Pentagon Furloughs Hit Hardest in Virginia, California

Photographer: Rich Clement/Bloomberg

The Pentagon in Arlington, Virginia. Close

The Pentagon in Arlington, Virginia.

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Photographer: Rich Clement/Bloomberg

The Pentagon in Arlington, Virginia.

Virginia, home to the military’s headquarters, and California have the most people who will be hit by Pentagon furloughs set to begin July 8, according to data provided by the Defense Department.

About 72,000 Defense Department civilian employees in Virginia will have 11 unpaid days off as a result of automatic U.S. spending cuts, according to the data provided to Bloomberg News. The furloughs will cost those workers about $237 million in lost wages.

California will see about 57,000 civilian workers furloughed, followed by Texas with 45,000, Navy Commander Leslie Hull-Ryde, a Pentagon spokeswoman, said in an e-mailed response to questions. The furloughs will cost the California workers about $189 million, with lost wages in Texas amounting to $149 million, according to Pentagon estimates.

Maryland, Georgia, Florida, Alabama, Ohio, Oklahoma and Pennsylvania fill out the ranks of the 10 states set to experience the biggest furlough impacts, she said.

The loss of personal income is likely to lead to reduced spending in other areas, leading to a greater economic impact, said Michael Brown, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina.

“You’ll get a slowdown in retail spending, and that can have a spillover effect for states in terms of sales tax,” Brown said in a phone interview. “Support industries like food services could also be impacted. Even though this is public-sector furloughs, it could spill over to the private sector.”

Furlough Savings

Defense Secretary Chuck Hagel said earlier this month that, starting in July, as many as 680,000 civilian employees will be furloughed for 11 days -- about one day per week through the end of the fiscal year in September. An additional 68,500 employees who are engaged in Navy shipyard work, intelligence-gathering and foreign arms sales were exempted from furloughs.

The furloughs will save $1.8 billion, according to two defense officials who briefed reporters on condition of anonymity to discuss details of the plans.

In all, the top 10 states will have 364,200 Defense Department civilians furloughed, with a combined economic impact of $1.2 billion, according to the Pentagon data. The economic effect is estimated using an average of $3,300 per employee for the duration of the furloughs, Hull-Ryde said in an e-mail.

Virginia, Maryland and the District of Columbia are among the most dependent on federal dollars, with both states and D.C. drawing 19.7 percent of their 2010 gross domestic products from U.S. government spending, according to a February report by Wells Fargo & Co. and the Pew Center on The States.

Most Dependent

Even in large states with diverse economies, such as California and Texas, a drop in federal spending because of the furloughs may have some impact on local spending, Brown said.

Defense Department furloughs could have a greater effect on states such as Ohio that were hard-hit by the global economic slowdown, Brown said. For example, he said, the furloughs “would be tough on” the area around Wright-Patterson Air Force Base near Dayton.

Furloughs will occur in every state, according to figures broken down by military service.

Navy civilian employees subject to furloughs range from 32,953 and 28,790 people in California and Virginia, respectively, to nine in Iowa, six in Kansas, and all three of the service’s civilian employees in Delaware.

Army furloughs range from 24,762 employees in Texas, and 17,305 in Virginia, to 216 in Wyoming.

The largest number of Air Force civilians subject to furlough are 15,567 in Oklahoma and 14,645 in Georgia. The lowest are 220 in Connecticut and all 192 Air Force civilians in Rhode Island, according to the Pentagon figures.

To contact the reporters on this story: Gopal Ratnam in Washington at gratnam1@bloomberg.net; Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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