Military news a mixed bag for state’s economy

Military installations and defense contractors are taking the brunt of the automatic budgets cuts mandated by sequestration. Why should we care?

Washington has major bases and military suppliers such as Boeing. They contribute more than $13 billion to our economy, about 4 percent of total GDP. A July 2012 study by George Mason University projected that sequestration could cost our state 41,000 military-related jobs. The U.S. withdrawal from Iraq and Afghanistan will also have an impact.

According to Defense News, sequestration will cut $15.8 billion from the Pentagon’s 2013 budget and another $37 billion in cuts to defense contractors, including The Boeing Company.

While Boeing’s major focus in Washington state is commercial aircraft production, the company is one of the world’s largest manufacturers of military aircraft with $33 billion in sales and 59,000 employees worldwide. That section of Boeing’s business is under pressure. The Navy has already announced an $18 million cut to its $1.3 billion program to buy 18 V-22 Osprey tilt-rotor aircraft from Boeing and Bell Helicopter.

Even though this particular program is not located in our state, cuts to Boeing’s military contracts will compel the company to redouble its efforts to economize across the nation – including scrutinizing the operating and regulatory costs that color decisions on where to operate or expand both its commercial and military production lines.

Fortunately, one of Boeing’s major military contracts in Washington escaped the sequestration budget ax so far. The company’s $35 billion contract to produce 179 KC-46A aerial refueling tankers in Everett over the next 14 years has not been affected. In late June, Boeing workers in Everett loaded the first wing span for the first U.S. Air Force KC-46A, putting the company on track to meet its first delivery in 2016.

Unfortunately, Spokane’s Fairchild Air Force Base lost its bid to host the first 36 K-46A refueling tankers, a decision Gov. Inslee called, “extremely unfortunate.” However, U.S. Rep. Cathy Morris Rodgers, R-Spokane, is optimistic, noting that Spokane is still in the running to host future KC-46A tankers.

Reducing our military presence in the Mideast will directly impact jobs in Puget Sound. Joint Base Lewis-McChord will lose about 4,500 active-duty soldiers over the next few years, including deactivation of the 4th Stryker Brigade, 2nd Infantry Division. On the plus side, Lewis-McChord will continue its role as the Army’s West Coast force projection base.

Reductions in Washington’s military presence create a ripple effect throughout our state’s economy.

According to the Tacoma News Tribune, an Army study released earlier in the year suggested a reduction of 8,000 soldiers from Lewis-McChord would cause more than 20,100 military family members to leave the Puget Sound area, prompting the loss of more than 10,000 military contract and private-sector jobs.

One positive note, Pentagon officials have indicated that, as the U.S. withdraws from Iraq and Afghanistan, it may shift more of its resources to the West Coast as the focus shifts to the Asia-Pacific region.

The state is also shifting its bureaucratic focus. Acting on a Gregoire administration study recommendation, Gov. Inslee’s new budget creates the position of director of military affairs, a $300,000 allocation designed to help the governor’s office coordinate with state agencies and local communities on military issues.

Unfortunately, coordination alone is not enough.

For example, the governor’s comprehensive “Washington Aerospace Strategy” talks about the need to reduce federal regulatory burdens to ensure a competitive business environment. Hopefully, that includes addressing similar burdens at the state level.

Keeping military bases and contractors really is no different than keeping other employers. It largely depends on costs to operate, the desire to keep them here, and setting regulations that are reasonable and achievable.

Don Brunell is the president of the Association of Washington Business. Formed in 1904, the Association of Washington Business is Washington’s oldest and largest statewide business association, and includes more than 8,000 members representing 700,000 employees. For more about AWB, visit www.awb.org.