap on spending in several broadly defined areas. If Congress appropriates dollars in excess of these caps, it automatically triggers across-the-board cuts in all affected categories.
In this case, Congress exceeded limits set in the Budget Control Act of 2011, triggering $984 billion in cuts between 2013 and 2021.
The first wave of reductions, $109 billion, was supposed to have taken effect Jan. 2. It was subsequently reduced to $85 billion and pushed back two months until March 1.
But after Congress failed to reach an agreement to reduce the deficit two weeks ago, various agencies were directed to begin implementing the cuts between now and the end of the federal fiscal year on Sept. 30.
Gov. Dannel P. Malloy didn't hide his frustration Wednesday with the fiscal threat hanging over Connecticut's defense industry.
"This is absolutely a game when it comes to military spending," Malloy told reporters after the State Bond Commission meeting.
The governor noted that U.S. Department of Defense officials have said they can accommodate an overall reduction equal to most of the level required by sequestration.
But the latter imposes cuts in an across-the-board basis, while military leaders want greater flexibility to apportion the cuts among various defense programs. The governor said Congress needs to give the Pentagon that flexibility.
Catherine Smith, commissioner of the state Department of Economic and Community Development, said that while any defense industry cuts are cause for concern, Connecticut would fare better than most states under the scenario Malloy outlined.
That's because Connecticut's defense industry is centered on products that are of chief strategic importance to the military:
- General Dynamics' Electric Boat Shipyard in Groton is the primary builder of submarines for the U.S. Navy, with much of its work centered on the Virginia-class, fast-attack nuclear vessel;
- Sikorsky Aircraft in Stratford, which is owned by United Technologies Corp., constructs helicopters for both the military and for private entities.
- And Pratt and Whitney of East Hartford, another UTC subsidiary, builds jet engines used widely both in civil and military aviation.
"The work we do here is extremely important to where the Department of Defense wants to go, strategically, in the future," Smith said.
Courtney noted that the U.S. House passed a temporary budget measure -- a continuing resolution -- that does grant the military some of the flexibility Malloy and Smith want to see. It also restores modest amounts of funding to various defense programs, though it was unclear Wednesday how that might affect Connecticut.
And the 2nd District congressman added that he is optimistic the Democratic-controlled Senate will adopt the measure soon. A member of the House Armed Services Committee, Courtney represents Connecticut's eastern half, a district that includes the EB Shipyard.
General Dynamics, which employs 11,700 people and does about $4 billion of business annually at the Groton shipyard, also provides the nucleus for an extensive network of small businesses that work on thousands of component parts for submarines.
State Sen. Andrew Maynard, D-Stonington, whose district includes EB, said that while he hopes the $906 million loss projection from OFA is a "worst-case, doomsday scenario," it underscores the need for Congress to act swiftly. "My concern is the uncertainty of all this weighs heavily on our defense contractors and subcontractors," he said. "These are businesses. Congress is taking its sweet time, but I remain cautiously optimistic they can get it together."
Robert Hamilton, communications director for EB, said Wednesday, "It would be very speculative for us to comment now."