The Denver Post - June 10, 2012, By Ann Schrader
The specter of $500 billion in automatic defense cuts beginning next year hangs heavily over the country's aerospace industry — and particularly so in Colorado, which ranks second nationally in aerospace employment and has four military commands.
Even the threat of the cuts has the state's aerospace and economic development communities concerned.
"If something doesn't get done, there will be a slowdown through the fall," said Gen. William Shelton, commander of the Air Force Space Command at Peterson Air Force Base in Colorado Springs.
A slowdown, which some argue already is happening, could include layoffs, no new resources for existing programs, no new programs, no new hires, renegotiated contracts, canceled orders and general stagnation, several experts said.
"It's ominous," said Tom Clark, executive vice president of the Metro Denver Economic Development Corp. The across-the-board spending cuts — referred to as a sequester — could total 10 percent for defense, something Clark called "pretty much a sledgehammer approach."
Sequestration is what could be triggered under the Budget Control Act — which last year reduced the defense budget by $487 billion — after a congressional supercommittee failed in November to hammer out a deficit-reduction agreement.
If Congress doesn't find ways to repeal or forestall the sequester, or doesn't find a budget-deficit compromise, the automatic cuts go into effect Jan. 2.
Members of Colorado's congressional delegation are well aware of what sequester could mean to the state, said Dick Hinson, senior vice president of Aurora Economic Development Council.
Everything, he said, is still in play as work for a solution continues behind the scenes on Capitol Hill. Hinson said he sees signs that the two political parties aren't quite as at odds as they have been.
Sen. Michael Bennet, who last month introduced a bill that would reform satellite exports, is among the delegation working to come up with a deficit-reduction proposal, said Adam Bozzi, spokesman for the Democrat.
"He's heard from Coloradans across the state in his town hall meetings who've told him a comprehensive plan should materially reduce the deficit, be bipartisan and show we're all in it together," Bozzi said. "And it would provide certainty for Colorado businesses that are already worried about the harm a sequester would do to their bottom line."
Defense and aerospace have a $2.8 billion payroll in Colorado, and a 10 percent reduction would cut $280 million out of pay in the state, Clark said.
"That doesn't all result in individuals being cut," he said. "Typically, half is labor and half is materials and buildings, so there would be 1,230 aerospace jobs lost and another 3,300 spinoff jobs."
The potential total job loss: 4,530.
"That's the worst-case scenario, and I don't expect it will happen," Clark said. "But this is a shot across everybody's bow."
Colorado is home to major aerospace and defense contractors such as Ball Aerospace & Technologies and Lockheed Martin Space Systems.
The potential impact of sequestration "already is creating uncertainty throughout our industry and the broader economy," said Lockheed spokesman Michael Friedman.
"It would be devastating, with a significant disruption of ongoing programs and initiatives, facility closures, and personnel reductions," Friedman said.
His boss, Lockheed chief executive Robert Stevens, has not minced words about sequestration potential. "We're not going to hire; we're not going to make speculative investments; we're not going to lean forward," he told the Senate Aerospace Caucus in March.
Half the $784 million annual revenues at Ball Aerospace & Technologies in Boulder come from the defense community.
"Sequestration is the elephant in the room that everyone is ignoring," said Fred Doyle, Ball's vice president and group leader of defense and intelligence.
The biggest issue, Doyle said, is "we don't see any definitive action to define what it is and how it will be implemented. That makes it very difficult to do any advance planning."
The real challenge is that heading off sequestration takes congressional action, Doyle said, adding, "The prognosis of that actually happening is bleak right now."
The government has told its customers and its military not to plan as though sequestration is going to happen.
In Colorado Springs, concern over sequestration hits close to home, said Brian Binn, president of military affairs for the Colorado Springs Chamber of Commerce.
The military employs about one-fifth of the city's workforce, and numerous large and small aerospace companies call Colorado Springs home.
Half of the state's six military installations are in Colorado Springs, contributing about $3 billion to the local economy. Their work ranges from communicating with Global Positioning System satellites in the consolidated space operations center to providing space and cyberspace capabilities for the military and the nation.
"Space capabilities are now indispensable — not only to our nation's defense but to our national economy as well," the Space Command's Shelton said in addressing a global space audience in April.
Shelton said space and cyberspace — two areas he oversees — have been emphasized in the national defense strategy as critical, so he's optimistic about the commitment to those programs as budget work moves forward.
Colorado officials are beginning to take up the sequestration issues.
"We have discussed it, and we're going to discuss it more and develop some positions," said Tom Marsh, co-chairman of the Colorado Space Coalition.
"We're going to have to start preparing for it if it does happen," he said. "The uncertainty has an impact as companies just try to work through the possibilities."
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