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FY2010 DoD economic impact to reach $28.4 billion

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Fiscal year 2008 Department of Defense spending increased roughly $2 billion while the overall economic output increased nearly $3 billion, bringing the totals to $16.18 billion and $26.51 billion, respectively, according to a new economic impact report released Wednesday by the San Diego Military Advisory Council.

The report also indicates that jobs, both directly and indirectly tied to the DoD, account for 23.1 percent of regional employment. Those jobs include the 136,729 active duty service members and civilian employees, plus the 191,351 jobs indirectly connected to the military’s presence in the county.

Tony Nufer, president of SDMAC, said the San Diego area has benefited from an increased military presence during the Base Realignment And Closure processes. The military brings a stabilizing effect to the economy, he added, because its presence is more permanent.

The jobs tied to the military help prevent what Nufer called the "hourglass" effect that is typical of recessions in which the top and bottom portions of the economy grow, while the middle class shrinks.

The report addresses the types of jobs created by the military and the effect they have on the local economy.

"The military has been a vital catalyst for San Diego economic growth and development by providing high-quality middle-class and upper-middle-class jobs, contracting with local companies, and investing in cutting-edge research," the study states. "Given the context of the 2008-2009 global recession, this commitment has been particularly beneficial to the local economy."

The military’s increasing economic impact will continue into the future, the report predicts.

Phillip Talatala, director of the UCSD Export Access research team working on the report, said the team used a "very conservative" growth rate of 3.5 percent in direct spending to predict the impact for 2010.

The study estimates defense spending in 2010 will reach $17.3 billion with an overall output impact of $28.4 billion. An estimated employment impact of 341,700 jobs with an earnings impact of $15.7 billion also is expected.

"These numbers are especially impressive considering the recent recession and high unemployment rates that have plagued the country," Talatala said.

This economic impact report is the second of its kind released by SDMAC. The first, released in August 2008, used 2005 numbers to project 2008 economic impacts.

The projections were close to the actual impact. The report underestimated output impact by nearly $2 billion, direct spending by roughly $600 million and earnings impact by $500 million.

Employment impact, however, was overestimated by nearly 52,000 jobs directly or indirectly tied to the DoD.

Jason Ashman, business analyst for Navy Region Southwest who assisted with the study, said the jobs discrepancy is in part an estimation error. Estimates for 2010 in the new report are more conservative, he said, and use a revised calculations method.

"From an economic standpoint, making a conservative estimate is the prudent (approach)," he said.

One factor that could skew the predictions is the large portion of American Recovery and Reinvestment Act of 2009 projects slated for the region on top of an already large construction budget.

The report considers the growing military presence in predictions for the future economic impacts.

"As the military continues to shift a greater portion of its forces to the Pacific area of operations and bolster its infrastructure in San Diego, expenditures within the region are likely to increase," the study states. "In the upcoming years, both the Navy and Marine Corps are already slated to spend significant amounts of money on construction projects."

Unexpected impacts of the increasing military presence also could result in a significant change from current predictions.

In addition to the financial implications, the report also highlights some of the socioeconomic impacts the military has on the county, including environmental stewardship, labor force strengthening and local community engagement.

While the study highlights the impact the military has on San Diego, Nufer also recognizes the impact San Diego has on the military.

"The economic impact on San Diego is beneficial to the community," he said. "The greater impact is this being home to our military families.

"The citizens of San Diego have (certainly) supported service members and their families. I think that’s more important than anything else."

SDMAC plans to update data annually and release full economic impact reports every two years. The next report is slated for 2012.

The group also soon plans to release a report that deals directly with the economic implications of military construction in the area. A separate medical report also is under consideration.

Send your comments to Erin.Bridges@sddt.com

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