This blog was originally posted at: http://smartblogs.com/finance/2013/02/25/which-states-will-the-military-sequestration-affect-the-most/.
Sequestration is a front-and-center issue for everyone these days. While many people may not know exactly what the term means, they know to be worried on March 1 if no agreement is in place and $109 billion in annual spending cuts go into effect across all departments of the U.S. government.
Sequestration is the plan to reduce the federal deficit by $1.2 trillion from the federal budget over the next 10 years. To encourage Congress to pass legislation to reduce the deficit, this plan was enacted by the Sequestration Transparency Act of 2012 (P.L. 112-155).
In 2012, the Office of Management and Budget issued a preliminary report that detailed the breakdown of exempt and nonexempt budget accounts and estimated reductions required across nonexempt accounts to meet the required budgetary reductions. Cuts in the budget will be split evenly between defense and non-defense functions. Many people are particularly worried about the defense budget cuts. The report concluded that a mandatory 9.4% reduction in nonexempt defense discretionary funding and a 10% reduction to nonexempt defense programs were necessary. This action would result in a cut of $54.7 billion in defense spending for fiscal 2013.
Sequestration is a particularly urgent issue in states with a significant government agency or military presence. Those states rely on significant Department of Defense spending, so sequestration would affect them much more dramatically than others. In recent years, Virginia, California and Texas have benefited the most from Department of Defense funding. In 2009, Virginia received $67 billion, California received $59.3 billion and Texas received $46.7 billion, according to NationalAtlas.gov. If the cuts are enacted, the negative impact trickles down to local economies as civilian employees may lose their jobs or be furloughed without pay.
Find out what each state receives in Department of Defense funding from this interactive map:
Per capita, Alaska, Virginia and Washington, D.C, receive the most Department of Defense funding. Alaska receives $8,652 per resident, Virginia receives $8,502 per resident and D.C. receives $8,209 per resident, according to NationalAtlas.gov. Large populations in California and Texas might lessen the blow of the budget cuts in those states.
States with the largest number of active duty military are California (159,380), Virginia (127,981), Texas (123,879) and North Carolina (116,114), according to the Department of Defense. Although sequestration may not affect salaries of active duty military, other cuts could affect where they live if bases close or military housing is reduced. Economies of communities with large military populations could be adversely affected. For example, most military families rent housing, so losing military personnel could cause a drop in the real estate market. Salary reductions or job losses by civilian military employees could also reduce local sales tax revenues. Spending by these consumers would probably be severely restricted, causing a negative ripple effect for merchants.
Esri, a geographic information systems company, has developed the Tapestry Segmentation system that classifies U.S. residential neighborhoods into 65 unique market segments based on socioeconomic and demographic characteristics.
Civilian and active duty military personnel help drive local economies and are a major influence in their communities. Residents of neighborhoods near military bases are typically dominated by Tapestry’s Military Proximity segment. Two-thirds of the households in Military Proximity neighborhoods are married-couple families with children. Some 93% of residents rent their homes. Residents participate in civic activities, join business clubs and go online to trade stocks and shop. For exercise, they snorkel, play tennis, practice yoga and jog. Families visit theme parks and the zoo, throw Frisbees and go bowling. Many households include a pet, most likely a dog.
Why This Matters
Budget cuts from sequestration will have an effect far beyond the line items that are reduced. While it is critical to reduce the deficit so future generations won’t pay for current debt, it is also critical that the economy thrives and isn’t negatively affected by the cuts. Although most agree that there are areas of the budget that can be reduced, deciding which items is cause for less agreement. Cutting defense spending reduces not only the military strength of the U.S. but also affects local communities that count on the military presence for their economic health.
Pam Allison is a digital media, marketing strategist, and location intelligence consultant. You can visit her blog at www.pamallison.com.