Sequestration threat hangs over Charleston
Leigh Ann Wakefield works for the Defense Logistics Agency on the grounds of the former Navy base and shipyard.
Major military jobs
The Navy is the largest employer in the region, with more than 12,000 employees, including both military and civilian workers.SPAWAR Atlantic has 3,100 active military and civilian employees, including more than 850 degreed engineers.The Charleston Air Force Base features the largest C-17 air base on the East Coast, with more than 7,000 active-duty and civilian employees.Source: Charleston Regional Development Alliance
All around her, colleagues are adjusting their lives with an eye toward the Pentagon-mandated furloughs that appear headed their way.
“My biggest fear is that just when the economy is starting to come back up, it’s going to go back down again,” the Summerville resident said.
While Wakefield is for the most part in good shape financially, she worries for others.
“Most people live right at their means already,” she said. “Or at least ‘to’ their means.”
Sequestration could be just days away, and Charleston’s military community is on edge. The Department of Defense, its local installations and its contractors already are making this year’s expenses fit last year’s budgeting, and sequestration would mean billions of dollars more in cuts, unless Congress comes up with a more nuanced solution.
The most optimistic are taking a “wait-and-see” approach, while others in the business believe the automatic cuts are a foregone conclusion.
Ryan Lemire, who leads the North Charleston office of Geocent, a software company that does work for the Department of Defense, has been preparing for the worst since at least last year, and believes the sequester ax will fall on Friday.
“When it was tied in with the ‘fiscal cliff’ and all that, I expected they’d come to a resolution at the same time,” Lemire said.
“When they separated it from the fiscal cliff and kicked it down the road a couple months, it kind of changed the ball game.”
Noah Leask, CEO of Mount Pleasant-based cyber firm ISHPI, feels the same way.
“There doesn’t seem to be a whole lot of bipartisanship and ability to work together today in our top level of government,” Leask said. “In my humble opinion, I think sequestration will go down.”
Sequestration could mean furloughs for thousands of civilian employees at Joint Base Charleston and reduced work for many more private contractors in the area who support the Joint Base’s tenant commands, like the Space and Naval Warfare Systems Center, better known as SPAWAR.
The threat has been hanging since summer 2011, when Congress set up the sequester mechanism, and has become more real since lawmakers postponed the effective date from January to March and, like a Band-Aid, passed a continuing-budget resolution in the meantime.
If Congress doesn’t act by Friday, more than 5,000 federal civilians who work for the military in Charleston face the probability of being furloughed, with workers expected to be staying home one day out of every five for as long as 22 weeks. Those furloughs would likely begin in late April.
The financial impact of sequestration is expected to be significant for military towns like Charleston. Locally, the military employs more than 22,000 people.
That includes the ranks of the active duty, civilian and contract civilian workers. Their contribution adds more than $4.67 billion annually to the local economy, according to the Charleston Regional Development Alliance.
While a 20 percent loss of salary is one thing, defense contractors say loss of their work will be rippled if the government goes to the extreme, possibly even pulling back on already issued contracts.
In a Feb. 15 letter to South Carolina’s congressional delegation, the board of the Charleston Area Defense Contractors Association said there are “more than 250 companies supporting the local defense/government agencies and contributing approximately 10 percent to the Metro Chamber economy.”
CADCA Vice President Jack Moore wasn’t sure where the 10 percent figure came from, but said the bottom line was correct. “The automatic spending cuts that would occur if the sequester takes effect could conservatively cost our area nearly 4,000 jobs,” the letter stated.
Over the next decade, sequestration calls for roughly $1 trillion in cuts, half of which would be cuts to defense programs.
This isn’t the first time Charleston’s military industrial complex has been at risk.
This week marks the 20th anniversary of former U.S. Sen. Fritz Hollings breaking the news that sent Charleston into disbelief and denial: The Charleston Naval Base and Shipyard were targeted for closure.
With that history in mind, Gov. Nikki Haley said last summer that the cuts simply “can’t happen,” and U.S. Sen. Lindsey Graham said allowing sequestration to take effect would be a “national disgrace.”
Newly appointed U.S. Senator Tim Scott said last week that the sequestration situation was not “even close” to the Navy base closure.
Since Hollings’ warning came true, the Navy has clawed its way back as the largest employer in the region, with more than 12,000 employees, including military and civilian workers.
“I think that would be very premature and a signal that we shouldn’t send to anyone that we are preparing to absorb the loss of that number of people,” Scott said, calling such a result “catastrophic.”
He added, “I think we are in a position that is better than the last time for us to hopefully be able to keep the assets that we have.”
SPAWAR alone has more than 2,600 employees and more than 8,000 local contractors, according to spokesman Tommy Groves. Joint Base Charleston had more than 23,500 employees and some 4,900 contractors on base as of November, according to spokesman Capt. Frank Hartnett.
Like other Department of Defense divisions, they have already taken some steps to cut costs, including a hiring freeze, postponing government-sponsored conferences, and curtailing travel and expenses.
Those moves came in response to a Jan. 10 memorandum from Deputy Secretary of Defense Ashton Carter, which noted that the department already is hamstrung thanks to the continuing resolution.
Other planning documents detail cuts in ship maintenance, flying hours and overseas deployments that would be necessary if the continuing resolution is extended or sequestration happens.
For suppliers and others, Hartnett, the Joint Base spokesman, said “at this point, contracts have remained honored.” He added “Until an event takes place at that level” in reference to the Pentagon, “those contracts continue to move forward.”
Leask, of Mount Pleasant-based cyber firm ISHPI, and others believe their government contracts are safe for years to come.
ISHPI specializes in cyber warfare, defense and offense, and Leask sees the demand for those services only increasing, regardless of any overall budget decreases.
“We’re in the hottest market,” he said. “A lot of our clients are well-funded because our mission is picking up.”
Groves, of SPAWAR, hinted that some contracts are less bulletproof.
“The scope of the contracts may need to be readdressed, or there may need to be changes in the performance requirements of those contracts out there,” he said. “There really is a lot of wait and see.”
Rebecca Ufkes, president of UEC Electronics in Hanahan, already has seen the effects. Just a few days after the Jan. 10 letter, Ufkes said an agency visit to UEC was canceled and two conferences UEC planned to attend were canceled.
Not long after, UEC’s contract to work on amphibious assault vehicles, which was supposed to go through 2014, was “defunded immediately.”
Ufkes remained upbeat last week, noting that UEC has commercial contracts, such as with Boeing, in addition to its defense contracts. But she expressed frustration that Congress has allowed the funding situation to reach this dire juncture.
“It’s just shocking that it’s gone on this far. It’s just shocking that what seems to be a No. 1 priority has not been resolved,” she said.
Lemire said Geocent hasn’t “gotten hit” yet, and is still hiring.
But he said there have been longer waits for task order awards within contracts because higher levels of approval are now necessary before agencies spend money.
He has shifted a couple of his guys from defense work to commercial work this year as part of a continuing hedge against federal budget cuts.
“Long-term,” he said, “I see this trickling down and affecting the whole community.”
Government employees agree that ready cash will disappear if the furloughs come. Several interviewed were reluctant to let their employers know they were talking with the press, but confirmed they expected the worst.
“I’m not going to pay down (my) debt as much as I would like,” said one 41-year-old man who wouldn’t give his name but said he worked at SPAWAR.
He pointed to carrying thousands of dollars in house, car, student and home equity loans.
Another man eating lunch outside a restaurant in the Park Circle area of North Charleston said a furlough would mean losing what he called real money.
“I don’t have 20 percent of my income in savings so it’s going to have to come from somewhere,” said the man, who is married, has three children and identified himself only as DoD employee “Matt B.”
Of his future spending habits, “We’re going to be home-bodies,” he said.