Pentagon analyzes defense spending in all 50 states

By Tony Bertuca / March 19, 2019 at 3:02 PM

The Pentagon has produced new data breaking down state-by-state impacts of defense spending at the county-level so local officials can build "resiliency" into their workforces and supply chains, according to Patrick O'Brien, director of the Office of Economic Adjustment.

"If you're a local official, you don't know what you don't know," he said today at the Brookings Institution. "How do you make your local economies more resilient to that defense spending that's going on? This is the raw data -- you guys have it."

The new data captures defense spending across all 50 states for fiscal year 2017. O'Brien's office is set to begin compiling FY-18 numbers this month.

In FY-17, the Defense Department spent $407 billion on contracts and payroll in all 50 states and Washington, approximately $1,466 per U.S. resident. The spending accounted for 2.3 percent of the country's gross domestic product.

Of the FY-17 total, $271.7 billion (67 percent) was spent on contracts for products and services, while $135.3 billion (33 percent) paid the salaries of DOD personnel.

Brookings analyst Mike O'Hanlon called the data set a "treasure trove" that could have significant implications for contractors, subcontractors and their supply chains.

"It's a beautiful report," he said. "What it really does is break down the way in which the defense dollar goes to different parts of the country."

The top 10 states for total defense spending in FY-17 were: California at $49 billion, Virginia at $46.2 billion, Texas at $37.7 billion, Maryland at $21.1 billion, Florida at $19.2 billion, Washington at $15.2 billion, Connecticut at $15 billion, Georgia at $13.2 billion, Pennsylvania at $12.1 billion and Alabama at $10.9 billion.

The data also names the top defense contractors in each state and the counties that are home to the most DOD spending. Fairfax County, VA, led the nation in FY-17 with $13.7 billion.

O'Brien suggested local officials could use the data to make informed choices about workforce training and business development.

For instance, he said, cyber vulnerabilities are a serious concern for the Defense Department, but could become an opportunity for local governments with sizeable defense spending in their states.

"Look at those vulnerabilities because with those vulnerabilities come opportunities to educate a local workforce . . . to prevent those cyberattacks," he said. "This information should prompt some of those conversations with the state."

O'Brien said Grand Forks, ND, is an example of a community that years ago realized significant defense spending was headed toward unmanned aerial systems and put resources into developing a UAS workforce and test facilities. The University of North Dakota's Grand Forks campus also began offering a bachelor's degree in unmanned aircraft systems operations.

O'Brien said he hopes the new data set will stimulate similar efforts.

Meanwhile, the data can also be used to expose a potentially dangerous dependence on defense spending in some localities, which O'Brien said has become more apparent in the current era of continuing resolutions and spending caps.

The data, which could also have political implications, is being released amid congressional heartburn over a nearly $13 billion list of military construction projects that could be delayed to construct a wall on the southern border. The list includes projects from across the United States as well as foreign nations.

Molly Reynolds, a Brookings analyst who studies the federal appropriations process, said the new 50-state study -- when paired with the MILCON list -- provides a window into congressional districts that have the most skin in the defense spending game.

"The same members of Congress who are thinking about making choices about the defense budget for next year . . . are also the same members of Congress who have to decide is there a MILCON project in [their] district that is going to get money diverted from it to build the wall," she said. "Those are the same kind of dynamics we're talking about when we think about how members react and how they think about the relative reliance in their individual districts on military spending."