North Carolina s Military Footprint:

Transcription

1 North Carolina s Military Footprint: Current Economic Impacts and Projections for 2013 P & R OLICY ESEARCH S t r a t e g i c P l a n n i n g A Division of The North Carolina Department of Commerce

2 North Carolina s Military Footprint: Current Economic Impacts and Projections for 2013 Prepared for North Carolina Advisory Commission on Military Affairs Prepared by The Policy, Research, and Strategic Planning Division of the North Carolina Department of Commerce Sara Nienow, Chris Harder, Tim Cole, and Anna Lea North Carolina Department of Commerce With assistance from Adam Cooper Regional Economic Models, Inc. June 2008

3 Table of Contents Executive Summary...1 Introduction and Background...5 Introduction...5 Background...6 Methodology Economic Impact of the Military in North Carolina...9 Components of Military Activity...11 Employment...11 Prime Contracting and Research Grants...12 Veterans Components of New Military Activity...15 Southeast Region...15 Eastern Region Economic Projections...17 Methodology and Approach...17 Total Growth in Military Growth Impacts...19 Conclusions...22 Appendix A: Overview of REMI Policy Insight...23 Appendix B Military Information by County...25 Appendix C 2013 Model Assumptions...28 Appendix D Map of Direct Military Benefits...29

4 Table of Contents List of Figures Figure 1: North Carolina Military Installations... 6 Figure 2: Military and Civilian Payroll by County...11 Figure 3: Military Contracts and Grants Performed in North Carolina by County...13 Figure 4: Military Veterans Pension and Benefits by County...14 Figure 5: Total North Carolina Employment Impacts...19 Figure 6: REMI Model Linkages...24 Figure 7: Direct Military Benefits by County for List of Tables Table 1: 2007 Regional and State Military Impacts...10 Table 2: Employees and Payroll by Region, Table 3: Military Contracting by Region, Table 4: Veterans Compensation by Regional Partnership...14 Table 5: Changes in Military Presence for the Southeast Region, Table 6: Changes in Military Presence for the Eastern Region, Table 7: Anticipated Economic Growth in North Carolina, 2006 and Table 8: Industry-Specific Employment Growth...20 Table 9: 2013 New Military Activity Impacts...21 Table 10: 2005 Military Information by County...25 The authors would like to thank the following people for their participation in this study: Major Wendy Gresis, Seymour Johnson Air Force Base, Paul Friday USMC; Don Belk and Paul Dordal, BRAC-RTF; Lieutenant Eric Cain and Captain Mark Rose, North Carolina Coast Guard; Peter Van Borkulo and Carrie Rice, Fort Bragg; Scott Dorney, North Carolina Military Business Center; Wayne Freeman, Training and Development Associates, Inc.; Allan Sandoval, Roberta Rose, and Angela Marshall, North Carolina Department of Commerce; Julie Gressley and Billy Leung, REMI

5 Executive Summary The military s presence in North Carolina has historically provided economic opportunities for many of our state s residents. Today, North Carolina has the fourth-largest active duty military population in the U.S. distributed among seven military installations and 14 U.S. Coast Guard facilities. These military installations contribute directly to economic development of North Carolina through capital investment, employment, and defense contracting, and indirectly through increased demand experienced by regional businesses and increased spending from households. Retired military personnel and veterans, given their attractive skill sets, are desired employees for our state s industries and own a significant number of small businesses. To understand the economic growth potential of the military, this report examines the economic impact of the military in North Carolina for 2007 and estimates the impacts of anticipated military growth on the state s economy in The following information supports these four main findings: In 2007, military activities contributed $23.4 billion, or 7 percent, of North Carolina s State Gross Domestic Product (total value of goods and services). More than 416,000 individuals, or 8 percent of total state employment, are either directly employed by the military or Coast Guard, or have jobs that are supported by military installations in North Carolina. In 2013, anticipated military growth is expected to increase North Carolina s Gross Domestic Product by $2.9 billion. 49,000 additional jobs will exist in 2013 as a result of increased military activity. Research Methodology Economic impacts for 2007 and 2013 were calculated using economic modeling software from Regional Economic Models, Inc. (REMI). To estimate the 2007 economic impacts of the military in North Carolina, a baseline model was constructed to include all existing military activity. 1 This model was then compared to a model which excludes the entire military from the state s economy. The difference between the two models represents the impact of the military in North Carolina in Through the use of REMI s built-in forecasting capabilities and by incorporating the planned military activities scheduled to occur between , the study team was able to estimate the total economic impact of the military for 2013 as well as impacts specific to Defense Base Realignment and Closures 2 (BRAC) and other planned troop increases. 1 North Carolina s military consists of the following installations: Seymour Johnson Air Force Base in Wayne County, Camp Lejeune in Onslow County, the Marine Corps Air Station Cherry Point in Craven County, the Marine Corps Air Station New River in Onslow County, Fort Bragg in Cumberland and Hoke counties, Military Ocean Terminal at Sunny Point in Brunswick County, and Pope Air Force Base in Cumberland County. This research includes the U.S. Coast Guard, Army Corps of Engineers, National Guard, all Veteran's facilities, and all reserve units in the analysis. 2 The Defense Base Realignment and Closure Commission (BRAC) reviewed military installations in This independent review identified excess infrastructure and created a plan to divert more resources to confront today s threats to national security. The review recommended closing 25 installations and realigning or consolidating 24 major installations. North Carolina s military installations are undergoing realignment as a result of these decisions. 1

6 Summary of Results To best understand the economic impact of the military in North Carolina, the study team chose to look at data based on several common indicators of economic health: Employment, State Gross Domestic Product (State GDP), Output, Demand, and Real Disposable Personal Income. Overall, the REMI models indicate what North Carolinians already know: the military provides substantial positive economic benefits to the state. The military in North Carolina supplies quality jobs, stimulates the production of goods and services, and increases the amount of money consumers have to spend on goods and services. Each of the indicators is defined and discussed in detail in the full report; below is a summary of the key findings. Military Impacts in 2007 Between 2004 and 2007, North Carolina experienced strong economic growth. A significant portion of the state s growth can be attributed to the military. In 2007, military activities contributed $23.4 billion, or 7 percent of North Carolina s State Gross Domestic Product (value of total final goods and services produced). Military base payroll accounts for $19.2 billion of the estimated impact on State GDP. Payments and services provided to veterans in North Carolina account for another $2.4 billion of State GDP while Department of Defense industrial contracts add $1.4 billion more. More than 416,000 individuals, or 8 percent of total state employment, are either directly employed by the military or Coast Guard, or have jobs that are supported by military installations in North Carolina. Active military, Coast Guard, and civilian employees account for 150,691 jobs, while approximately 181,889 jobs are indirectly supported by local spending attributed to military employees and their families. Another 34,030 people are employed by companies engaged in supplying goods and services on military contracts. The remaining employment, some 49,790 positions, is supported through the transfer payments and benefits provided to retired members of the military still residing in North Carolina. Output is the total value of both final and intermediate products. In 2007, military spending increased state output by $17.6 billion. The construction industry, retail stores, and real estate and rental companies experienced the greatest increases in output due to military spending. Demand is the total value of goods and services consumers are willing and able to purchase. Military activities stimulated $35.1 billion of demand in Goods and services most in demand included construction, hospitals and other health care, real estate services, and manufactured goods such as wood products, fabricated metal products, machinery, and computers and electronic goods. The more disposable income an individual or family has, the more goods and services can be purchased. In 2007, the residents of North Carolina had $16.8 billion more Real Disposable Personal Income due to the presence of the military, with the majority, $11.4 billion, concentrated in the eastern and southeastern parts of the state near the military installations. 2

7 Employment 2004 and 2007 Estimated State Military Impacts Gross Regional Product (Billions) Output (Billions) Demand (Billions) ,380 $20.12* $14.65 $24.94 $ ,400 $23.42 $17.57 $35.12 $16.79 Percent Increase Real Disposable Personal Income (Billions) *This number was adjusted from fixed 1996 dollars to fixed 2000 dollars for a better comparison numbers provided by Richard Brockett, Adam Cooper,, Dana J. Gauland, and Erin Francisco. North Carolina Statewide Military Impact Study by East Carolina University Regional Development Services and Regional Economic Models, Inc. North Carolina Department of Commerce REMI model estimates, 2007 All monetary figures reported in fixed 2000 dollars. The results of this study are not directly comparable to the 2004 work because this effort has included employment and wage data from the Coast Guard and additional veterans benefits. In addition, this work has modeled expenditures and employment on the regional, rather than state level. Military Impacts in 2013 By 2013, North Carolina s military bases will have undergone a substantial transformation due to the BRAC activity and other planned troop increases. Fort Bragg will be the new headquarters for U.S. Army Forces Command (FORSCOM) and the U.S. Army Reserve Command (USARC). Between 2006 and 2013, there will be an additional $2.4 billion in construction at Fort Bragg. These changes will lead to an estimated increase in employment of 4,024 new troops, more than 2,146 new civilian employees, and 1,942 new private contractors. In the eastern part of the state, the Marine Corps plans to add an additional 11,477 Marines, Navy, and civilian workers at Camp Lejeune and associated air stations by The Marine Corps also anticipates an increase in the number of private contractors at their installations but has not yet formulated an exact estimate. Seymour Johnson Air Force Base experienced a decline in staff in 2006 and 2007 as a result of national efforts to reduce the size of the Air Force. However, these losses are partially offset by the addition of 474 new positions in An additional $3.8 billion in military construction will occur in the Eastern Region between 2006 and These changes are expected to substantially impact the state s economy and the economies of surrounding communities. The following is a summary: In 2013, new military activities (employment, capital investment and contracts) are expected to increase North Carolina s Gross Domestic Product by an additional $2.85 billion. Similar regional impacts in Gross Regional Product (GRP) for the same year are $1.03 million in the Southeast Region and $1.46 billion in the Eastern Region. The 2013 statewide employment growth related to new military activity is approximately 49,620 jobs. In the Southeast Region, which includes Fort Bragg, Pope AFB and Sunny Point, employment is anticipated to increase by approximately 16,530. The Eastern Region, where Seymour Johnson AFB, Camp Lejeune, New River, and Cherry Point are located, is expected to have around 28,030 additional jobs. These two regions account for 90 percent of the statewide employment impact. Professional and technical services, retail trade, construction, administrative/waste services and health care industries are each projected to experience employment gains in excess of 2,300 statewide by The military growth scheduled to take place between 2006 and 2013 translates into a more than $1.93 billion increase in real disposable personal income. By 2013, the annual real disposable per capita income will increase in the Eastern Region by $183 and in the Southeast Region by $133. 3

8 In 2013, new military activities are expected to increase output in the state by $2.14 billion. Five industries are estimated to see increased output in excess of $100 million: Construction ($513 million); Retail Trade ($281 million); Real Estate, Rental and Leasing ($188 million); Professional and Technical Services ($311 million); and Health Care and Social Assistance ($149 million). The total value of goods and services demanded by consumers in North Carolina is expected to be $663 billion in 2013, of which $4.37 billion can be attributed to anticipated military adjustments. Employment Anticipated Impact of Military Growth in North Carolina for 2013 Gross Regional Product (Billions) Output (Billions) Demand (Billions) 49,620 $2.85 $2.14 $4.37 $1.93 North Carolina Department of Commerce REMI model estimates, 2008 Real Disposable Personal Income (Billions) Conclusions In 2007, the military and Coast Guard installations in North Carolina had a $23.4 billion impact on the state s economy. The military s current and future organizational realignment, personnel presence, and budgetary activities present an enormous opportunity for state businesses and citizens in all regions of the state. Military contracting provides employment in a wide variety of industry sectors, while members of the military and their families support local communities by creating demand for goods and services. In addition, retired military pensions and other forms of compensation provide individuals and communities with a reliable source of income. This research indicates that these impacts will grow by an additional $2.9 billion in

9 Introduction and Background Introduction The military historically has provided North Carolina with economic opportunities for many of our state s residents. Military installations contribute directly to the economic development of North Carolina through capital investment, employment, and defense contracting, and indirectly through increased demand experienced by regional businesses and increased spending from households. Retired military personnel and veterans, given their attractive skill sets, are desired employees for our state s industries and own a significant number of small businesses. To understand the economic growth potential of the military, this report examines the economic impact of the military in North Carolina for 2007 and estimates the impacts of anticipated military growth on the state s economy in There are two purposes to this research. First, the study will update the results of an earlier military impact study completed in 2004 entitled North Carolina Statewide Military Impacts Summary. This research was completed by the East Carolina University Regional Development Services group. 3 While the 2004 study used data from 2002, the current study aims to provide similar results for 2007 using 2005 data. Second, the research will estimate economic impacts of the U.S. Military s latest Base Realignment and Closures 4 (BRAC) as well as other announced military personnel increases, most notably the Marine Corps effort to add up to 11,477 Marines, Navy, and civilian workers in the near future. The estimated impacts will be reported for 2013, when the changes in troop levels are scheduled for completion. Direct impacts of North Carolina s military sector are quantified for the seven economic development regions of the state 5 and for North Carolina as a whole. This information is reported as the number and total wages of military and civilian employees of the military by region, number of veterans and payments and benefits to veterans by region, and amount of military contracts and research grants by region. Indirect and induced impacts are added to the direct impacts to arrive at a total impact by region and state. 6 The total impact for each region and the state are reported in terms of State Gross Domestic Product, Employment, Output, Demand, and Real Personal Disposable Income. The second section of this paper examines the impacts of current and future military activities and estimates the military s impact to state and regional economies in This work was commissioned by the North Carolina Advisory Commission on Military Affairs. 3 Brockett, S. Richard, Cooper, Adam, Gauland, Dana J. and Erin Francisco. North Carolina Statewide Military Impact Study Prepared for the North Carolina Advisory Commission on Military Affairs by East Carolina University Regional Development Services and Regional Economic Models, Inc. in cooperation with NCSU Economic Development Partnership, The Base Realignment and Closure Commission (BRAC) reviewed military installations in This independent review identified excess infrastructure and created a plan to divert more resources to confront today s threats to national security. The review recommended closing 25 installations and realigning or consolidating 24 major installations. North Carolina s military installations are undergoing realignment as a result of these decisions. 5 North Carolina s seven economic development regions are: Advantage West Partnership, Charlotte Regional Partnership, Eastern Partnership, Northeast Partnership, Southeast Partnership, Piedmont Triad Partnership and Research Triangle Regional Partnership. 6 According to IMPLAN, direct effects are changes in the industries to which final demand change was made, indirect effects are changes in inter-industry purchases as they respond to the new demands of the directly affected industries, and induced effects typically reflect changes in spending from households as income increases or decreases due to the changes in production. 5

10 Background The U.S. military has a long and prolific history in North Carolina. Fort Bragg was founded in 1918 as an artillery training ground and was the first modern military base in the state. A year later, the neighboring air strip was established as Pope Air Force Base. During World War II, Cherry Point, New River, and the Seymour Johnson Air stations were opened and Camp Lejeune was opened as a training base for Marines. The last major installation, Sunny Point, was added in 1955 to serve as an ammunition shipping base. In 1873, Congress established the U.S. Life Saving Service to patrol the beaches along the treacherous North Carolina coast. This group evolved into the present-day U.S. Coast Guard, which maintains air stations and support centers in Elizabeth City as well as other operations along North Carolina s coast. Today, North Carolina has the fourth-largest active duty military and reserve population in the United States distributed among seven military installations: Seymour Johnson Air Force Base in Wayne County, Camp Lejeune in Onslow County, the Marine Corps Air Station Cherry Point in Craven County, the Marine Corps Air Station New River in Onslow County, Fort Bragg in Cumberland County, Military Ocean Terminal at Sunny Point in Brunswick County, and Pope Air Force Base in Cumberland County. There are 101 Army Guard locations in 75 counties and three Air Guard locations in Charlotte, New London, and Badin. The U.S. Coast Guard also has a sizable presence in the state, with the majority of workers located in Pasquotank County. Figure 1: North Carolina Military Installations Legend Military Base Interstate County Boundary Municipality Map Created April 2008 Source: North Carolina Center for Geographic Information Analysis Methodology In updating the 2004 study, North Carolina Statewide Military Impacts Summary, the Department of Commerce used REMI 9.5 software and much of the original methodology. A comprehensive description of the REMI model is included in Appendix A. The data for this project were collected from a variety of sources: Department of Defense, individual military bases, the North Carolina Coast Guard, the Veterans Administration, North Carolina Military Business Center, Marine Corps Installations East (MCIEAST), and the Base Realignment and Closing Regional Task Force (BRAC-RTF). 6

11 To measure the current economic impact of the military, a baseline model was constructed using 2005 data and updated employment information for military and civilian employment at all military installations and Coast Guard stations in North Carolina. The model uses the 2005 data to create estimates of 2007 employment, Gross Domestic Product, and other economic indicators. The employment variables in the REMI baseline forecast use historical data from the Bureau of Economic Analysis (BEA). 7 Several policy variables were changed in the baseline model to reflect what the economy would look like without any military presence. An aggregate model that included all changes was then compared to the baseline to quantify total military contributions to the economy. The variables which comprise military economic activity fall into three basic categories: Military and civilian employment Retirees and veterans compensation and benefits Purchases of goods and services including research contracts To account for each of these in the model, the following REMI policy variables were changed: Military employment: A variable that can be changed to increase or decrease the number of employees in a region; Federal civilian employment: A variable that can be increased or lowered to reflect the change in civilian employment by the military; Transfer payment: a general variable which can be altered to the dollar amount of federal government payments to state residents; and Exogenous final demand: A policy variable which reflects the change in demand for goods and services. Military and civilian employment includes the Department of Defense, Coast Guard, Army Corps of Engineers, National Guard, and all reserve components. The employment variables in REMI are based on place of work and include part-time employees, full-time employees, and the self-employed. The model counts full-time and part-time jobs at equal weight. Employment is reported in thousands of people. Transfer payments are income given to individuals by the federal government. These government payments usually consist of retirement and disability payments, income maintenance benefit payments, unemployment insurance benefits, and veterans benefit payments. Transfer payments are reported in millions of dollars. 7 This variable is based on place of work and includes part-time employees, full-time employees, and the self-employed. The model counts fulltime and part-time jobs at equal weight. 7

12 Exogenous final demand is a series of policy variables which change the total amount of final goods and services demanded in specific industries. REMI uses 70 industry sectors to model the economy in each region. The model attributes the military s demand for goods and services, as expressed through Department of Defense place of performance contracts, to the regions of the state where the goods were produced. Veterans benefits such as educational assistance also are modeled as a demand for specific goods rather than as transfer payments which may be spent on any type of good or service. The model alters this amount by the Regional Purchase Coefficient (RPC) 8 to account for only the proportion of demand that is supplied locally. The remainder of the value of the demand is assumed to be produced in other regions and imported to the local area. Approximately $50 million in Coast Guard contracts is not accounted for in this model because the industrial sector is not identified. 9 Four simulations of the model were run. Three simulations accounted for the separate impacts of employment, contracting, and pensions and retirement benefits. The final model aggregated all of these factors to estimate total impact. All values were entered as subtractions against the baseline values and extended out to This was done to represent the permanent changes that would occur if the military did not exist in North Carolina. The results of this research are reported in fixed 2000 dollars. 10 The results of this study are reported for the state as a whole and the Regional Economic Development Partnerships. These partnerships were formed by the General Assembly in 1993 and 1994 to engage in: marketing the region to promote new investment, promotion of travel and tourism, undertaking trade missions, and supporting existing industries. Every county in the state is assigned to a regional partnership. Because this research uses regional and state-wide models, it is difficult to attribute impacts to specific counties and this paper does not attempt to do so. This research also does not explore the unique issues that counties and municipalities will face with the impending military growth. 11 However, county level data for 2005 employment, veterans benefits, and contract spending is reported in Appendix B. The results of this study are not directly comparable to the 2004 work because this effort has included employment and wage data from the Coast Guard and additional veterans benefits. In addition, this work has modeled expenditures and employment on the regional, rather than state, level. The regional level of analysis provides us with a more-detailed picture of the military and its impacts across the state. 8 Regional Purchase Coefficients are derived by an econometric equation. RPCs predict how much local production is actually used locally (IMPLAN). 9 The Coast Guard uses a different accounting system for contracts that makes it difficult to integrate with Department of Defense data. 10 Fixed 2000 dollars may be inflated to current dollars by taking the 2000 value and multiplying it by (Personal Consumer Expenditure Index 2007/Personal Consumer Expenditure Index 2000) 11 Issues include school construction and federal support for military dependents education, housing, municipal boundaries, and land use planning. 8

13 2007 Economic Impact of the Military in North Carolina To determine the impact of the military in North Carolina, the study team compared a REMI economic model which includes all existing military activity against a model which excludes the entire military from North Carolina s economy. The difference between the two models represents the impact of the military in North Carolina as of Following are the specific results: State Gross Domestic Product is the total value of all finished goods and services produced within the state in a given year. It is a value-added concept similar to the national concept of gross domestic product. State GDP is one of the most important indicators because it gives economists a rough idea of how fast the economy is growing. On a national level, Gross Domestic Product is used as a measure of human well-being, because people in counties with high GDPs often have longer life expectancy, better health, and other desirable attributes. Spending by government, investment within the region by firms and individuals, consumption by individuals, trade, and changes in business inventories (CBI) are all components of GDP. In 2007, military activities contributed $23.4 billion, or 7 percent, of North Carolina s State Gross Domestic Product (GDP). This figure has increased about $3.3 billion 12 since this research was done in Military base payroll accounts for $19.2 billion of the estimated impact on State GDP. Payments and services provided to veterans in North Carolina account for another $2.4 billion of State GDP while Department of Defense industrial contracts add $1.4 billion more. Table 1 reports State GDP and Regional Gross Domestic Product for each of the seven economic development partnerships. Employment, or the number of people with jobs, is an important indicator of economic health. When employment is increasing it means that companies are experiencing demand for their products and expanding their workforce to meet this demand. When employment is declining, people are losing jobs and their ability to pay for goods and services is diminished. More than 416,000 individuals, or 8 percent of total state employment, are either directly employed by the military or Coast Guard, or have jobs that are supported by military installations in North Carolina. Active military, Coast Guard personnel, and civilian employees account for 150,691 of these jobs. Approximately 181,889 jobs are indirectly supported by the local spending of direct hires and their families. Another 34,030 people are employed by companies engaged in supplying goods and services on military contracts. The remaining employment (49,790 positions) is supported through the transfer payments and retirement benefits provided to former members of the military residing in North Carolina. Military-supported employment is greatest in the eastern region of the state where Camp Lejeune, Cherry Point, New River, and Seymour Johnson AFB are located and in the southeastern region of the state which contains Fort Bragg and Pope Air Force Base. Table 1 reports military induced employment for each of the seven economic development partnerships and for the state as a whole. 12 The 2004 result for GDP was $18.1 billion chained 1996 dollars or 18.8 fixed 1996 dollars. This figure was inflated to fixed 2000 dollars to provide an even basis for comparison. 9

14 Output is a more general measure than Gross Domestic Product because it counts the total value of both final and intermediate products. It is the amount of production in dollars, including all intermediate goods purchased as well as the value added to these goods by labor, capital, investments, and profits. Output is driven by consumption from households and companies, government spending, investment, and exports out of the region. In 2007, military spending increased state output by $17.6 billion. The construction industry, retail stores, and real estate and rental companies experienced the greatest increases in output due to military spending. Demand is the total value of goods and services consumers are willing and able to purchase. Demand is impacted by changes in consumption, government spending, investment, exports, and intermediate demand. Military activities stimulated $35.1 billion of demand in Goods and services most in demand included construction, hospitals and other health care, real estate services, and manufactured goods such as wood products, fabricated metal products, machinery, and computers and electronic goods. Real Disposable Personal Income is the total after-tax income that people have to either spend or save. This number serves as an indicator of how much money consumers have to purchase goods and services. In 2007, the Real Disposable Personal Income produced by the military was $16.8 billion in North Carolina, with the majority, $11.4 billion, concentrated in the eastern and southeastern parts of the state near the military installations. Table 1 summarizes these results: Region Employment GRP (Billions) Table 1: 2007 Regional and State Military Impacts Output (Billions) Demand (Billions) Real Disposable Personal Income (Billions) AdvantageWest 11,990 $0.472 $0.521 $1.313 $0.634 Charlotte 24,650 $1.551 $2.047 $2.630 $1.182 Piedmont Triad 21,040 $1.062 $1.396 $1.996 $0.957 Research Triangle 48,660 $3.155 $4.081 $5.114 $2.242 Northeast 8,942 $0.435 $0.329 $0.822 $0.406 Eastern 152,800 $7.919 $4.106 $ $5.462 Southeast 148,300 $8.825 $5.091 $ $5.906 North Carolina 416,382 $ $ $ $ North Carolina Department of Commerce REMI model estimates, 2007 The 2007 results are based on data comprised of military employment, prime contracting and research grants, and veterans benefits. The specific impact for each of these categories follows. 10

15 Components of Military Activity Employment North Carolinians receive more than $5 billion annually in wages from the Department of Defense and the Coast Guard. 13 In 2005, there were 101,935 active duty military and 17,184 federal civilian workers in North Carolina. In addition, there were 28,895 members of the National Guard and other reserve units. The Coast Guard reported 2,062 active duty, 615 civilian employees, and 221 reservists. The largest concentration of employment is in the Eastern Region of the state. This is where Seymour Johnson Air Force Base and the Marine installations New River, Cherry Point, and Camp Lejeune are located. Table 2: Employees and Payroll by Region, 2005 Partnership Military and Civilian Employees Military and Civilian Payroll ($ millions) AdvantageWest 3,044 $112 Charlotte 5,891 $217 Piedmont Triad 4,520 $167 Research Triangle 5,906 $218 Southeast 58,657 $2,164 Eastern 69,252 $2,562 Northeast 3,422 $149 State Total 150,691 $5,589 Information compiled by the NC Department of Commerce from Department of Defense and Coast Guard data 2007 Figure 2: Military and Civilian Payroll by County Legend Regional Partnerships Payroll (millions of dollars) $0.4 - $10 $ $50 $ $197 $ $375 $ $2,063 Map Created April 2008 Information compiled by NC Department of Commerce with data obtained from the Department of Defense and the Coast Guard. 13 U. S. Department of Defense. Department of Defense Personnel and Procurement Statistics. Statistical Information and Analysis Division < 11

16 Prime Contracting and Research Grants Table 3: Military Contracting by Region, 2005 Region Contract Amounts ($ millions ) AdvantageWest $141 Charlotte $209 Piedmont Triad $241 Research Triangle $439 Southeast $1,050 Eastern $763 Northeast $116 State Total $2,959 Information compiled by the NC Department of Commerce U.S. Department of Defense and U.S. Coast Guard, 2006 The majority of the Department of Defense s spending occurs through prime contracts which are used to purchase supplies, materials, equipment, and services. Prime contract activity includes $2.9 billion in contracts for work done in North Carolina facilities but excludes subcontracts. 14 While North Carolina s amount of contract funding has consistently ranked in the middle of states overall, the total dollar amount of contracts performed in the state has increased from $1.4 billion in 2001 to $2.9 billion in Since this data only examines final goods and services, it is likely that these figures undercount North Carolina s true contribution to the military s prime contracting due to the amount of intermediate goods produced in the state. Department of Defense contracting is distributed widely across the state. Business facilities in 97 counties performed Department of Defense contracts in The majority of contracting was done in the Southeast and the Eastern regions of the state. Cumberland County contracts accounted for approximately 32 percent ($946 million) of the state total, followed by Onslow (13.2%, $390 million), Wake (6.8%, $200 million), and Craven County (6.8%, $199 million). Other counties with more than $50 million in contracting include: Mecklenburg, Harnett, Guilford, Durham, Wayne, Pasquotank, and Brunswick. 14 U. S. Department of Defense. Department of Defense Personnel and Procurement Statistics. Statistical Information and Analysis Division < 12

17 The Department of Defense also stimulates the local economy through the Small Business Innovation Research program (SBIR) and Small Business Technology Transfer program (STTR). 15 Between 2002 and 2006, the Department of Defense provided North Carolina businesses with almost $45 million in research grants. In 2005, North Carolina businesses were awarded $10.8 million in grants. Most of these grants were awarded in the Triangle region. Figure 3: Military Contracts and Grants Performed in North Carolina by County Legend Regional Partnerships Contract Spending (millions of dollars) $0 $1 - $54 $ $150 $ $390 $ $946 Map Created April 2008 Information compiled by NC Department of Commerce with data obtained from the Department of Defense and the Coast Guard. 15 SBIR/STTR is a competitive three-phase award program which provides qualified small businesses with opportunities to propose innovative ideas that meet the specific R&D needs of the Federal Government. SBIR/STTR targets the entrepreneurial sector by funding the critical startup and development stages, and encouraging the commercialization of technologies, products, or services. 13

18 Veterans Table 4: Veterans Compensation by Regional Partnership Regional Partnership Number of Veterans Veterans Compensation ($ millions) AdvantageWest 105,969 $534 Charlotte 156,982 $699 Piedmont Triad 127,608 $452 Research Triangle 134,073 $771 Southeast 110,078 $671 Eastern 95,726 $439 Northeast 33,537 $146 State Total 763,973 $3, U.S. Department of Veterans Affairs and U.S. Coast Guard North Carolina has more than 763,000 veterans and former members of the military as residents. This is the 10th highest number in the country. 16 These residents receive $3.7 billion dollars in federal retirement payments and Veterans Administration pensions and benefits each year. This figure includes other forms of compensation such as education benefits, vocational rehabilitation, insurance, medical care, and indemnity programs. Medical benefits are shown on the map for the county in which the service was provided. The highest concentration of veterans is found in the Charlotte and Triangle regions of the state and this is where the largest amount of pension payments and services are received. Figure 4: Military Veterans Pension and Benefits by County Legend Regional Partnerships Pension (millions of dollars) $1 - $14 $ $30 $ $69 $ $166 $ $397 Map Created April 2008 Information compiled by NC Department of Commerce with data obtained from the Department of Defense and the Coast Guard. 16 National Center for Veterans Analysis and Statistics. Demographics by State < 14

19 Components of New Military Activity To ensure that DOD s domestic bases were structured appropriately to support operational requirements, the Defense Base Realignment and Closure Commission (BRAC) reviewed military installations in This independent review identified excess infrastructure and created a plan to divert more resources to confront today s threats to national security. The review recommended closing 25 installations and realigning or consolidating 24 major installations. North Carolina s military installations are undergoing realignment as a result of these decisions. In addition, North Carolina s military will be growing for reasons related to current operations rather than the BRAC process. The Marine Corps plans to add an additional 11,477 Marines, Navy,and civilian workers at Camp Lejeune and associated air stations by The changes to specific bases are described by North Carolina economic development regions below. Southeast Region Pope Air Force Base The BRAC actions will relocate 25 C-130E aircrafts from Pope AFB to Little Rock AFB and 36 A-10 aircrafts to Moody AFB, and establish an Air Force reserve/active duty associate unit of 16 C-130H aircraft at Pope. The Department of Defense (DOD) recommendations were amended by the BRAC Commission to add an active duty Air Operations Group and move the 440th Air Reserve Component Wing from Milwaukee to Pope AFB. The BRAC Commission rejected the DOD recommendation to eliminate the Air Force command structure at Bragg/Pope and instead directed the establishment of an Air Force Air Operations Group to oversee the associate unit and other airlift functions. The Commission s amendment did not specify how many personnel will be in the group or how it will be structured. In 2010, Fort Bragg will officially take control of Pope Air Force Base. Fort Bragg The Base Realignment and Closure (BRAC) Commission approved Department of Defense recommendations to transfer Headquarters US Army Forces Command (FORSCOM) and Headquarters US Army Reserve Command (USARC) from Fort McPherson, GA to Fort Bragg. In addition, the 4th Brigade Combat Team (BCT) of the 82nd Airborne Division will be activated and a small number of European-based forces will be relocated to Fort Bragg. The 7th Special Forces Group (SFG) will be relocated to Eglin AFB in Florida. Non-BRAC changes at Fort Bragg include: unit conversions, USASOC transformation, stationing changes, and the relocation of air defense units from Fort Bliss. It is estimated that the moves will be phased, starting in 2008 and completed by Facilities are already under construction for the 4th BCT. The 7th SFG relocation will depend on timing for military construction of new facilities at Eglin AFB. As a result of these recommendations, the Army s Fort Bragg will gain more than 8,000 additional military personnel, civil employees, and private contractors by The biggest growth is attributed to the re-stationing of U.S. Army Forces Command from Fort McPherson in Georgia to Fort Bragg. This command provides internal coordination for the military and procures and allocates resources. This may lead to an increase in civilian employment as the employees who do not relocate with the headquarters are replaced locally. Relocation of this group to North Carolina means that more procurement decisions will be made locally. It is anticipated that private defense contractors who perform large amounts of military business will relocate along with the Army Forces Command. 15

20 Military Ocean Terminal Sunny Point With the exception of a small amount of construction, the Sunny Point facility is expected to see little change in employment over current numbers. Table 5: Changes in Military Presence for the Southeast Region, Resources Cumulative Change Fort Bragg Active Duty Pope AFB Active Duty , ,223 Total Active Duty 1,119 1, , ,236-1, ,024 Fort Bragg Civilian Employees Pope AFB Civilian Employees Total Civilian Employees Fort Bragg Contractors Pope AFB Contractors , , ,146 NA , Total Contractors ,942 Construction Contracts* ($ millions) $235.5 $251.7 $368.3 $524.4 $296.1 $357.8 $259.6 $148.5 $2,441 *Employment data as of 3/19/2008 as reported by base; Construction contracts based on existing federal budgets and estimates of future activity supplied by the North Carolina Military Business Center Eastern Region Planned growth in the Eastern region of the state will occur at Seymour Johnson Air Force Base and Marine Corps facilities Camp Lejeune, New River, and Cherry Point. Seymour Johnson Seymour Johnson experienced a decline in staff in 2006 and 2007 as a result of national efforts to reduce the size of the Air Force. Due to the realignment of the Grand Forks Air Force Base in North Dakota, the 319th Air Refueling Wing s KC-135R aircraft is slated to be relocated to the 916th Air Refueling Wing (AFR) at Seymour-Johnson AFB in The 916th ARW also will host an active duty associate unit. This realignment will bring approximately 474 new personnel and their families to Goldsboro. Camp Lejeune, New River, and Cherry Point The changes at Marine facilities in Camp Lejeune, New River, and Cherry Point are unrelated to the BRAC process but will occur during the same time period and are included in this analysis. The Marine Corps plans to add an additional 11,477 troops and civilian workers at Camp Lejeune and associated air stations by 2012 in an effort to increase the size of the force. The Marine Corps also anticipates an increase in the number of private contractors at their installations but has not yet formulated an exact estimate. 16

21 2013 Economic Projections Table 6: Changes in Military Presence for the Eastern Region, Resources Cumulative Change Marine Corps Active Duty Seymour Johnson Active Duty 0 1,632 3,649 2,425 2, , Total Active Duty ,087 4,123 2,425 2, ,509 Marine Corps Civilian Seymour Johnson Civilian , Total Civilian ,249 Construction Contracts* (millions) $160.3 $495.8 $511.9 $596.4 $500.0 $500.0 $512.0 $500.0 $3,776 *Contracts for based on and estimates from the MCIEAST Employment estimates provided by military installations Methodology and Approach In addition to estimating the current economic impact of the military in North Carolina, REMI can be used to estimate future impacts. For purposes of this report, 2013 was selected as the analysis year for two reasons: 1) 2013 represents the year BRAC troop level changes and other troop increases are scheduled to finish, and 2) the estimated impacts are expected to level off beyond The economic impacts for selected regions, Southeast 18 and Eastern, 19 and the state are reported in terms of Employment, State Gross Domestic Product, Output, Demand, and Real Personal Disposable Income. Economic impacts of the military are quantified two different ways. First, a REMI model was constructed to look at total economic growth in the future. Using information about the existing military presence as well as all anticipated future military adjustments (troop and civilian employment, contractors and construction contracts) related to BRAC and other base activities, this model projects what will happen in the economy over the next 50 years. Then the research team identified the incremental impacts directly related to BRAC and other programs to increase the number of troops. These economic impacts are summarized in Tables Seven and Eight. See Appendix C for assumptions included in the 2013 projections. 17 In almost all cases the peak year for cumulative economic impacts is After 2011 the impacts tend to level off, but still remain higher than the baseline model is the peak year for construction. 18 Counties: Bladen, Brunswick, Columbus, Cumberland, Hoke, New Hanover, Pender, Richmond, Robeson, Sampson and Scotland. 19 Counties: Carteret, Craven, Duplin, Edgecombe, Greene, Jones, Lenoir, Nash, Onslow, Pamlico, Pitt, Wayne and Wilson. 17

22 Total Growth in 2013 North Carolina is expected to experience continued economic growth over the next decade assuming no extreme shocks to the national or international economies. The main results of the 2013 model, in terms of employment, real disposable personal income, output, State GDP and Exports are summarized below. North Carolina s Gross Domestic Product is estimated to be $408.3 billion in 2013, an increase of 28.1 percent from Employment in North Carolina is expected to increase by 8.5 percent between 2006 and According to REMI, the estimated employment in 2013 will be approximately 5.69 million. The total value of sales for final and intermediate products, otherwise known as output, will reach $629.2 billion in In 2006 state output was $494.8 billion. Real disposable personal income is anticipated to increase by 22.9 percent between 2006 and Statewide real disposable personal income is estimated to be $282.6 billion in 2013 or just under $29,000 per capita. Exports, an indicator of economic growth, were valued at $206.3 billion in 2006 and are estimated to be $258.5 billion by 2013, a growth rate of 25.3 percent. In 2013, 19.3 percent of exports in North Carolina are projected to go to foreign countries, up from 15.6 percent in Table 7: Anticipated Economic Growth in North Carolina, 2006 and 2013 (Billions) Economic Variable Percent Change State Gross Domestic $318.7 $ % Product Employment 5,248,228 5,692, % Output $494.8 $ % Demand $522.9 $ % Exports $206.3 $ % Real Disposable Personal Income $229.9 $ % Regional Economic Model, Inc. (REMI) 18

23 Military Growth Impacts The following section separates out the impacts of planned new military activity against a baseline model that assumes no growth in the military between 2006 and 2013 (i.e., military adjustments outlined in Tables Five and Six are not implemented). 20 In 2013, new military activities (employment, capital investment and contracts) are expected to increase North Carolina s GDP by an additional $2.9 billion when compared to the baseline model. The two most significant components of the state s 2013 projected GDP are the increases in consumption ($1.69 billion) and fixed investment ($567 million). 21 Similar regional impacts in Gross Regional Product (GRP) for the same year are $1.03 million in the Southeast Region and $1.46 billion in the Eastern Region. The 2013 statewide employment growth related to new military activity is approximately 49,000 jobs. In the Southeast Region, which includes Fort Bragg, Pope AFB and Sunny Point, REMI estimates impacts to be 16,530 and 28,030 for the Eastern Region, where Seymour Johnson AFB, Camp Lejeune, New River, and Cherry Point are located. These two regions account for 90 percent of the statewide employment impact. As seen in Figure 5, there were an additional 20,000+ jobs in North Carolina as a result of new military activities in The REMI model predicts that employment will rise to more than 56,000 jobs in 2011 as a result of new military activities. Employment projections level off at approximately 42,000 jobs in 2014 and ensuing years. The graph displays the estimated spike in employment that results from construction investment along with a sustained employment increases in other sectors after this investment period. Figure 5: Total North Carolina Employment Impacts Military Growth Military Growth: Total North Carolina Employment Impacts 60,000 Jobs Created Jobs Created 50,000 40,000 30,000 20,000 10,000 20,600 34,450 49,510 49,200 56,370 51,350 49,620 42,940 42, Year North Carolina Department of Commerce North Carolina Department of Commerce REMI model, REMI model, State Gross Domestic Product (GDP), a measure of value added, is equivalent to gross output minus intermediate inputs. State GDP is the sum of gross product for all its industries. 21 These numbers were derived by using the final demand method of calculating GDP 19