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State of the region: Defense spending trending downward in Hampton Roads

Hugh Lessig
Hampton Roads is seeing less spending by the Department of Defense, study says

Money spent on advanced weapons systems can spell good news for Hampton Roads, where defense spending drives the economy. But that trend can be a doubled-edged sword, a new report says.

As the Pentagon spends more on pricey ships, airplanes and other technology, it has less money for military personnel, whose paychecks also support the region, according to Old Dominion University's "The State of the Region" report released Tuesday.

Military technology impacts active-duty personnel in two ways. First, as technology's share of the budget goes up, personnel spending drops. Advanced technology also requires fewer people.

The aircraft carrier Gerald R. Ford is a case in point, the study says. The first-in-class ship will cost at least $12.9 billion and has kept business flowing at Newport News Shipbuilding, the division of Huntington Ingalls Industries that is the state's largest industrial employer.

However, the Ford will go to sea with hundreds of fewer sailors than earlier aircraft carriers, thanks to that new technology and other improvements.

"Here is the rub for Hampton Roads," the study says. "More expensive carriers will result in fewer active-duty personnel at Naval Station Norfolk. More expensive aircraft at Oceana Naval Air Station eventually will mean fewer active-duty personnel there. The same DOD dollar cannot be spent in two places."

All in all, a combination of influences has reduced military and defense spending as a major pillar of the economy. In 1984, that spending accounted for 49.5 percent of regional economic activity, an all-time high. That dropped to 44.9 percent in 2011, and 39.3 percent last year.

The trend in personnel is also downward, both in terms of raw numbers and compensation. The rise of technology is not the only factor. The study also cites "stagnant or declining" defense expenditures in the region and a refocus of Navy presence to the Pacific, which has siphoned away some personnel.

The number of active-duty troops in Hampton Roads topped out at 113,400 in 1984. It has declined every year since then, to 86,500 in 2013.

Active-duty compensation, which includes wages, benefits and housing, has dropped nearly 7 percent the past three years after a decade of robust growth. That reflects fewer personnel stationed in the region coupled with more moderate pay increases, the study says.

Economic leaders in Hampton Road have often talked about the need to diversify the region's economy to lessen dependence on military spending.

"We have diversified our economy, but not as the result of strong, private-sector growth," the study says. "Instead, the reason is declining DOD spending."

The picture isn't all bad, however. Billions of defense dollars flow into a Virginia every year. A separate report released last week by the Defense Department ranked Virginia number one in the nation for defense expenditures at $54.7 billion.

The ODU report notes that Congress has stated its intention to maintain a fleet of 11 aircraft carriers, provided a 1 percent pay hike for most military and civilian government workers and authorized $190 million in military-related construction projects for the region.

Lessig can be reached by phone at 757-247-7821.

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