October 03, 2012
Impact of Looming ‘Sequestration’ Cuts to Nevada’s Military Bases Difficult to Gauge
That, technically, is Congress’ last day to strike a deal to avoid pushing the country off the “fiscal cliff” — a proverbial construction that’s come to stand for the double-punch of across-the-board tax hikes and budget cuts set to take effect next year that will disproportionately affect the military.
On and off the campaign trail, politicians have been visiting Nevada and warning that the result of those automatic deficit-reducing measures would be catastrophic to the state’s many military communities.
But it’s difficult to determine just how concerned Nevadans should be about the so-called sequestration cuts because no one really knows what they are going to look like.
Here’s what we do know: At the end of the year, absent a lame-duck Congress deal on taxes and spending, the sequester will strike.
Sequestration is the brainchild of Sen. Harry Reid, who devised it amid last summer’s congressional standoff over raising the debt ceiling after a “super committee” of lawmakers failed to deliver a compromise on taxes and spending cuts. It is, on the surface, a $1.2 trillion cut to the budget — half from defense and half from almost everything else.
On paper, the sequester translates to about a 10 percent across-the-board cut to the defense department. Beyond that, there are few details on which programs would be cut or which states would be hardest hit.
“There is still uncertainty about this because we don’t know whether the (Department of Defense) is going to have or allow any kind of leeway for managerial discretion, protecting some accounts over others,” said Michael O’Hanlon, director of foreign policy research at the Brookings Institution.
To some extent, Nevada’s military installations could potentially be protected from severe cuts by virtue of the fact their missions align strongly with the Obama administration’s reprioritization strategy.
Even before the sequestration deal was struck, the Obama administration had begun moving away from building the ground troop capacity needed during wartime to focus more on the country’s post-Iraq, post-Afghanistan security needs in the Asia-Pacific region.
“The Asia-Pacific region in general is more of a naval and air theater,” said Jacob Stokes, a policy analyst with the politically progressive Center for a New American Security. “So, in broad strokes, the Air Force and Navy are going to be on the ascendancy and the Army is going to take some cutbacks.”
Nevada’s particularly unique combination of military interests puts the state in an enviable stance for that sort of planning. Nevada has no Army installations but does host the only F-16 naval fighter pilot training facility in Fallon Naval Air Base. The state also has one of the largest Air Force installations at Nellis Air Force Base. And abutting Nellis is the original drone base,Creech, which still plays a central role in overseas unmanned aerial drone operations.
“They are hugely significant not just to the U.S. Air Force but to our personnel. ... They are supporting guys in Afghanistan in shooting situations every single day,” said Mackenzie Eaglen, a defense expert with the conservative-leaning American Enterprise Institute. “But if we are talking in January, in a post-sequester trigger world, the military will not be able to avoid any cuts, from money that is supporting the war fighters to military personnel and to civilian personnel.”
In other words, Nevada’s military installations wouldn’t be able to escape the sequester cuts entirely.
“The cuts are supposed to come equally from the program, project and activity level,” Stokes said.
But it’s impossible to know exactly how they would be implemented.
“You can’t buy 80 percent of a ship,” Stokes said. “So there’s been a lot of back-and-forth about how they can wiggle out of that if a deal isn’t made in Congress.”
Representatives at Nevada’s military bases said they can’t speculate about the possible effect of the sequestration cuts.
“We would be on the receiving end of the decisions,” said Zip Upham, a public affairs officer from Fallon.
Though he hasn’t weighed in with many details of where cuts might come down, President Barack Obama has put one restriction on the sequester: Military compensation is exempt.
But exempting pay cuts for military personnel means others — including contractors and civilians employed by the military — will have to take a greater hit if the Defense Department is to meet the requirement for the 10 percent cut.
And that’s where the sequester begins to become an economic quagmire.
Take Nellis Air Force Base, for example.
In fiscal year 2011, Nellis, Creech and the Nevada Test and Training Range were home to 9,748 active-duty military personnel and 1,061 National Guard members and reservists. Also on the base’s payroll were 5,246 civilian contractors and employees — about one-third of the total base workforce.
In Fallon’s much smaller workforce, the proportions are similar: The base’s payroll includes 902 military service members and 399 contractors and other civilians, according to that base’s most recent available calculations from fiscal 2008.
“This could be the IT people, it could be the kitchen staff, it could be the paycheck processors and it could even be the intelligence analysts,” Eaglen said.
In terms of payroll, the numbers are comparable: Nellis-Creech-NTTR spent about $856.1 million on military payroll in fiscal 2011 and $302.2 million on civilian employees and contractors. Similar numbers were not available from Fallon.
That means if military personnel are exempt from salary cuts, civilian employees at Nellis could see as much as a 15 percent cut in either workforce, pay levels or the size of contracts, O’Hanlon estimated.
“It depends what their economic relationship is to the base,” he said. “The civilian personnel will perhaps be furloughed one or two months on average. And the contractor workforce may be somewhere in between.
“On the other hand, if you’re providing a service to that base and that needs to be scaled back quickly, then it’s going to hit the contractor harder.”
Gaming exactly how things will shake out for Nellis and Fallon requires details that don’t exist yet. What’s clear is the bases should be bracing for some belt-tightening, even though they they may offer crucial services to the military’s long-term planning.
According to official DOD projections, defense expenditures in Nevada are slated to drop over the next few years — significantly. According to a report published in November 2011, direct defense expenditures, about $5.17 billion in Nevada during fiscal 2011, are projected to drop to $3.4 billion in fiscal 2016.
“What you’re seeing reflected in reports like that is the defense budget cuts that started in earnest under President Obama in 2010 that are just becoming manifest in communities across the country,” Eaglen said.
“While everything has been coming down, the cuts are disproportionately focused on hardware. ... So there’s some strategy here, but a lot of it is just budget-driven,” she said. “Now they’re having to cut people, too, to meet their ever-growing budget targets.”
The Defense Department has sustained one round of cuts to the tune of $487 billion over 10 years. That amount was mandated in the first, pre-sequester round of cuts Congress agreed on last summer.
If there’s another round of cuts, more draconian measures, such as base closures, could be on the table, Stokes said.
“Nevada’s bases would not be on the list, given the capabilities that they’re supporting ... but bases where they do a lot of training can be affected if the cuts aren’t done right,” Stokes said, referring to Fallon's and Nellis’ training programs. “When you’ve got a lot of force structure but you don’t have the money for upkeep, historically what you’ve seen then is there’s somewhat less money to spend on things like training.
“It’s important not to be Pollyannaish about where the budget’s going.”
But like everything else, the debate over the sequester’s potential effects must be viewed through the prism of the election.
Democrats, from Senate Majority Leader Harry Reid to former White House Chief of Staff Pete Rouse, say there is nothing to fear.
“I do not believe that we are going to go over the fiscal cliff,” Reid told reporters last month.
He has remained adamant that the only way to avoid sequestration is for Republicans to agree to certain tax hikes and closing certain tax loopholes.
Even if Congress misses its lame-duck session window to reach a compromise, Reid and Rouse may be right.
Falling off the fiscal cliff could trigger a second recession, but odds are the economic effect wouldn’t last for more than a few months. And just last month, Congress built itself a temporary cushion to break the looming fall: It approved a budget that continues current federal spending levels through March 31, delaying the actual budget chops by at least three months.
But experts warn that assuaging fears about the sequester is no better than indiscriminately raising them when so few details are known.
“I think it’s too soon to predict that this will be easily solved. If it were going to be easily solved, why hasn’t it already?” O’Hanlon said. “I’m hopeful that they’ll find a way. But I see no particular reason to think it’s a gimme.”