For a preview of how states are likely to respond to deep cuts in federal military spending — a key component of the debt-reduction deal Congress approved this month — consider the Pentagon's proposal a year ago to eliminate the Joint Forces Command, a sprawling military installation near the mouth of the Chesapeake Bay in southeastern Virginia.
Last August, then-Defense Secretary Robert Gates announced that the installation — one of 10 headquarters for U.S. military operations around the world — would be shuttered as a result of Pentagon budget cuts. Its operations, Gates said, relied too heavily on outside contractors, the kind of spending that the defense secretary wanted to curtail, and he suggested that its specific mission of training troops to work in a joint capacity had largely been fulfilled.
But for Virginia, the installation was far more than a military training and command center. With an annual operating budget of $838 million and a workforce of 5,700 civilians, contractors and military personnel located in two neighboring cities, Norfolk and Suffolk, the Joint Forces Command represented an economic powerhouse . And Virginia's leaders were not going to accept its demise without a fight.
Republican Governor Bob McDonnell called the proposed closure "outrageous," and set up a commission charged with retaining and expanding U.S. military operations in the state. Democratic U.S. Senator Jim Webb protested by blocking all of the Defense Department's pending nominees in the Senate. Webb and the House member who then represented the district surrounding the installation introduced legislation that demanded the Pentagon give "full justification" for the decision. And a team of state officials demanded a face-to-face meeting with Gates, which they eventually got last November.
In the end, Virginia's protests paid off. The White House announced in January of this year that the Joint Forces Command would indeed be eliminated, but that it would be restructured and that about half of its budget and personnel would be retained in southeastern Virginia. The dismantling of the command became official earlier this month — almost exactly a year after Gates first proposed it — but thousands of civilian employees remain, and the economic devastation that had been widely forecast has not been realized.
The story of the Joint Forces Command highlights the tug-of-war that is likely to happen between the federal government and individual states as national leaders try to reduce the federal debt. Military spending, a major driver of many states' economies, is targeted for large cuts in the debt-reduction deal. While state leaders from both parties regularly criticize the federal deficit as unacceptable, they also have their own states' best interests in mind, and they are keen to avoid cuts that could cost their constituents jobs in a fragile recovery. As Virginia's example makes clear, states have a powerful incentive to make sure that the deepest budget cuts happen elsewhere — effectively opening up a new front in their long-running battle for jobs and economic development.What's at stake?
At Stateline has reported, states so far have fared relatively well in the debt-reduction deal. Key state-specific programs such as Medicaid, food stamps and children's health insurance were specifically exempted from the cuts ordered by Congress, although they could reappear in discussions held by a congressional "Super Committee" in the fall. Military programs, on the other hand, have already been targeted for a minimum of $350 billion in cuts over 10 years, with the possibility of $600 billion more if the Super Committee fails to agree on other areas to cut — a strong possibility given Washington's well-known gridlock.
State officials from Alaska, Hawaii, Maryland, New Mexico, Virginia and other military-dependent states are being tight-lipped about how deep Pentagon cuts would affect their economies, saying that far too many details of the debt deal are still unknown. But the plan has clearly served as a wake-up call in some states where the Pentagon provides much of the economic activity.
In Virginia, which is home to the Pentagon itself as well as a range of important military bases and contractors, McDonnell last week reported a $545 million state budget surplus amid better-than-expected tax collections. But he tempered the celebrations by advocating for the creation of a new state fund to safeguard against the impending federal cuts in military and other spending.
In Maryland, some business groups and economists say the state needs to fundamentally rethink its economic development strategy in light of a shrinking federal role. The state is home to the National Security Agency and tens of thousands of military jobs at bases including Andrews Air Force Base, Aberdeen Proving Ground and Fort Meade.
Meanwhile, the list of the federal government's top defense contractors "reads like a who's who of Maryland business," says Ron Wineholt, vice president of government affairs for the Maryland Chamber of Commerce. The contractors include Lockheed Martin, Northrup Grumman, Textron, and hundreds of smaller businesses that compete for defense and research work.
A recent study by Blueprint Maryland, an advocacy group that is pushing for Maryland to diversify its economy, found that hundreds of thousands of Maryland jobs are at stake in the federal government's negotiations over debt. "Maryland's principal industry is the federal government," the study found, "and that is now the American industry most likely to downsize in the years ahead."
For their part, Maryland officials say they think they can absorb the cuts that have already been approved. But they are concerned about what might happen if more are triggered.
"If the cuts stay in the $350-to-$400 billion range over the next 10 years, I think the cuts in Maryland will be relatively modest," says Mike Hayes, a retired Marine Corps brigadier general who now works for the state Department of Business and Economic Development. Hayes believes Maryland actually may be well-positioned if Pentagon cuts focus primarily on personnel, since the state's renowned high-tech sector can provide information technology and other services that could replace manpower. "If we diminish the number of people in uniform," he says, "then we become dependent on the very best technology that we have."
But Hayes sees far bigger problems on the horizon if deeper military spending cuts become reality. "If they go beyond ($400 billion)," he says, "then I think we're in uncharted territory, frankly."Jockeying for position
With the Super Committee set to start its work in the fall, the jockeying among the states has already begun. The Associated Press recently noted the Pentagon has many friends on the Super Committee, which is tasked with finding at least $1.2 trillion more in federal spending cuts by the end of this year. The committee includes senators and representatives from military-dependent states including Massachusetts, Ohio and Washington State, and there is growing speculation that hundreds of billions of dollars in additional defense cuts are simply unacceptable to many members of the committee.
Indeed, the two states with arguably the most on the line — Maryland and Virginia — have some of the best-connected politicians who will be working hard to safeguard their interests. Maryland has House Minority Whip Steny Hoyer, Super Committee member Chris Van Hollen and Martin O'Malley, head of the Democratic Governors Association. Virginia has House Majority Leader Eric Cantor and McDonnell, the head of the Republican Governors Association.
For some states, meanwhile, a major dependence on federal military spending creates an unusual political dynamic as the Super Committee begins its work: State officials actually could be pushing for entitlement cuts or reductions in state aid that they might otherwise oppose, since the alternative — automatically triggered military cuts of historic magnitude — may be even less palatable for them.
"From a Maryland perspective, the best solution would be adjustments made to Social Security, Medicare and Medicaid," Anirban Basu, a prominent economist with the Sage Policy Group, a private consulting firm, recently told The (Baltimore) Sun. "That would spread the pain of those adjustments across the country and not just disproportionately impact Maryland's economy."