Effect of troop cuts may be muted

The U.S. Army’s decision to reduce personnel at Joint Base Elmendorf-Richardson by 2,600 troops sent shock waves through Anchorage when the announcement came July 9.

However, after several days of thinking through the implications, community leaders and some economists think the actual effects of the reduction will be relatively light.

“Do we like this decision? No. It is the end of the world? No,” said Bill Popp, president of Anchorage Economic Development Corp.

Jonathan King, president of Northern Economics, an Anchorage-based consulting firm, said his initial assessment is that the economic effects will be felt to some degree, but muted by geography.

“If you own a barbershop on Muldoon Road in northeast Anchorage you’ll feel an effect. If you live in south Anchorage you won’t feel it at all,” King said.

His estimate of job losses, including direct and indirect, is 4,500.

University of Alaska Anchorage economist Scott Goldsmith arrived at a higher estimate of job losses, 6,000, by factoring in rising pay for Alaska military personnel in recent years, which would increase the “multiplier” effect in the economy of reduced payroll, as well as rough estimates of civilian defense employees. Both he and King said their estimates were rough, however.

Popp said the fact that the reduction will take place over two years will soften the effects. It will give people time to plan and make adjustments, he said.

King said the reduction, if it really happens, will reduce the amounts the number of military personnel at JBER by about one-fourth. However, it’s tricky to calculate the economic effects of that.

For example, while a substantial number of soldiers live off base, both owning and renting homes, the military doesn’t say where they live, in Anchorage, Eagle River or the Matanuska-Susitna Borough.

Popp said the anecdotal evidence is that many military living in the Mat-Su tend to own homes rather than rent, which is made more possible by recent Defense Department policies to not rotate married personnel and families as frequently as single soldiers.

Military homeowners, in Mat-Su or elsewhere, would also be more likely to want to remain in Southcentral Alaska and to seek jobs with private employers, Popp said.

King said his data indicates that the loss of the 2,600 soldiers will include 1,400 spouses and 2,600 children. The impact on schools depends on where the military families live, which isn’t known, he said. The effect may be so spread out across the region so that it will hardly be noticed.

“Depending on the schools, I can see some of this as reducing overcrowding in classes,” King said.

The amount and effect of the loss of local spending by military families is also hard to judge, he said. The total military payroll at JBER is estimated at about $142 million per year but a lot of this spending — how much is unknown — occurs on base. These are dollars that never touch the regional economy in a significant way.

King said his back-of-the-envelope estimate is that military payroll spending in the regional economy might be reduced by 10 percent to 15 percent.

However, Popp said the loss of military payroll has to be viewed in context of the entire economy.

“Anchorage’s total payroll, including the military, was $8.58 billion in 2014. This will be a very small fraction of that,” he said.

JBER also spends about $135 million per year on private contract services for various support functions, but how this would be affected by the troop reduction is also unknown, for now.

On-base housing services, which accounts for a good portion of it, will be largely unaffected because there is a waiting list for housing on JBER, Popp said. Much of the contract spending will be on support of other infrastructure, and these kind of expenditures change more gradually because a base like JBER has a lot of fixed costs.

Finally, it isn’t for certain that the cut will happen in the end, although the Army seems committed.

“We’re considering options that could result in these cuts to JBER being avoided,” said Matt Felling, spokesman for Alaska U.S. Sen. Lisa Murkowski.

Felling wouldn’t elaborate on pathways being investigated to accomplish that, and also cautioned against false expectations being raised.

He also said the Army could be under pressure to make more cuts nationwide if sequestration kicks back in during 2017. The reductions being made now are part of a plan by President Barack Obama and the Defense Department and not sequestration, Felling said.

The plan now being followed is to reduce the Army by 120,000 soldiers, from a recent peak of 570,000 to 450,000.

Congress has meanwhile given the Pentagon a two-year reprieve from sequestration to allow lawmakers to make changes in the overall national budget.

However, if sequestration resumes in 2017, the Army’s overall forces would be reduced from 450,000 to 420,000 soldiers by 2019, according to information provided by the Army to the congressional offices. If those reductions occur the Alaska Army posts may see more reductions.

Updated: 
11/20/2016 - 3:34pm

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