Automatic federal spending cuts still pose a significant risk to government contractors in Connecticut, defense industry experts told state business leaders on Friday, and the state must position itself to be competitive amid increased budget pressures in the coming years.
Jay DeFrank, vice president, Communications and Government Relations, Pratt & Whitney, joined Whitcraft Group CEO Colin Cooper and Robert Ross, executive director, Connecticut Office of Military Affairs, for a defense panel discussion at the 2013 Economic Summit and Outlook in Hartford. The event, presented by the Connecticut Business & Industry Association and the MetroHartford Alliance, is the largest economic conference in southern New England.
The American Taxpayer Relief Act of 2012, signed into law last week, includes a provision that delays the automatic spending cuts – "sequestration" – until March 1. Studies commissioned by the Aerospace Industries Association found that the cuts put more than 2 million American jobs at risk, with Connecticut among the states most likely to lose jobs.
"Basically nothing has changed on the threat of sequestration and its potential impact on companies who do a significant amount of business with the Department of Defense or the federal government," DeFrank said. "Both Pratt & Whitney and Connecticut have a lot at stake in how sequestration plays out."
Citing a George Mason University study, DeFrank noted that 42,000 Connecticut jobs – many in small businesses with 500 or fewer employees – are threatened if the sequestration cuts go into effect. Pratt & Whitney does business with 463 supplier firms in Connecticut, while UTC deals with a total of 600.
"Threatening an entire industry with a trillion dollars in cuts can quickly cascade to states, communities and individual businesses – costing jobs and capital investments at a time when we're struggling to recover from the recent recession," DeFrank said. "In fact, just the threat of sequestration is already having an effect, particularly in the supply chain, by suppressing hiring decisions and capital investments."
The long-term outlook, DeFrank explained, is that sequestration is just the first of many government spending battles to come. With Department of Defense suppliers already facing pressure to keep costs low, Connecticut businesses need to capitalize on their strengths in high-tech manufacturing. At the same time, he noted, state legislators must institute policies that make Connecticut a "business advantage" and encourage long-term investments.
"We need to recognize that we are facing a long-term, challenging trend with the budget environment we're in. This trend will dictate major changes in how companies in Connecticut that depend on defense and government spending do business," DeFrank said. "We can recognize the difficult long-term challenge ahead and turn it to our advantage by seizing this opportunity to collaborate on positioning ourselves for the future. Or, we can react to it year after year as it erodes the industrial base and the economic foundations of our state."
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