$38.7B Generated In San Diego County From Defense-Related Activities, Spending

MAUREEN CAVANAUGH: Is San Diego a military town? Our region has been growing away from that designation for years, focusing instead on the biotech industry and growing tourism. But a new report reminds us that the military still plays a vital role in San Diego's economic health. The sixth annual military economic impact report for San Diego finds that billions of dollars are pumped into the region by everything from aircraft carriers to Navy hospitals. Joining us for a breakdown of the economic report are my guests, Doctor Lynn Reaser and Terry Magee. Lynn, give us an overview on the kind of economic impact in San Diego from military spending, for instance, how much of a percentage does it make up of the regional economy? DOCTOR LYNN REASER: We can start with the fact that we are attracting about $25 billion from outside of the region, everything from the pay for the military, active-duty civilians, research grants, military contracts that the various companies received, to even tourism. We are receiving Wi-Fi billion dollars, about $1000 per person in the county. If you look at the ripple effects, subcontractors and the supply chain and consumer spending, it turns out the military directly and indirectly is responsible for about 370,000 jobs, about 22% of our total employment in the region. Bottom line, the military it was responsible for about 20% or one out of every five dollars of our total gross regional product and output. MAUREEN CAVANAUGH: This report finds it is about $25 billion in direct dispensed spending, about 38 billion in gross regional product. Is that up or down from years past? DOCTOR LYNN REASER: We're seeing revisions that the government is now indicating that the military actually contributes more than previously estimated. We recently started to see military spending level off. We are seeing effects of sequestration. We saw at the Washington budget cuts have impact on San Diego, but to this point it has not been stating. MAUREEN CAVANAUGH: One of the reasons for that is because San Diego is such an important hub were the Pacific Navy, and all of those operations, is that right? DOCTOR LYNN REASER: We are seeing rebalancing towards the Pacific, by 2020 we expect to see 60% of the fleet headed towards the Pacific. Every time a new ship comes on board, we have it repositioned to San Diego. MAUREEN CAVANAUGH: Terry, what is the reason for doing an economic impact report like this? TERRY MAGEE: The San Diego military advisory counsel was formed in 2004 to support the military in their ability to operate and train, and also, the members and their quality of life. As we worked challenges that the military faced, we quickly found that if you were unable to quantify the value of the military economically to the region, it weakens your argument. In 2008, since no one had ever done it, we decided we needed to credibly show the economic impact of the military in the region. We did the first report in 2008. It was highly regarded, it was quantified and brought some light onto the economic value that the military brings to the region, and we have generated one annually ever since. MAUREEN CAVANAUGH: To other military towns and regions also generates this kind of economic impact report? TERRY MAGEE: That's an interesting question. SDMAC is unique organization. There are a lot of other centers of military people and facilities that would like to form in organization like SDMAC. It is always cited as the model, and the economic impact report is cited as a model for the region. There is talk about doing one for other areas of high military concentration. This is the highest concentration anywhere in the world in San Diego. Yesterday there was some talk about the state of California that needed to do a military economic impact study, because of upcoming BRAC activities, basic realignment and closure. And also sequestration, it is really coming out in the horizon and could be devastating. MAUREEN CAVANAUGH: We can hear from this report how important the military is to the San Diego economy, but how important is San Diego to the military? TERRY MAGEE: It is essential. If you look at the of researcher here, San Diego generated from being a military town. It helps San Diego to grow. The majority of the Pacific Fleet stationed here. Over one third of the Marine combat powers here. This is the only area in the country that has unencumbered ranges to operate and train in. Both and ranges, surface ranges, and over the water ranges. It is extremely important, and the amount of a structure that the military has invested in the area is irreplaceable and impossible to duplicate, anywhere else in the country. MAUREEN CAVANAUGH: Doctor Lynn Reaser, you talked about the amount of jobs, but what kind of jobs, what kind of job generator is the military in San Diego? DOCTOR LYNN REASER: It generates jobs across the board. We have everything from jobs in real estate, and retail, into jobs in engineering and education. MAUREEN CAVANAUGH: Let me break that down for a minute. So the real estate jobs would redefine military family homes? What would that be? DOCTOR LYNN REASER: It could be military family homes, I will briefly describing what these multiplier effects are. Think of a ship contract going to a shipyard, and the yard has to hire some people, and order some supplys, they hire subcontractors and they have to get supplies. Those are consumer effects. All of those people employed along the supply chain are using some income to buy products made in San Diego. That is where all of these jobs and various industries, about. Real estate jobs, for instance, the Navy personnel and Marines, they will be using housing allowances to buy houses off base, and also people in the supplier chain jobs will be using some of that money. It really supports a wide range of jobs in San Diego County. MAUREEN CAVANAUGH: Does this report taken to consideration the amount of money that comes to San Diego from things like VA benefits? DOCTOR LYNN REASER: Yes, we have some VA benefits. We estimate about $2.7 billion of VA benefits from healthcare to retirement benefits, to the vocational training and education. MAUREEN CAVANAUGH: What about the economic impact of the Navy ships in San Diego? You broke that down in this report as well. DOCTOR LYNN REASER: Yes, we currently have fifty-six ships home reported in San Diego, and Mister MaGee knows as well. He has been on ships and commended them. They contribute about $4.5 billion to the economy. One aircraft carrier alone accounts for about $1 billion in economic activity. We have two of them. They are extremely important to our region. MAUREEN CAVANAUGH: One of the comments to the president of SD Mac, when this report was released yesterday, is that San Diegans should never take this military economic impact for granted. Do you think we do? TERRY MAGEE: It is interesting, you talk about the fact that San Diego had gotten away from being a military town, and I think the economic impact report that Doctor Reese and her staff did has brought the realization of how important the military is economically to the region. It is the largest economic cluster in the region. For any time we work an issue, it was interesting. There were always people that would say the Marines can give up some land, they can go elsewhere. You can't, because it is a training range. The same thing on basis. I can remember when Miramar was being proposed as being a commercial airport. We actually opposed that and broke out a pact and it was defeated. That would have been devastating. If that had passed, you would have seen a migration of the military out of the region. The carriers public we would have migrated up to Bremerton, and all of the training and things that go with the Navy would have moved away from Miramar, and he would have lost economic value. Plus, the military are good citizens in San Diego. And the spouses are the teachers and nurses. The members are great citizens, Little League coaches and the PTA, they are stabilizing influences in the area. You would have lost all of that benefit. MAUREEN CAVANAUGH: Is part of the goal of this report is to get respect for the contribution to San Diego? TERRY MAGEE: I am not Aretha Franklin, respect, but absolutely. I think yesterday, for example, we had Congressman Davis and Hunter, and Chairman McKean, and they all commented how valuable this report was on working issues that affected the area. You can talk a lot about strategic value, national security, but when you start talking about dollars and jobs, you get people's attention and it reflects legislation that is passed. MAUREEN CAVANAUGH: In compiling this report, did you factor in any of the costs San Diego sustains because of military presence? In other words, the cost of having that real estate in federal property and not being able to get a tax base from it? Or even the costs of providing for homeless veterans? We are at big hub for homeless veterans as well. Was that part of the report at all? DOCTOR LYNN REASER: No, we did not look at the externalities of cost. But I think the $25 billion is a cost that national taxpayers are putting out. But as Terry suggested, San Diego's sort of ecosystem of contractors and supplies and research firms and military personnel that represent the nation's security is an enormous asset value. MAUREEN CAVANAUGH: Are there more sequestration cuts expected? DOCTOR LYNN REASER: As you know, we had a two-year rest bite from sequestration. It comes back in 2016, however. That is law, which means that the spending caps on defense spending would be set lower. As you discussed in the first segment, there are additional major threats with the Islamic state in the Middle East, which means that sequestration could be lifted or deferred that year. We could have more funds set for the overseas contingency operations, but we are now looking at a big conflict between budget issues, and have a mandate to reduce the budget deficit over time. These enormous monetary threats, in terms of terrorism and conflict, threats from China and North Korea, Russia and the whole Middle East. MAUREEN CAVANAUGH: If indeed sequestration cuts do rule out the way they are intended to now, I think I recall when we originally talked about this that it would begin to make an impact on defense spending and military spending in San Diego. Do you see that, if indeed it rolls out the way it is intended to? DOCTOR LYNN REASER: It depends on how it will be structured. San Diego may actually there all right, if there is a greater emphasis on technology and the Asia-Pacific area. The way it is now structured, you would actually see discretionary spending fairly level. It really depends on what Congress does with the other pocket of the defense budget, the overseas contingency operation. MAUREEN CAVANAUGH: It is also contingent on world events, as you mentioned. Terry Magee, how do you see San Diego's position as a military hub in the years to come? TERRY MAGEE: I agree with Doctor Reaser. I think the of researcher here is impossible to be replaced. I think San Diego will farewell. The concern, of course, is the reduction in the Department of Defense budget. If you look at the work that Doctor Reaser does, you would see that the percentage of GDP is the lowest in history before World War II. In the current trend, it will go down below 3%. Doctor Reaser talked about the threats around the world, this is the most unstable, uncertain time I have ever seen in thirty-five years. The threat is a multitude of threats. You have the sophisticated threat of China, which requires different training and equipment, terrorism, and Africa. You have those concerns. I heard a great comment yesterday that Chairman McKean said, during a hearing he asked the price chief of staff what would happen if sequestration would come back in 2016. He made a trying comment, he said basically you will have not a hollow force, but a devastated force. That is the biggest concern, the trend and the DOD budget, matching up the threats, and additionally, the military has assumed the mission of humanitarian assistance and domestic relief. Domestically and nationally, whenever anything happens, because of the distance and command and control ability, the military is called to react. MAUREEN CAVANAUGH: Thank you both very much.