With the axe of $500 billion in automatic defense cuts hanging over the aerospace industry, Colorado is set to be hit particularly hard. The state currently ranks second nationally in aerospace employment and has four military commands.
Federal discretionary spending is facing a sequestration that would automatically cut federal spending by $1.2 trillion over ten years, beginning on January 2, 2013, unless new legislation is enacted to prevent it. It includes $0.8 trillion in cuts to defense programs and $0.7 trillion in cuts to non-defense programs.
"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, in the Denver Post.
Defense and aerospace have a $2.8 billion payroll in Colorado. So a 10 percent reduction in defense spending would cut $280 million in payroll in Colorado, said Tom Clark, executive vice president of the Metro Denver Economic Development Corp, in the Denver Post.
"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 worst-case scenario is that 4,530 jobs will be cut he said.
Colorado is home to major aerospace and defense contractors such as Ball Aerospace & Technologies and Lockheed Martin Space Systems. The cuts could translate to layoffs in the state, no new resources for existing programs, very little new hires, renegotiated contracts, canceled orders and general stagnation, some say. The potential sequestration "already is creating uncertainty throughout our industry and the broader economy," said Lockheed spokesman Michael Friedman.
"We’re not going to hire; we’re not going to make speculative investments; we’re not going to lean forward," Lockheed chief executive Robert Stevens told the Senate Aerospace Caucus in March.
Colorado Springs might be hit especially hard, since the military employs about one-fifth of the city’s workforce, and numerous aerospace companies are located in the city. "We’re going to have to start preparing for it if (sequestration) does happen," said Tom Marsh, co-chairman of the Colorado Space Coalition. "The uncertainty has an impact as companies just try to work through the possibilities.”
