Arkansas ranks 42nd in U.S. national defense spending by state

Exactly a week after Gov. Asa Hutchinson unveiled a new initiative to woo more military jobs and spending to the state, the Pentagon on Monday (Sept. 28) released a comprehensive report showing Arkansas ranked near the bottom out of all 50 states in national defense spending in fiscal 2014.

According to the newly released report by the U.S. Department of Defense’s Office of Economic Adjustment, Arkansas ranked 42nd in total U.S. defense spending with more $1.4 billion doled out during the military’s budget cycle, which runs from Oct. 1 to Sept. 30. That total represented 1.1% of the state’s gross domestic product (GDP), and a scant 0.3% of total U.S. defense spending.

By far, most of the state’s defense expenditures occurred in Pulaski County, where the Little Rock Air Force Base and Camp Robinson are located. According to the DoD report, more than $420.8 million was spent on the nation’s defense in Central Arkansas last year, supporting some 7,779 military and civilian jobs.

Jefferson County, home to the Pine Bluff Arsenal, ranked second with $182.7 million in defense spending, followed by Calhoun, Lonoke and Ouachita counties with $177.5 million, $128.5 million and $78.2 million, respectively.

Statewide, defense spending in Arkansas supported 21,154 jobs with a total payroll of $735 million. General Dynamics and URS Corp. are the largest defense contractors in the state, bringing in revenue of $170 million and $122.3 million, respectively.

NATIONAL NUMBERS
Nationally, more than $418 billion was spent on the U.S.’s national defense in fiscal 2014, with the top 10 states splitting nearly $247 billion. That total represented 2.4% of the nation’s GDP, and breaks down to nearly $1,312 spent per every U.S. resident, compared to only $469 per resident in Arkansas. The nation’s defense spending in fiscal 2014 also supported nearly 2.7 million jobs with a payroll totaling $135.8 billion.

Virginia, California and Texas were well ahead of all other states with $54.7 billion, $52.5 billion and $39.6 billion, respectively, in total military spending. Maryland, Florida, Pennsylvania, Washington, Georgia, Massachusetts and Alabama rounded out the top 10.

The $54.7 billion of defense spending in Virginia includes $38 billion in contract spending and another $16.6 billion in defense payroll. Several large defense contractors, including Huntington Ingalls and General Dynamic, are also based in Virginia, which is also home to several large military bases such as the Naval Air Station and Fort Lee.

Although Arkansas ranked at 42nd, the five state’s with lowest amounts of defense spending were all well below $1 billion. Vermont had the lowest total with only $289.6 million, followed by Wyoming and Montana with $398.3 and $513.5 million, respectively. West Virginia and Idaho were next with $539.8 million and $630.6 million.

AN EFFORT TO CHANGE COURSE
In an announcement unveiling a new statewide initiative on Sept. 21 to promote Arkansas in a way to add short- and long-term economic value for the state’s varied military interests, Gov. Hutchinson drew out the importance of attracting more national defense dollars to Arkansas.

“Obviously, as governor, it is significant that our military installations altogether contribute over $1 billion (annually) to our state economy,” Hutchinson told the crowd of mostly field-dressed military personnel at Camp Robinson. “But just as significantly, or more significantly, is the fact that our military installations are critical to our national defense.”

Hutchinson explained in his brief speech at that he has personally learned of the economic impact and importance of Arkansas’ military by making visits to bases and installations across the state. He specifically mentioned Camp Robinson, the Little Rock Air Force Base, the 188th Air Force Fighter Wing and Fort Chaffee in Fort Smith, the Pine Bluff Arsenal and the state’s various National Guard offices as having a broad effect on economic activity in every corner of the state.

“All these military installations that I have cited are important to our economic future in Arkansas,” Hutchinson said. “I recognize … that we need to broadcast that message more.”

SEQUESTRATION IMPACT
Despite Hutchinson’s brainstorm to attract more defense dollars to Arkansas, Monday’s DoD report noted that the apportionment of defense funding to all 50 states will be increasingly smaller in the future.

For example, in the Obama administration’s budget for fiscal year 2015, which begins on Oct. 1, national defense spending is expected to decline 28% from fiscal 2011 to 2019 in real terms, after increasing by more than 65% from fiscal 2000 to 2010. Sequestration went into effect in March 2013 and required across-the-board cuts to defense and non-defense programs from fiscal 2013 to 2021. Over this period, defense spending will be reduced by a total of $454 billion, the report said.

“The impact of defense spending cuts has been, and will continue to be uneven across states as it depends in part on the number of defense personnel and amount of defense contract revenue in each state and region,” states the executive summary of the 69-page report. “Some states that benefitted from the DOD budget expansion are now grappling with budget issues caused by cuts to military personal and defense contract spending.”

In announcing his new military initiative last week, Hutchinson said he not only wants to attract new defense sector to Arkansas, but keep military jobs already in the state that could be threatened by base closures or defense programs that are being phased out. For example, Hutchinson mentioned that it was important for the state to seek congressional and Pentagon support for the Air Force’s 188th Fighter Wing in Fort Smith when it was targeted for closure in 2013. Since then, the western Arkansas military base has remained open by transitioning its mission from fighter jets to drones.

The DoD report says that the impact of reduced defense spending on states that have been the recipients of relatively little spending will likely be minimal. However, some will still suffer if they have local and regional economies that are overly dependent on Pentagon dollars.

“This (study) highlights factors, such as reliance of regions on military bases or private contractors – which can be used to evaluate each state’s potential exposure to projected declines in defense spending,” the report states.

Not surprisingly, the report also showed that Bethesda, Md.-based Lockheed Martin was the nation’s top defense contractor in fiscal 2014, winning nearly $30.6 billion of the total $282.7 billion in contract awards handed out for defense spending on military supplies and equipment, service, research and development and construction.

Unfortunately, the nation’s largest defense contractor finished second in the highly-competitive $30 billion contract for the Joint Light Tactical Vehicle (JLTV) that went to Oshkosh Defense in late August. With Hutchinson’s strong support, the Arkansas General Assembly approved the passage of an $87 million bond financing package in late May to help Lockheed Martin upgrade its bid to help bring the JLTV project to the company’s industrial facility in south Arkansas.

That contract alone, which will pay Oshkosh an initial fixed-firm contract award of $6.7 billion during the first three year low-rate production phase to manufacture 17,000 JLTVs, would have moved Arkansas up nearly 10 spots higher in the DoD’s defense spending rankings.