Connecticut’s defense industry braces for ‘unthinkable’ Pentagon cuts

Washington — Once unthinkable, dramatic cuts to the Pentagon’s budget that would hurt Connecticut’s defense industry are now looking more and more real.

The so-called sequestration could cost the state as many as 42,000 jobs, one study estimates.

Congress has a deadline of March 1 to find billions of dollars in cuts to the federal budget to avoid automatic, across-the-board reducations, half of them to the Pentagon’s budget.

At a Senate Armed Services Committee hearing Tuesday, Undersecretary of Defense Ashton Carter said he’s been asking lawmakers to avoid the automatic cuts, known as sequestration, for months.

“Now the wolf is at the door,” he said.

The looming cutbacks, on top of reductions to the Pentagon’s 2013 budget, have caused defense contractors to retrench, stop hiring or even laying off workers and postponing expansion plans.

“There is a lot of frustration and uncertainty in the market,” said Pratt & Whitney spokesman Ray Hernandez.

In a recent filing with the Securities and Exchange Commission, Pratt & Whitney’s parent company, United Technologies, said it is “sensitive” to U.S. military budgets “which may fluctuate based on the policies of the current administration or Congress.”

“One or more of the programs that we currently support could be phased out or terminated. Reductions in these existing programs, unless offset by other programs and opportunities, could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition,” the company said.

While sequestration will be tough for large defense contractors, smaller companies that make up the industry’s supply chain would be harder hit, Hernandez said, and are already hurting from the uncertainty about defense cuts.

According to a study by George Mason University economist Stephen Fuller, Connecticut could lose up to 42,000 jobs if sequestration is implemented.

To plan for a sequester, the Navy plans to postpone $300 million in emergency repairs to the USS Miami, a Groton-based attack submarine that was damaged by suspected arson last year.

The Army plans to cut its helicopter training by 50 percent, so pilots wouldn’t be able to fly enough to meet proficiency requirements. Cutbacks at flight schools would also leave the Army short about 500 aircrews for its fleet of helicopters. That could eventually affect Sikorsky’s helicopter contracts with the Army.

Paul Jackson, spokesman for Sikorsky, said the company has created “hypothetical models” to cope with a new era of austerity. But he said the helicopter manufacturer is at the mercy of Congress and the Pentagon.

“We need to get some real direction,” he said.

There are dozens of cost-cutting measures planned by all branches of the Armed Forces. Top brass must submit their cost-cutting plans by Friday, but many of their proposals have been leaked, in part to pressure lawmakers.

Sequestration was approved in a 2011 deal to raise the national debt limit. It was designed to be so onerous that lawmakers would rush to replace it with targeted cuts to the federal budget. But that hasn’t happened.

In fact, in the last few weeks, Republicans, including House Budget Committee Chairman Paul Ryan, have indicated they will accept the draconian cuts because they think President Obama and congressional Democrats are unable to come up with another way to cut the federal budget.

Robert Ross, executive director of Connecticut’s Office of Military Affairs, said that with sequestration looming, work on certain projects has already stopped at the Naval Submarine Base New London, including the demolition of old buildings and other plans to modernize the plant.

“Things that we would like to get done, can’t get done,” Ross said.

Even without the sequestration cuts, Connecticut’s defense industry is projected to shrink by  10 percent because of other reductions to the Pentagon’s  spending.

Ross said sequestration would sharply increase the pain of a shrinking industry. He also said Connecticut’s defense contractors are unable to plan as they wait for Congress to act.

“The industry we have here in Connecticut can’t make the choices they should,” Ross said.

Rep. Jim Himes, D-4th District, said the impasse over sequestration has already taken a toll because it was blamed for the slow growth of the U.S. economy at the end of 2012.

“We are playing Russian roulette with the U.S. economy,” Himes said.

He said the Pentagon’s budget must shrink if the nation ever hopes to trim the federal deficit. But Himes said those cuts should be “thoughtful,” weeding out “obsolete and unsuccessful” programs and weapons systems and saving “weapons of the future,” like Sikorsky’s Blackhawk helicopters.

Besides laying off civilian workers, furloughing active duty military members and postponing repairs and overhauls of ships and planes, sequestration would mean that Tricare benefits — the health care program for military members and veterans — could not be paid after the end of summer.

Military leaders also warn of a “hollow force.”

“We will immediately erode the readiness of the military,” said Navy Adm. Mark Ferguson. “We must also be mindful of the corrosive effect of this uncertainty on the morale of our people.”

Pratt & Whitney President David Hess and other defense industry executives who attended a White House meeting last weekend urged President Obama’s senior advisers to do everything possible to cancel the cuts to the defense industry —  or in the very least postpone them.

A few days later, Obama proposed a sequester-avoidance package built on a combination of tax increases and spending cuts that would leave the military with $21 billion less than originally planned for this fiscal year and roughly $250 billion less through fiscal 2022 — about half of the reduction the military faces if there is no deal.

Republicans, however, are unwilling to sign onto a plan in which 50 percent of the savings would come from tax increases.

Congress has just a handful of working days before the March 1 deadline.

Still, Rep. Joe Courtney, D-2nd District, who sits on the House Armed Services Committee and represents New London’s sub base, said he’s optimistic sequestration will be avoided.

“I am still of the belief that cooler heads will prevail,” Courtney said.