By: Bill Cummings
Greenwich Time
HARTFORD — A rush of automatic cuts in federal spending now in the pipeline is creating chaos in Connecticut’s defense industry and threatening the state’s anemic economic recovery.
One large state defense contractor said last week the company is already considering layoffs and state officials are telling agency heads there is no money to replace expected losses in federal aid.
Although the extent of cuts from an ongoing budget stalemate in Washington and the so-called sequestration process is not fully known, early predictions are chilling. The White House estimates at least 3,000 Connecticut civilian defense workers could be furloughed as the Department of Defense cuts $46 billion this year.
A study by George Mason University predicts more than 36,000 job losses in Connecticut’s defense industry, creating a $4.2 billion drop in gross state product. The Center for Security Policy places state defense cuts at $2.2 billion this year.
“Even if the defense cuts are half that, it would be really bad,” said Pete Gioia, an economist with the Connecticut Business and Industry Association. “You would get four-figure job losses.”
The state, which is struggling with deficits and reducing its pending, is bracing for a $58 million reduction in federal aid this year that could leave thousands of residents, ranging from students to the poor and elderly, with reduced services.
Teachers could lose jobs, special education students could be offered less training, children could receive fewer vaccinations and small airports like Sikorsky Memorial Airport in Stratford could lose air traffic controllers.
“Across-the-board cuts mean the loss of thousands of jobs in Connecticut, and that can impede the economic recovery,” said U.S. Sen. Richard Blumenthal, D-Conn.
“I’m still very hopeful we can reverse sequestration by the end of the month by mobilizing bipartisan support for a better and more balanced solution that makes small spending cuts and raises revenue,” Blumenthal said.
Defense layoffs
Eric Remington, a spokesman for the Kaman Corp., an aerospace manufacturer in Bloomfield, said the company is anticipating defense spending cuts of up to $25 million this year.
“This range assumes across the board cuts to all defense programs, whether already funded or not,” Remington said.
“Layoffs and furloughs are considerations. In addition, we would likely reduce overtime and planned hiring. We cannot quantify these actions at this point, but they could be significant,” he said.
In 2012, Kaman received $303.5 million from DOD, or 19 percent of its consolidated revenue.
“Cuts would ripple throughout our supply base. We have significant operations in Connecticut, and one quarter of our 5,000 worldwide employees are based here. So cuts would clearly impact local suppliers,” Remington said.
Connecticut is heavily dependent on defense spending: The state’s $25 billion defense industry provides 42,000 direct jobs and 60,000 indirect jobs through vendors and other suppliers.
Meanwhile, the state’s economy is struggling, making it the worst time to absorb big cuts in defense spending or widespread layoffs and furloughs. The state’s unemployment rate in November was 8.9 percent, and 1,800 jobs were lost in December. The state ended 2012 with a disappointing 100 fewer jobs than in 2011.
Making matters worse, Metropolitan Life Insurance Co. on Thursday gave layoff notices to 650 workers in Bloomfield as part of a national relocation of 2,600 employees to North Carolina.
“Overall, it shows an economy that isn’t even in first gear right now,” Gioia said. “It’s really stuck in neutral.”
Because of sequestration, the federal government this year is forced to cut defense spending by 13 percent and non-defense outlays by 9 percent, with exceptions for what is deemed essential.
The first cuts began March 1, and more are scheduled for the end of the month.
U.S Sen. Chris Murphy, D-Conn, said defense cutbacks will worsen unless sequestration is reversed.
“There has already been a slowing of contracting and purchasing at DOD,” Murphy said. “It’s slowing to a halt. It’s going to be significant.”
Connecticut Republican Party Chairman Jerry Labriola said sequestration cuts will hurt the state, but blamed President Obama for not striking a deal with congressional Republicans.
“The effects of the sequestration cuts will hurt Connecticut just as they will hurt many states,” Labriola said. “What is worse is the president has now resorted to irresponsible scare tactics to advance his `my way or the highway’ approach to governing.”
Uncertainty
Bob Hamilton, a spokesman for Electric Boat in Groton, which builds submarines for the Navy, said the company doesn’t know how bad defense cuts will be.
“We don’t have any firm direction from the Navy. At this point, we are uncertain. It makes it difficult to plan,” Hamilton said.
Electric Boat is a $4 billion company dependent on defense spending to keep its 12,000 employees working. Company officials have privately said they believe big-ticket items like new submarines are safe from cuts.
But smaller procurements could be at risk, and spending cutbacks of just a few percentage points could impact hundreds of employees, those officials said.
Blumenthal said two authorized subs will be built but there is an open question about six others and how much funding Electric Boat will receive in 2014.
The White House said a repair contract for the submarine USS Providence is at risk.
A White House list of effects on Connecticut this year include the loss of $15 million in defense-related payroll, $1.6 million in cuts to Army base operations and the loss of $13 million for two demolition projects in New London.
Ray Hernandez, a spokesman for Pratt and Whitney in East Hartford, said his company is in a holding pattern.
“We continue to assess the impact of sequestration on our business now that it has gone into effect. The cuts will be felt, especially in the supply chain, where decisions on hiring and capital investments are likely to be delayed,” Hernandez said.
Paul Jackson, a spokesman for Sikorsky Aircraft in Stratford, said, “Uncertainty remains. We are waiting to hear from our government customers as to how they will comply and what that will mean for us, in particular our U.S. government support programs and our supply base.”
Longer lines
Ben Barnes, director of the state Office of Policy and Management, said there is no money to replace lost federal funding.
“The state does not anticipate being able to make up for or replace funding reductions to state or local agencies resulting from sequestration,” Barnes told agency heads.
U.S. Rep. Rosa DeLauro, D-Conn, said Democrats are working to convince Republicans of the dire need to prioritize cutbacks.
“Health care, education air traffic control, job training, defense, you name it, it’s all going to be impacted negatively. And it’s wrong,” DeLauro said.
A sudden round of layoffs, or even a modest retraction caused by federal cutbacks, could damage Gov. Dannel P. Malloy’s proposed $43 billion, two-year state budget.
Gioia said Malloy’s proposed budget employs “robust assumptions” regarding job growth, including an expectation that 17,000 jobs will be created next year and 37,000 more between 2015 and 2017.
The proposed state budget relies on borrowing, spending cuts and increased revenue from economic growth to erase a $1.2 billion deficit over the next two years.
Predictions
A report issued by the Army in February said Connecticut’s economy would lose $108 million and 747 jobs because of reduced Army spending.
Federal officials warn Coast Guard operations could be cut by 25 percent and wait times to clear customs at ports and airports could be twice as long because of reduced personnel.
A 2012 report by George Mason University in Virginia said the defense budget trimming could reduce the nation’s gross domestic product by $215 billion, decrease personal earnings by $109 billion and cost the U.S. economy 2.1 million jobs.
The report predicts 36,230 job losses in Connecticut due to defense cuts and 5,712 job losses because of reduced aide to state government.
The Center for Security Policy based in Washington, D.C., said defense spending reductions in Connecticut could result in 34,215 fewer jobs, a $1.9 billion loss in earnings and a $2.9 billion loss in gross state product.
The center estimates 656 civilian defense jobs could be lost along with 319 active military jobs.
“It should not happen all at once. It just gets worse and worse,” Murphy said of the sequestration cuts.
“Republicans are interested in adding defense dollars, but not for any other program,” he said. “Some Republicans are gleefully waiting for cuts to go into place. I’ve learned not to predict this place, but I’m hopeful moderates and pragmatists will win out.”
The state GOP’s Labriola countered that Obama “has only one tool in his toolbox: taxes and more taxes.”
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