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HomeMy WebLinkAbout2012-09-25 - AGENDA REPORTS - FED SEQUESTRATION CUTS (2)CONSENT CALENDAR DATE: SUBJECT: DEPARTMENT Agenda Item: 3 CITY OF SANTA CLARITA AGENDA REPORT City Manager Approval Item to be presented by: September 25, 2012 0 Michael Murphy FEDERAL LEGISLATOR SUPPORT LETTER: STOP FEDERAL 2013 SEQUESTRATION CUTS AND SAVE CALIFORNIA JOBS City Manager's Office RECOMMENDED ACTION City Council adopt the recommendation of the Legislative Committee to send letters to Senator Dianne Feinstein and Senator Barbara Boxer urging them to support the enactment of legislation to prevent the 2013 Federal sequestration cuts and find a balanced budget compromise. BACKGROUND In 2011, the U.S. Congress enacted a federal spending reduction plan in conjunction with increasing the Federal government's borrowing authority called the "Budget Control Act of 2011." This Act placed spending caps on Federal agencies designed to reduce Federal spending by approximately one trillion dollars over the following ten fiscal years. This bill also allowed for the establishment of a joint House and Senate "Supercommittee" charged with finding an additional $1.2 trillion in deficit reduction. To motivate the Supercommittee, the Congress enacted automatic across the board reduction to all federal budgets known as the "sequester." The sequestration is calendared to take effect on January 1, 2013. The sequestration is divided between 50% cuts in defense spending and 50% in all other categories. Military and defense spending represents 20% of the federal budget but is targeted for bearing 50% of the burden of the sequestration. The $500 billion target under sequestration is in addition to the $487 billion in cuts already planned for defense over the next decade. The joint House and Senate Supercommittee failed in its mission to enact the $1.2 trillion in reductions and in the absence of legislation to alter the automatic reductions and the cuts will be triggered in less than four months. The automatic cuts required under sequestration were designed to be a motivator for the House and Senate Supercommittee and was not expected to actually be enacted. If sequestration moves forward the results are anticipated to be the smallest Army since 1940, the smallest Navy since 1916, and the smallest Air Force in U.S. history. It is anticipated that California would lead the nation in job loses with 125,000 projected in fiscal year 2013 particularly the defense contractors and their suppliers. There are 69 aerospace and defense contractors located in Santa Clarita Valley alone representing around 4,000 jobs. The annual sales for these contractors in 2010 were $953 million. While it is difficult to project the specific impact to SantaClarita, clearly local jobs will be impacted. Currently California has the nations' third highest unemployment rate at 10.7 percent. The greatest immediate threat to our State's economic recovery and longer-term economic wellbeing are these looming federal sequestration cuts. It is recommended that Council send a letter modeled after the attached letter urging Congress to find a balanced, bipartisan budget compromise and avoid sequestration; and to prepare our region for the across-the-board defense- and non -defense -related cuts set to take place on January 1, 2013 should Congress not find a budget compromise and sequestration not be avoided. The letter was prepared by the Los Angeles Economic Development Corporation and was already co-signed by 35 public sector, business, labor, nonprofit and education partners across California including State Senator Sharon Runner, State Senator Steve Knight and the Santa Clarita Valley Economic Development Corporation. On Wednesday, September 12, 2012, the City Council Legislative Committee met and discussed the issue of averting the fiscal year 2013 sequestration cuts. The Committee recommends the Santa Clarita City Council send a letter to Senator Dianne Feinstein and Senator Barbara Boxer urging them to to support the enactment of legislation to prevent the 2013 sequestration cuts and find a balanced budget compromise to protect the California workforce. ALTERNATIVE ACTIONS Other direction as determined by the City Council. FISCAL IMPACT No additional resources are needed to support this letter. ATTACHMENTS Letter September 11, 2012 The Honorable Dianne Feinstein United States Senate 331 Hart Senate Office Building Washington, DC 20510 The Honorable Barbara Boxer United States Senate 112 Hart Senate Office Building Washington, DC 20510 Re: Stop Sequestration Cuts and Save California Jobs Dear Senators Feinstein and Boxer: We, the undersigned, a network of civic stewards representing various organizations and sectors (e.g., business, labor, education, nonprofit, and public sectors) from California's diverse economic regions, who are dedicated to protecting the hundreds of thousands of workers, countless families and entire communities throughout the State that will be severely and cruelly affected by the automatic, across-the-board $1.2 trillion in federal spending cuts (sequestration) set to trigger on January 2, 2013, urge your leadership to pass legislation to avert the fiscal year 2013 sequestration cuts and to bring together your Congressional colleagues to find a balanced, bipartisan and long-term budget compromise that protects California and the nation going forward. Without your urgent attention and swift action, the $1.2 trillion in federal spending cuts over 10 years will mercilessly shrink defense and non-defense discretionary spending (including critical programs in community development, education, health, housing, workforce development and numerous other discretionary grants to states and localities) and do so in a way that not only frustrates the still sluggish national and California economies, but that triggers the following near-term - almost immediate - threats to our economic security: • A projected 2.14 million jobs lost in the United States, including 225,464 jobs lost in California.' • An estimated $215 billion reduction in the nation's gross domestic product (GDP), including an almost $23 billion reduction in California's gross state product (GSP).z I Stephen S. Fuller, Ph.D., George Mason University, The Economic Impact of the Budget Control Act of 2011 on DOD&non-DOD Agencies (July 17, 2012). 2 Id. 3 Here in California, especially in Southern California, the impacts of these draconian, forced spending cuts will affect almost every area of life for our residents. Bear in mind that California represents the heart of the nation's aerospace and other defense -related industries - which include aerospace products and parts as well as analytical instrument manufacturing. The estimated [direct, indirect and induced] economic and fiscal contributions (2010) of the aerospace industry in California are about $93 billion in output ($66 billion in Southern California), almost 393,000 annual jobs (276,000 in Southern California) with $29.7 billion in labor income (about $21 billion in Southern California), and an estimated $9.9 billion in federal, state and local taxes 3 In San Diego County alone, more than 25 percent of the county's total jobs are supported by defense -related spending.4 What's more, the uncertainty surrounding sequestration has already had significant impacts on many companies' willingness to spend and hire. And can you think of a worse time to put Californians in uncertain risk with almost two million of our neighbors still out of work and with the nation's third highest unemployment rate (10.7 percent)? While we all understand and agree that the job and loss of GDP and GSP figures are overwhelming and scary, the other underlying effects of sequestration are similarly alarming, including: ■ The very real likelihood that the U.S. economy could be pushed back into a recession in the first half of 2013 and that the federal unemployment rate could spike by as much as 1.5 percent nationally.5 • The loss of innovation -driving companies in various sectors of our economy and the lost technological spillover effects provided by these "incubators of innovation." (Indeed, the economic contribution of impacted industries reaches far beyond the dollar value of the products produced and the number of people employed.) • California's ability to fund and deliver human and social services programs will not only be undermined directly by the discretionary cuts to state and local programs, but will also face severe budgetary shortfalls from an overall decline in economic output, hundreds of thousands of jobs lost (and the added stress that mass joblessness places on state and local social services programs) and a major reduction in personal earnings, savings and spending. In turn, this will result in plummeting quality of life, overall health and general well-being measures - all of which are so closely linked with increased unemployment. There is simply no greater immediate threat to our economic recovery and longer-term economic wellbeing than these looming sequestration cuts. For the sake of both the California and national economies, we ask you to carry on your stellar records in DC of protecting jobs here at home in California and urge you to find a way to avert the fiscal year 2013 cuts and to help bring all sides together to ensure that a long-term, balanced and thoughtful budget solution is reached. 3 Source: Estimates by LAEDC Economic & Policy Analysis Department. 4 Source: San Diego Military Advisory Council, San Diego Military Economic Impact Study (June 20, 2012). 5 See generally, Fuller, note 2 above Sincerely, Honorable Sharon Runner John Kelsall John D. Welty Bill Allen Patricia Donaldson Leigh Nixon President President/CEO Los Angeles County Economic President South Bay Association of Chambers of Commerce Development Corporation Chambers of Commerce Alliance of Ventura & Santa Barbara Counties Honorable Sharon Runner John Kelsall John D. Welty State Senator (R-17) Chairman President District 17, California State BizFed, Los Angeles County California State University, Senate Business Federation Fresno Bill Burratto Norm Hickling Jonas Peterson President/CEO Co -Chair, LA Jobs Defense Council President/CEO Ventura County Economic Senior Deputy, LA County Santa Clarita Valley Economic Development Association Supervisor Mike Antonovich Development Corporation Robert N. Christensen Steve Knight Joe Pritchard Vice President State Assemblymember (R-36) Chairman 4ward Sciences, Inc. District 36, California State Port of San Diego Ship Repair Assembly - Association 0 Derry Pence Michael Manchak Glenn Barney President President/CEO Vice President Port of San Diego Ship Repair Economic Vitality Corporation COM DEV International Ltd. - Association of San Luis Obispo County USA 12 '22 - Bradley FI. Feldman Ted W. Lieu Scott K. Celley President State Senator (D-28) Vice President, External Affairs Cubic Defense Applications, District 28, California Stale TriWest Healthcare Alliance Inc Senate Barbara DeBoom Cynthia Kurtz Paul Little President/CEO President/CEO President/CEO Palm Desert Area Chamber of San Gabriel Valley Economic Pasadena Chamber of Commerce Partnership Commerce & Civic Association 4 Sc/ i Cll i ! Y Carl Guardino Robert Nascenzi Thella Bowen President/CEO President/CEO President Silicon Valley Leadership DefenseWeb Technologies San Diego County Regional Group Airport Authority Barbara DeBoom Cynthia Kurtz Paul Little President/CEO President/CEO President/CEO Palm Desert Area Chamber of San Gabriel Valley Economic Pasadena Chamber of Commerce Partnership Commerce & Civic Association 4 Sc/ Larry Blumberg Jim Lazarus Executive Director Senior Vice President San Diego Military Advisory San Francisco Chamber of Council Commerce Mal Lavne Mark Cafferty President President/CEO Greater Antelope Valley San Diego Regional Economic Economic Alliance Development Corporation Duane Roth Vicki Medina CEO Executive Director CONNECT Antelope Valley Board of Trade Lucy Dunn George Nagy President/CEO President/CEO Orange County Business Mojave Desert Bank Council Gary Toebben President/CEO Los Angeles Area Chamber of Commerce George Burden Co -Chair, LA Jobs Defense Council Secretary Treasurer U.A.W. Local 148, Long Beach, CA Ruben Barrales President/CEO San Diego Regional Chamber of Commerce CC: Senator Carl Levin, Chair, Armed Services Committee Representative Buck McKeon, Chair, Armed Services Committee Representative Joe Baca Representative Xavier Becerra Representative Howard Berman Representative Mary Bono Mack Representative John Campbell Representative Judy Chu Representative Susan Davis Representative David Dreier Representative Sam Farr Representative Elton Gallegly Representative Janice Hahn Representative Mike Honda Representative Darrell Issa Representative Jerry Lewis Representative Daniel Lungren Representative Kevin McCarthy Representative Jerry McNerney Representative George Miller Representative Devin Nunes Representative Laura Richardson Representative Lucille Roybal-Allard Representative Loretta Sanchez Representative Adam Schiff Representative Jackie Speier Representative Mike Thompson Representative Henry Waxman Members of the U.S. Senate Armed Services Committee Members of the U.S. House of Representatives Armed Services Committee Representative Karen Bass Representative Howard Berman Representative Brian Bilbray Representative Ken Calvert Representative Lois Capps Representative Jim Costa Representative Jeff Denham Representative Anna G. Eshoo Representative Bob Filner Representative John Garamendi Representative Wally Herger Representative Duncan Hunter Representative Barbara Lee Representative Zoe Lofgren Representative Doris 0. Matsui Representative Tom McClintock Representative Gary Miller Representative Grace Napolitano Representative Nancy Pelosi Representative Dana Rohrabacher Representative Ed Royce Representative Linda Sanchez Representative Brad Sherman Representative Pete H. Stark Representative Maxine Waters Representative Lynn Woolsey