Sequester cuts to Arizona aerospace industry could cost $2.3B a year

Posted: Updated:
By Mike Gertzman By Mike Gertzman

PHOENIX -- Phoenix Mayor Greg Stanton, in plain English, shared his take on what the federal governments budget cuts would really mean for the Valley. In a packed room, he and the Greater Phoenix Economic Council presented a study on our aerospace and defense industry, and how the sequester will impact a big piece of Arizona's economy.

"The word is sequestration, which is this funny word, but we should call it what it is -- significant job loss," Stanton said.

"It's a big challenge for us, as an economy, to digest this type of decision from the federal government," said Barry Broome, CEO of the Greater Phoenix Economic Council.

The Department of Defense must cut $1 trillion over 10 years. Our state has the sixth largest share of defense contracts, which means we could lose $2.3 billion in annual revenue.

Broome used Luke Air Force Base as an example of the impact.

"Luke drives about $2 billion a year every year into the West Valley, and we all know how important Luke is to the West Valley," he said. "Just this first round of cuts is basically going to be  the equivalent of carving Luke out of the state's economy."

The cuts will also mean tough decisions for smaller Valley companies.

"The fear of sequestration, much less sequestration itself, has stopped everybody from issuing contracts," said Kinetx CEO Glenn Williamson.

He fears what a further slowdown will mean for business.

"When you're a small company like Kinetx and you've got a team of really bright engineers ready to work but we don't have the work, we try to keep those here as long as we can before we let people go, because at a certain point the economics a company can't exist," Williamson said.

The first round of the sequester cuts are set to become official March 1.