The vast majority of civilian defense employees face a 20 percent pay cut from April through September if looming federal budget reductions aren't averted, a move that will hit Maryland harder than almost every other state, the Pentagon warned Wednesday.
The Department of Defense notified Congress that affected employees would be furloughed without pay one day a week for 22 weeks. The agency estimated a $359 million hit to the paychecks of those working in Maryland — trailing only Virginia and California.
Just over 45,000 of the Defense Department's 800,000 civilian defense employees work in Maryland. The Army alone expects that 21,000 of its civilian employees in the state would see weekly furloughs.
"This is going to have disastrous consequences on the Maryland economy," said Richard Clinch, director of economic research at the University of Baltimore's Jacob France Institute. "It's going to cause economic hardship across the state."
The pay cuts are part of the Pentagon's plan for handling across-the-board "sequestration" reductions to the federal budget starting March 1. The cuts would hit defense and non-defense agencies alike — both of which Maryland has in spades.
Defense Secretary Leon E. Panetta said Wednesday that his agency hasn't given up hope that Congress and the president will agree to a different deficit-reduction plan, but he described furloughs as a necessity if a bargain isn't reached.
"The furloughs contemplated by this notice will do real harm to our national security," he said in a letter to House Speaker John A. Boehner, a Republican from Ohio. "Moreover, we understand that furloughs would have serious adverse effects on the livelihood, morale, and productivity of our workforce."
Jacqueline Simon, policy director at the American Federation of Government Employees, said the union's members typically take home $400 to $500 a week after taxes, health insurance and mandatory retirement deductions, and a 20 percent pay cut would "destroy these families' budgets."
She said the Defense Department should be looking first to service contractors for cuts, not employees, whose pay has already been frozen for the past two years.
"They currently spend about $200 billion a year on service contractors," Simon said of the Pentagon. "It's more than doubled in 10 years. Civilian costs to the Department of Defense in those 10 years have been flat."
The hit to civilian employees' paychecks wouldn't be the only cut. The Defense Department estimates those savings at $4 billion to $5 billion of the $46 billion it must reduce by the end of September.
Sequestration's full effect on defense contractors — another significant part of Maryland's economy — isn't clear yet. But large employers in the industry have been cutting back for months. Last week Northrop Grumman said it will lay off 60 of its electronic-systems employees, largely in Maryland and Virginia, to further slim down after accepting 280 buyouts.
As the clock ticks down to March 1, state and local officials have grown increasingly anxious. From direct employment to spending on contractors, research grants and the like, the federal government accounts for about a quarter of the jobs in Maryland, according to the state Department of Business and Economic Development.
County executives of Howard, Prince George's and Montgomery, which are particularly dependent on federal spending, held a joint news conference Tuesday, urging that a substitute to sequestration be found. State leaders have made similar pleas.
"We encourage Congress to work together to avoid such drastic measures that would adversely affect so many Maryland families," said Maureen Kilcullen, a spokeswoman for the state economic development agency, on Wednesday after the furlough announcement.
Robert F. Hale, the Defense Department's chief financial officer, said in a briefing Wednesday that the agency anticipates "very limited exceptions" to the mass furloughs. Those would include civilians deployed to combat zones and whatever number of employees is necessary to "maintain safety of life or property," he said.
The Defense Department expects to start the furloughs in late April. Hale said employees would be notified in mid-March if they might be furloughed, with a final determination the next month.
Every state in the country has civilian defense employees. But for a state like Maryland, where the potentially affected workers number in the tens of thousands, the effect could ripple widely.
"That's 20 percent of [their] income not being spent at dry cleaners, restaurants, investments in their children and schools," said Tim O'Ferrall, general manager at the Fort Meade Alliance, which advocates for the Army post. "It hits everything."
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