CT defense industry big loser in federal budget stalemate
Washington – With only days to act remaining, Congress is once again on the brink of a fiscal crisis that will have a special impact on Connecticut’s $13 billion defense industry.
Congressional feuding about how fund the federal government has resulted in the rise of several scenarios – none of them good for those dependent on Pentagon dollars.
Observers say there are prospects that federal funding may be frozen, at least until the end of the year and maybe longer, which could stall Electric Boat’s plans for an Ohio-class replacement nuclear submarine and proposals to boost the number of engines Pratt & Whitney will build next year for the F-35.
There is also a chance that conservative House Republicans insistence on defunding Planned Parenthood will lead to a government shutdown similar to the one in 2013 that was a result of a fight over the Affordable Care Act.
There are only a few legislative days until the end of this federal fiscal year, Sept. 30, and wide divisions between Democrats and Republicans on how the federal government should be funded in 2016.
“A shutdown scenario — which would be a shameful replay of 2013 – would damage our military families, government employees, and our economy, and I have called on [House] Speaker [John] Boehner to sit down at the negotiating table to prevent another self-inflicted wound to our nation,” said Rep. Joe Courtney, D-2nd District.
During the 2013 shutdown, hundreds of civilians in Connecticut who work for the Pentagon were furloughed, including federal workers who audit and approve operations of the state’s biggest defense contractors.
That prompted United Technologies Corp. to say it would have to temporarily lay off about 5,000 employees.
“Without the required … inspectors, who were deemed non-essential federal employees, certain defense manufacturing work must be halted, which will result in employee furloughs,” said a United Technologies statement issued during the 2013 shutdown.
“Crisis-driven budgeting has hindered the Pentagon’s ability to plan and execute long-term investments that top military and administration officials have identified to meet our nation’s global challenges,” Courtney said.
Pratt & Whitney spokesman Matthew Bates said a new shutdown “could have…negative effects on Pratt & Whitney’s ability to deliver products as scheduled, as government personnel have a critical role in approving shipment of engines and spare parts.”
A shutdown that lasts more than a month could also stall Pentagon payments to defense contractors.
Republicans want to boost defense budgets by about $31 billion, which would benefit Connecticut’s defense industry.
But federal law has put spending caps on the federal budget, so Republican plans have hinged on getting around the limits for Pentagon spending by using overseas contingencies funds, while leaving caps in place for all other domestic spending.
President Obama and Democratic lawmakers reject this approach, with Senate Democrats vowing to block any budget that does not undo the caps.
“Obama has said if defense goes up, domestic spending must increase too,” said Loren Thompson, a defense analyst at the Lexington Institute.
Meanwhile, a separate fight has broken out about defunding Planned Parenthood, a response to undercover videos of organization officials discussing their deals to provide medical labs with fetal tissue for research.
Senate Democrats say they will block any budget bill that would defund Planned Parenthood. That would likely result in a shutdown of the federal government and furlough of non-essential federal workers.
There’s another looming fiscal problem for Connecticut’s defense industry.
If a federal budget busts the spending caps, automatic, across- the-board cuts known as sequestration would be implemented –- unless Congress amends the Budget Control Act of 2011 .
“Sequestration continues to impact the [Armed] Services’ ability to fund critical modernization programs and to manage readiness needs,” Pratt spokesman Bates said. “The uncertainty posed by sequestration makes it difficult for industry — including Pratt & Whitney and our supply chain — to plan for the future, such as making key capital investments.”
Courtney, a member of the House Armed Services Committee, said “if the House Republican leadership continues to fail to produce a budget that ends sequestration, the impacts will grow across every facet of our government.”
But, since elections are nearing, Republicans are not likely to end sequestration or eliminate budget caps, Thompson said.
He said the best scenario for Connecticut’s defense industry is a short-term spending bill, known as a continuing resolution or CR, that extends last year’s funding levels.
But that means new programs can’t start, and existing programs can’t expand or adapt.
And some say the push to defund Planned Parenthood will make even a temporary funding measure difficult to negotiate.
Both Boehner, R-Ohio, and Senate Majority Leader Mitch McConnell, R-Ky., insist they want to avert such a shutdown.
But budget expert Stan Collender, executive vice president at Qorvis MSL Group, estimates there is a 75 percent chance that the federal government will shut down at the end of the month.
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