Possible military cuts unnerve contractors
By Barrie Barber | Dayton Daily News | Published: August 15, 2012
DAYTON -- Months before automatic, across-the-board defense budget cuts could strike, the defense industry is being impacted by automatic federal budget cuts with pay cuts and layoffs, the leader of a Miami Valley defense contractor said.
"We are drowning in a sea of uncertainty," Sam Greenwood, chairman of The Greentree Group in Beavercreek, said at a defense forum Tuesday at Sinclair Community College in downtown Dayton.
Some defense contractors are still evaluating whether they have to send out layoff notices before the November election to comply with a federal law for a 60-day notice for large job cuts, other company representatives said at the forum.
The Greentree Group has laid-off about 20 percent of its workforce, Greenwood said.
The automatic 10 percent cuts, known as sequestration, would begin in January if Congress and the White House don't take action to avert about $500 billion targeted at the defense budget over a decade. The across-the-board reductions are in addition to the $487 billion the Defense Department agreed to absorb through 10 years. Sequestration was set into motion when a bipartisan deficit reduction committee failed to reach agreement last November on how to reduce the deficit by $1.2 trillion over 10 years.
"That has potentially disastrous consequences for the economy of the Dayton region which depends so heavily on defense spending," said Jeff Hoagland, executive director of the Dayton Development Coalition. "The implementation of the cuts would result in significant job losses in Dayton and in the state. National defense is by far the biggest creator of jobs in the Dayton region."
U.S. Rep. Mike Turner, R-Centerville, organized the forum with defense-related speakers, and state Sen. Peggy Lehner, R-Kettering, state Rep. Jim Butler, R-Oakwood, and Greene County commissioners Alan Anderson, Marilyn Reid, and Rick Perales.
Turner emphasized while the defense budget has a 17.6 percent slice of federal spending this fiscal year, it would absorb 53 percent of budget cuts through 2022. "Right now, prospects do not look good at a last minute deal to save these jobs," he said.
Estimates vary widely on how many jobs sequestration might cut in Ohio and nationwide. Turner has said sequestration could mean the loss of 4,000 to 5,000 jobs in the region. Statewide, observers have estimated from 6,000 to 40,000, with no clear consensus or agreement on the final number. President Barack Obama signed the Sequestration Transparency Act this month which will require the federal government to spell out within 30 days where the cuts would fall.
"It's almost impossible to do any planning," said Dennis J. Andersh, Science Applications International Corp. vice president and Dayton regional executive.
Some companies have redirected part of their workforce away from government contracts and more to other income generating streams to compensate, officials said.
David Harry, president of GemCity Engineering and Manufacturing in Dayton, said sequestration would hurt the kind of science, engineering and technology jobs, such as mechanical, electrical and computer science at his company, the nation says it most wants and needs.
Fewer defense dollars could mean partial hiring freezes and unpaid government furloughs, less base construction, reduced Air Force flight hours and less funding or delays in payments for Tri-Care, a military health care insurance program, Hoagland said based on a senior defense official's statements.
Hoagland said he couldn't say how many jobs or the full effect of those consequences that might mean at Wright-Patterson Air Force Base, which employs more than 27,000 civilian and military employees and has a more than $4.5 billion impact on the economy.
"Wright-Patterson is not only the area's top employer, it's bigger than the second, third and fourth largest employers combined," he said.
Phil Parker, president of the Dayton Chamber of Commerce, said defense job losses have the potential to eliminate the job gains the region has reached with an expansion of jobs at Wright-Patterson while manufacturing faded.
While job losses could happen in defense, officials also touted the potential for significant job gains in southwest Ohio with the expected expansion of the unmanned aerial vehicle industry in both the military and civilian sectors. The region is in contention to be chosen as one of six test sites nationwide to integrate unmanned aerial vehicles into manned civilian airspace by 2015.
The campaign of Sharen Neuhardt of Yellow Springs, a Democrat who opposes Turner in the November election, released a statement about the forum saying Republicans and Turner were unwilling to compromise on "unpopular divisive tax breaks for the wealthiest Americans" to find a bipartisan solution to avoid sequestration in both defense and domestic programs.
A spokesman for Turner has said the congressman did not support raising taxes during an economic recession.
The Project On Government Oversight in Washington, D.C., also has challenged the contention more defense spending equals more jobs.
"What we've seen historically is defense spending is one of the least productive ways to create jobs," Benjamin Freeman, a POGO national security investigator, told the Dayton Daily News.
Turner said defense advocates were not calling for more defense spending, but avoiding cuts Defense Secretary Leon Panetta has said would weaken national security.