Sequestration: “A harsh reality for families and businesses”

Mark Cafferty, CEO of San Diego Regional Economic Development Corporation, sent a letter this morning to EDC board members about the local impacts of sequestration and what’s next…

Board members, investors and partners:

As you are aware, the law of sequestration will likely take effect today. The result – essentially a 10 percent across-the-board cut of all federal programs, projects and activities – will bring a dense rolling wave of financial implications for our region.

The impact to our military economy is significant. The impact to our innovation economy is troubling. The impact to our tourism economy compounds the problem we already have with the region’s TMD standoff. Effects throughout the local economy will be felt in the coming months and thousands of jobs are at risk, quickly making this a harsh reality for families and businesses across the region.

These cuts have the potential to set back medical research and our innovative economy by a generation or more, according to former NIH director Dr. Elias Zerhouni. Imagine all that will be lost – life-altering innovations, technological breakthroughs, not to mention jobs and businesses. There will be immediate impacts, for sure. We’re already seeing some. But the long-term effect – the slow and steady burn – is what really has the potential to hurt San Diego most.

Our partner Larry Blumberg, Executive Director of the San Diego Military Advisory Council (SDMAC), put it this way: “Defense contractors are going to be the first ones let go — and we know some of them are already starting to receive pink slips. In mid-April, the Department of Defense is going to furlough civil servants one day a week. This would impact 25,000 San Diegans, and a day’s pay for each of them is a lot of money to take out of the local economy.”

Just this past Tuesday, EDC received notice from GD NASSCO that the company has informed 1,040 employees in San Diego, Norfolk and Mayport that layoff notices would likely be issued in early April. Notices from BAE, Continental Maritime and other shipbuilders also have been received by our office over the past month totaling an additional 1,321 job losses. The job numbers are real and estimated to total more than 5,500 in the shipbuilding industry alone.

It’s also worth noting that sequestration is only one of the challenges coming out of Washington. We face additional threats in the weeks ahead.

On March 27th, the current continuing resolution (CR), the mechanism through which the federal government draws funds it needs to operate, will expire. A federal government shutdown is on the horizon without a new CR in place before the end of March.

At some point toward the end of March, President Obama is expected to deliver a budget for fiscal year 2014. Based on everything we are hearing in Washington, I believe a request for another round of base realignment and closures (BRAC) will likely be included within that 2014 budget.

On May 19th, the current debt ceiling will be reached, which represents an unprecedented fourth fiscal event in three months with serious implications for the country and San Diego’s economy.

There is plenty our region must do. EDC, SDMAC, the Chamber of Commerce, CONNECT, BIOCOM and other partners are ramping up efforts in Washington, Sacramento and throughout the region to ensure that our military and innovation economies are protected. We thank you all for your interest and support to date. As always, we will work to keep you informed of both the implications and challenges we face, along with our plans for addressing them in the weeks ahead.

If you would like to be added to our regular distribution list with timely updates from Washington and Sacramento, please let Sean Barr, Vice President, Economic Development (sb@sandiegobusiness.org) know of your interest.

On a related note, there is a story today’s New York Times that does a nice job explaining the impacts of sequestration. Here is the link.

As always, thank you for your leadership and for your continued support.

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Cafferty is CEO of the San Diego Regional Economic Development Corporation, a nonprofit funded by more than 150 companies and public partners committed to enhancing regional prosperity and global competitiveness.