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Budget Cuts Underscore Role, Vulnerability of Growth Industries

Posted by Christopher Geehern on Feb 22, 2013 1:37:00 PM

Massachusetts has outperformed the rest of the nation during the Great Recession and not-so-great recovery largely because of growth industries heavily funded by the government.

Budget CutsWe’re about to see just how important these industries – including defense, research, biosciences and medicine – are to the Massachusetts economy as federal policymakers appear ready to allow $85 billion in automatic spending reductions take effect a week from today.

Officials estimate that Massachusetts stands lose $127 million in federal research funding alone and several thousand jobs in the first year of the so-called sequester.

The $85 billion in spending reductions would cover the final seven months of the federal fiscal year, split equally between defense and non-defense programs. Exemptions would include Social Security, Medicaid and Food Stamps, with Medicare absorbing a smaller percentage cut — 2 percent compared to 8 percent for the Pentagon.

The cuts would total nearly $1 trillion over the next decade.

Not good news for a Massachusetts innovation economy that has provided much of the commonwealth’s economic and job growth during the past decade. Defense contracts to Massachusetts companies increased 83 percent from 2003 to 2011, supporting 130,000 jobs that represent 4.1 percent of employment in the state. Meanwhile, Massachusetts created more biotechnology research jobs than any other state in the country from 2007-2011.

The potential challenge for the growth areas of the Massachusetts economy is sobering:

  • The American Association for the Advancement of Science estimates that Massachusetts may lose $3.1 billion in federal research and development grants during the next five years.
  • Massachusetts brings in $2.5 billion each year in funding from the National Institutes of Health, more per capita money than any other state. Dr. Gary Gottlieb, president and chief executive of Partners HealthCare, told lawmakers this week that NIH research dollars support about 35,000 jobs in Massachusetts, and that sequestration reductions of $275 million annually could eliminate 2,600 of those jobs.
  • Throughout New England, defense supports about 320,000 jobs. Industry executives say a $300 million loss in funding would cost 3,300 jobs in just the first year of the sequester.
  • Defense and medicine are also significant generators of innovation and business formation in areas ranging from computer software to biosciences to nanotechnology. Economists worry that the creative soup of world-class universities, prestigious hospitals and renowned defense technology companies may cool to a low simmer in the wake of federal budget reductions.

Cuts are coming in one form or another to all of these industries, even if Congress and President Obama eventually replace the sequester with a long-term agreement to reduce the nation’s $16 trillion debt. But the prospect of getting an accelerated view of how important these sectors are to Massachusetts is more than a little unsettling.

Topics: Defense Industry, Research, Issues, Massachusetts economy

AIM Joins Defense Technology Initiative

Posted by Christopher Geehern on Feb 22, 2012 1:34:00 PM

Associated Industries of Massachusetts has joined an organization working to strengthen the New England defense industry in the face of increasing military demands for advanced technology.

Defense TechnologyAIM will become a regional partner of the Defense Technology Initiative (DTI), a Waltham-based collaboration that grew out of regional efforts to insulate military Bay State installations from the 2005 Base Realignment and Closure process. DTI sponsors research intended to promote access to, and investment in, New England’s defense and security assets.

The defense industry remains a cornerstone of the Massachusetts and New England economies, but defense contractors face uncertainty as the federal government looks at a sustained period of budget contraction. Announcement of the AIM/DTI partnership comes a day after The Boston Globereported that Hanscom Air Force Base in Bedford is set to lose three-quarters of its funding for contract workers.

“AIM is pleased to be part of DTI and its work to support a defense industry that employs more than 115,000 people in Massachusetts alone,” said Richard C. Lord, President and Chief Executive Officer of AIM, who will sit on the DTI Regional Advisory Board.

“And those jobs are just the start of the economic benefits provided by defense companies. These contractors also disseminate many of the new technologies that will form the basis of economic growth in Massachusetts and New England during the next decade.”

An AIM study last year found that Massachusetts ranks fifth nationally in Department of Defense contract awards and seventh in contracts from the Department of Homeland Security. Payroll generated by Bay State defense companies, from giant first-tier suppliers to smaller manufacturers up and down the supply chain, now stands at a record $8.93 billion. The industry generates more than $3 billion in tax revenue for local, state and federal governments struggling with fiscal emergencies.

The partnership will allow AIM member companies to join DTI at a reduced rate. DTI members gain access to strategic discussions with members of the New England congressional delegation and to proprietary research on defense-related economic trends in the six-state region.

“DTI welcomes AIM and its 6,000 employer members. DTI exists because New England must adopt a collaborative, cross-border, cross-political party strategy to stabilize and strengthen its share of Department of Defense and Department of Homeland Security federal investment,” said Christopher Anderson, President of DTI.

Anderson said the convergence of technology-heavy defense contractors and major research universities in New England gives the region distinct advantages for Department of Defense mission requirements. The challenge, he said, is to ensure that companies, universities and political leaders continue to work together to preserve that advantage.

AIM members interested in supporting DTI and taking advantage of the discounted membership may contact Anderson at chris@mhtc.org

Topics: Defense Industry, Associated Industries of Massachusetts

Massachusetts Defense Industry Grows Amid Economic Changes

Posted by Rick Lord on Dec 6, 2010 9:49:00 AM

The success of the defense industry in Massachusetts during the past two decades is one of the great untold stories of the commonwealth’s economic history.

As the overall economy has struggled in the face of two recessions and fundamental industry shifts, Massachusetts defense contractors have quietly tripled the value of their contracts to $15.6 billion. They have almost doubled their employment rolls to 115,563 people and increased their overall economic output by 146.2 percent. Defense contracts support businesses large and small, as well as many of our state’s higher education institutions – including the University of Massachusetts system.

HomelandSecurityThe impressive numbers come from a report released this morning by Associated Industries of Massachusetts and the UMass Donahue Institute called The Defense Industry in Massachusetts: Current Profile and Economic Significance.

Massachusetts currently ranks fifth nationally in Department of Defense contract awards and seventh in contracts from the Department of Homeland Security. Payroll generated by Bay State defense companies, from giant first-tier suppliers to smaller manufacturers up and down the supply chain, now stands at a record $8.93 billion. The industry generates more than $3 billion in tax revenue for local, state and federal governments struggling with fiscal emergencies.

Eighty-five percent of all federal contracts with Massachusetts companies are for defense-related activities.

And the best is yet to come.

Massachusetts specializes in the kind of research and technology related products and services that are expected to be the lynchpin of defense spending in the future. Nine of the top 10 products sold to defense agencies are related to technology and research; almost $2 billion in Fiscal Year 2009 contracts were awarded to colleges and universities.   The Department of Defense confirms in its 2010 Quadrennial Defense Review that future priorities and initiatives will lean heavily on technology advancements and research and development.

Innovation may insulate the Massachusetts defense industry in the long term if lawmakers decide to move forward with the deep reductions in overall defense spending outlined recently by President Barack Obama’s bipartisan commission on reducing the national debt. The economics of defense and federal budgets underscore the importance of continued support among employers for improvements in science, technology, engineering and mathematics education both in public schools and on the college and university level.

Federal priorities for defense and homeland security bode well for a commonwealth with a history of technological innovation, outstanding public schools, well-trained workers and the best research universities in the world.

The report shows that a defense industry that has been vital to the Massachusetts economy will become even more so in the years ahead. For AIM, the voice of Massachusetts employers for 95 years, and the University of Massachusetts, the potential growth of the defense industry represents the kind of economic development that will rebuild our economy. The formula for success is simple: cutting-edge producers of world-class technologies and services providing stable, well-paid jobs for the people of our commonwealth. 

Topics: Defense Industry, Associated Industries of Massachusetts, AIM, Massachusetts economy, Manufacturing

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