By: Kevin Eigelbach
Most of Business First’s coverage about the “fiscal cliff” of tax increases and budget cuts set to go into effect next year has focused on the tax increase side — for example, the expected increase in the capital gains tax.
But the Budget Control Act of 2011 also calls for $110 billion in annual spending cuts from 2013 to 2022, split evenly between defense and non-defense discretionary spending. And that cut in defense spending could affect Louisville-area businesses with ties to the defense industry.
In September, the Washington, D.C.-based Center for Security Policy issued a report that showed defense spending in Congressional districts in 2011, which should give readers some idea of how much money is involved. I pulled together the numbers for Jefferson, Oldham, Shelby and Bullitt counties in Kentucky, plus Floyd, Clark and Harrison counties in Indiana.
They show that for 2011, $4.3 billion in military contracts were issued to companies headquartered in those counties.
The largest contract by far — $3.4 billion — went to Louisville-based Humana Military Healthcare Services Inc., a subsidiary of Humana Inc. (NYSE: HUM) that administers health benefits for the U.S. Department of Defense. The second-largest contract was for $520 million for UPS Contractor Team, 825 Lotus Ave., which provided nonscheduled chartered freight air transportation.
As you might expect, BAE Sysems Land & Armaments Inc., 163 Rochester Drive, was on the list with a $108 million contract to make electronic components. As Business First previously reported, BAE’s work in Louisville includes propulsion systems for Virginia-class attack submarines and an advanced gun system for the U.S. Navy.
Rounding out the top five contracts are $70 million for United Parcel Service Co. (NYSE: UPS), 1400 N. Hurstbourne Parkway, for scheduled freight air transportation and $49 million for Strategic Communications LLC, 1961 Bishop Lane, for telephone apparatus manufacturing.
With 80 percent growth in revenue from 2010 to 2011, Strategic Communications was the fastest-growing company in the Business First Fast 50 list this year. The company provides information technology products and services for Department of Defense agencies worldwide.
The Center for Security Policy estimates that Kentucky would lose defense contracts worth more than $957 million every year if the automatic cuts go into effect.
According to the Center for Security Policy Web site, the agency was founded in 1988 as a non-partisan, non-profit organizaiton that advocates “Peace through Strength.”