California Sequestration Impact, Local Response, and National Scope

California sequestration impact BladeBorge / Shutterstock.com[/caption]

Congress has let the future of the nation’s budget go down to the wire — again. Lawmakers are having trouble agreeing on a budget deal as the March 1 sequestration deadline approaches and the state of California is anticipating cuts.

Federal sequestration came out of the Budget Control Act of 2011 as motivation for lawmakers to pass a budget on time. To put the large concept short, the federal government forces itself to make indiscriminate budget cuts to defense and domestic spending.

Cuts would amount to $1.2 trillion in a 10-year period, and certain sectors have nuances with regards to the portion in which it is cut. Tweet stat:

Washington is currently operating under a Continuing Resolution (CR). This has allowed the federal government to work at 2012 funding levels for a six-month period. It has been in effect since September 2012. The CR is set to expire on March 27 and the government faces potential shutdown in the absence of a budget agreement.

Sequestration was developed by Congress, so it’s hard to believe that Congress would let it happen. However, stop-gap measures can only buy so much time. The Office of Management and Budget (OMB) stated, “the sequestration itself was never intended to be implemented.” Tweet quote:

[For an in-depth look into how lawmakers arrived at this point, check out IVN’s previous coverage.]

California Sequestration Impact

The most notable sector affected by these cuts is defense, specifically ‘military readiness’. In California, furloughs for around 64,000 Department of Defense (DoD) civilian employees are scheduled to take effect. Tweet it:

The resulting payroll reduction saves $400 million for 2013. Army and Air Force operation funding in California would be reduced by $54 million and $15 million, respectively.

It’s important to note that sequestration does not touch military personnel salaries and benefits. The cuts come from defense projects, contracts, and DoD civillian employees.

Other notable cuts in California that would take place in 2013 alone:

  • Head Start early education program would service 8,200 less children. (For more on Head Start, read IVN’s previous coverage.)
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  • Elementary and secondary education would lose 87.6 million in federal funding, putting around 1,200 teaching jobs at risk, affecting 187,000 students and 320 schools.
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  • Education for children with disabilities will also lose $62.9 million.
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  • $12.4 million in federal funding for environmental protection would be lost.
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  • $1.6 million loss in grant money for law enforcement and public safety.
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[For the White House report on the California sequestration impact, click here.]

The Local Response

In San Diego, the Department of Defense is its largest employer. The San Diego Military Advisory Council (SDMAC) explains that Congress’ Continuing Resolution (CR), along with sequestration, magnifies the impact on defense jobs.

For example, Naval ship repairs will be cancelled which would result in 4,000 to 5,000 layoffs (40-50 percent of employees) starting in April for the ship repair workforce. San Diego’s 25,000 DoD civilian workers will also experience furloughs due to sequestration.

Executive Director of SDMAC Larry Blumberg was contacted to discuss how the defense sector has prepared for the spending cuts. Mr. Blumberg explained that the Defense Department notified military services that there would not be a need to prepare for sequestration:

“The administration was in complete denial that the sequester was going to happen. Direction came down through the Department of Defense to the military services, ‘you are not to plan for it.’ It was specific guidance to not plan for it.

Mr. Blumberg said that military services did not plan or anticipate for the effects until mid-January. He also stated that he’s well connected to the activity in Washington and is not confident that lawmakers will be able to make a sound decision to avoid the sequester.

SDMAC is connected with the San Diego Workforce Partnership and Economic Development Corporation to help affected defense employees. Without a long-term budget, the defense sector is unable to do long-term planning for projects and employment.

San Diego City Council President Todd Gloria was also contacted for comment on how federal sequester impacts local governing. He noted that about one in four jobs in the city are connected to defense spending and stated:

“If a number of jobs are cut due to budget constraints, the unemployed people will likely spend far less money and will therefore impact the taxes from which the City benefits.  If the City has less money, we’ll obviously need to revisit our budget priorities.”

Mr. Gloria stated that the Council “will be able to act to address likely local impacts through our budget process.” The city government formally opposed federal sequestration as one of its 2013 legislative priorities.

San Diego also has a large scientific and bio-technical presence. Representative Scott Peters (D-CA) paid a visit to the Salk Institute for media availability. The San Diego Free Press’ Andy Cohen covered the event and highlighted the stake scientific research has in sequestration:

“About 42,000 people work in science and biotech, equating to the loss of 3,100 life-science jobs and an additional 1,400 industry support jobs, and $290 million in funding.”

The future of STEM (Science, Technology, Engineering, and Math) jobs face potential impacts. Congressman Peters stated that important, well-paid STEM jobs could leave the United States as a consequence of sequestration.

The National Scope

The estimated percentage of overall cuts are said to be around five percent in non-defense sectors and eight percent in defense.

Libertarian 2012 presidential candidate and two-term governor of New Mexico, Gary Johnson, sees federal sequestration as a step in the right direction. However, the lack of a plan to reduce the national debt still leaves fiscal conservatives like Gov. Johnson unsatisfied. Throughout his campaign, Johnson advocated a 43 percent reduction of federal spending — much bigger scale than sequestration.

The following graph from the Congressional Budget Office (CBO) projects federal spending up until 2021 with or without sequester cuts:

National and California Sequestration Impact

California operates as the ninth largest economy in the world. It is understandable that the state, and cities like San Diego, would want to avert sequestration. However, the large scope of government spending and absence of a meaningful budget may be the bigger focus of the politically active.