SoCo Economic Forum Preview: County relies too heavily on military

El Paso County’s economy relies heavily on the military for its job creation, housing growth and increases in personal income.

That could mean trouble in the coming year if a 12-member “super committee” decides to cut billions from the federal budget, including defense spending over the next 10 years.

“That ‘gang’ of 12 could have a pretty dramatic affect on military expenditures and now you are talking about an industry, that in this community, has become quite dominant,” said Tom Zwirlein, University of Colorado at Colorado Springs professor of finance and founder of the Southern Colorado Economic Forum.

The county’s reliance on the military is a key finding in the 2011-2012 Southern Colorado Economic Forum report, which will be released Oct. 14 at the forum’s 15th annual event, where local economists and business leaders will discuss the current state of the local economy.

No doubt the local economy is affected by such global events as uprisings in the Middle East, the earthquake in Japan and European countries facing rising debt. Another issue trickling into the local economy is the effect of the Dodd-Frank Bill, which mandates new and onerous banking regulations; and, a consumer sentiment as low as it was in 1982.

In El Paso County, a look behind the numbers reveals that a great deal of the local economy is tied to the military — 30 percent of all jobs are connected to the military.

The average personal income has gone up because of the military and more than half of the county’s gross metropolitan product is due to federal expenditures. Unemployment, which is 9.5 percent, would be worse if not for the military.

And, that is something to celebrate, said Fred Crowley, UCCS senior instructor and senior economist for the Southern Colorado Economic forum. But, it’s also the very thing that makes him nervous.

“While welcome, this is too much of the community’s economic activity coming from a single source,” he said.

In August, President Obama signed a bill that allows the national debt to grow to $16.7 trillion, an increase of $2.4 trillion over the current $14.3 trillion limit. A “super committee” of 12 lawmakers was appointed to identify $1.5 trillion in cuts for the coming 10 years. The committee has until Nov. 23 to come up with the cuts. If lf they do not reach agreement, the military budget could be slashed by $850 billion over the next 10 years.

Crowley does not want to be the town crier, but he has been repeating the same message for the past few years. The economy must be built on a more diverse workforce. In the past decade, private sector jobs went down and military related jobs went up.

“There is nothing wrong with having a military presence in town, it’s a stabilizing factor,” Crowley said.

“We’ve been saying for years, the importance of growing the private sector, increasing diversification and targeting certain areas.”

The forum has assembled a panel including Frank Caris, CEO of dpiX, Dave Csintyan, president of the Greater Colorado Springs Chamber of Commerce and Dennis Donovan, principal of Wadley-Donovan-Gutshaw Consulting in New Jersey. Donovan is an expert is corporate site selection and will discuss “trends in corporate site selection which includes re-emergence of manufacturing as a force in the U.S. economy,” he said.

There appears to be movement among city and county leaders toward a regional economic development plan, Zwirlein said. A city or county that lands a new factory or company will benefit, he said. But, there could be opportunities for the neighboring communities to benefit through attraction and opening of businesses that support the large factory or company.

“Regionalism in economic development has been around for some time, but it seems to be a pretty hot topic,” Zwirlein said.

Colorado Springs, through the Operation 60Thirtyfive initiative in 2009, identified areas it would target for job growth — aerospace, software and information technology, renewable energy, sports industry and emerging technologies. And, the Governor’s Blueprint for Colorado identified strategies such as advance a business friendly environment and recruit, grow and retain businesses — all in the name of expanding and diversifying the El Paso County workforce so that it is not entirely reliant on the military.

The forum is advancing a few ideas of its own: any new economic strategy should be integrated, comprehensive and regional, the report says. There should be a statewide look at the taxing structure, to make it less complex and more transparent. And, there should be a good look at what the county imports to see if some of the goods can be produced locally.

Crowley said there has been enough thinking and talking about economic development in the county. It’s time for action plans.

“It’s kind of scary to think what unemployment would have been without the military,” Crowley said.

El Paso County by the numbers

9.5 percent unemployment rate in El Paso County

25,433 fewer people employed in the county in June 2011 than in June 2007

46,071 population increase in that same period

LART receipts are expected to be $3.9 million in 2011 down from $4.2 million in 2007

Private sector personal income grew .7 percent; military personal income grew 16.1 percent

The average wage increased in 2010 to $42,989 — 1.9 percent higher than 2009 average wage but, still 10.2 percent below the state average

Five sectors — health care, education services, retail, government and administration and waste services — saw job gains in 2010

In 2010, construction lost 1,514 jobs, manufacturing lost 863 jobs, professional technical services lost 659 jobs and wholesale lost 499 jobs

Retail sales in 2010 were $12.79 billion, down .5 percent from 2009

There were 1,627 permits for new single family and town homes in 2010, a 24.5 percent increase over 2009 and the first yearly increase since 2005

All statistics are current as of June 2011.

Southern Colorado Economic Forum

7 to 11:30 a.m. Oct. 14

Antlers Hilton Hotel

www.southerncoloraodeconomicforum.com