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Economic Impact of the Closure of Cannon Air Force Base E-mail Article
Print Article
Dr. Chris Erickson
Erin Ward

May, 2005

The Department of Defense has announced the planned closure of the Cannon Air Force base as part of the 2005 Base Realignment and Closure Process. This will have a significant impact on the economy of the state of New Mexico. Indeed, the impact on the Clovis area, where Cannon is located, will be devastating. In the fall of 2003 the New Mexico Military Base Planning Commission contracted with New Mexico State University to develop and implement a computer model for estimating the economic impact of each of the state’s four military installations: Cannon Air Force Base, Holloman Air Force Base, Kirtland Air Force Base, and White Sands Missile Range. Implicit in the request was the need for information on the potential economic loss to the state should any one of the installations be closed under the 2005 Base Realignment and Closure (BRAC) process. This report presents the economic impacts statewide in employment (jobs), value-added (income), and total industrial output (materials, services, labor, and inter-industry dependencies). The overall objective of this report is to provide the New Mexico Military Base Planning Commission, the state’s citizens, its elected officials, and policy makers with information on the economic impact of the state’s four military installations in terms of jobs and income at the state and county levels.

New Mexico’s Military Installations

New Mexico is home to four unique military installations: Cannon AFB, near Clovis, hosts one of the most ambitious and successful fighter wings in the Air Force; Holloman AFB, west of Alamogordo, serves as host and training ground for the F-117 Nighthawk “Stealth” aircraft, and the base holds several world records for high altitude and speed testing; Kirtland AFB, which houses Sandia National Laboratories, performs an array of high-tech research and development programs unique to the nation’s defense and supports 15 major missions including training for all Air Force Special Forces aircrews; and the U.S. Army’s White Sands Missile Range, east of Las Cruces, oversees the single greatest expanse of controlled air space in the nation, used today for deployment and testing of the latest in missile defense systems.

Understanding BRAC

Since 1988, there have been four bipartisan Defense Base Closure and Realignment Commissions (BRAC) that recommended the closure of 125 major military facilities and 225 minor military bases and installations, and the realignment in operations and functions of 145 others facilities. Recently, the U.S. Department of Defense chose to revive BRAC for 2005 with the intention of reducing military infrastructure by as much as 20 to 25 percent. On January 6, 2004, the Department of Defense ordered commanders of U.S. installations to gather information about their installations as part of the FY 2005 round of BRAC. All installations, including New Mexico’s four military bases, were required to participate.

Methodology

Our analysis used impact analysis to determine the impact of military spending in New Mexico. Impact Analysis uses input-output (I/O) modeling from which both the direct and induced effect of initial spending is calculated. Using the IMPlan Pro 6.0 database, we were able to calculate employment, value-added (i.e., contribution to GDP), and gross receipts generated spending at each of the four military installations. .

Findings

Findings from the analysis show a significant impact from employment and value-added income statewide and in many of the state’s 33 counties. A summary of the statewide economic impacts by military installation is shown below.

Summary of the Economic Impact of Military Installations in New Mexico
Gross ReceiptsValue AddedEmployment
Cannon$212,500,000$122,190,0006,850
Holloman349,650,000190,350,00010,275
Kirtland2,497,380,0001,435,030,00055,180
WSMR856,890,000497,240,00016,965
Total$3,916,420,000$2,244,810,00089,270


Taken as a group, New Mexico’s military installations are a powerful driver of the state’s economy. In terms of employment the analysis finds 89,270 New Mexico jobs arise either directly from military employment or indirectly from the impacts of military spending. This amounts to 11.65% of the state’s total employment or about one-in-nine jobs in the state. In regard to personal income the analysis finds 10% of personal income can be traced to military spending. The loss of Cannon Air Force base, as the above table indicates will result in a loss of nearly 7000 jobs.

Cannon Closure

For the Clovis community, the economic impact of the Cannon base closing will be devastating. Of the 7000 jobs associated with Cannon, our study found that slightly more than 6000 are in Curry County. This represents about 26 percent of total employment in Curry County. Gross receipts will likely fall by $173 million and Curry County value added will likely fall by about $100 million. It is unlikely that the County’s economy will ever recover from the loss of the base. Clearly, saving Cannon must be a top priority of state and local government and of New Mexico’s congressional delegation.



Reconciling NMSU’s and Defense’s estimates of economic impact

While we estimate that the closure of Cannon will result in a decline in employment of 26 percent in Curry County, the Department of Defense (DoD) estimates the impact to be 20.7 percent. Both sets of estimates use impact analysis, which relies on input-output tables to determine the effect of a spending change on a region. So what accounts for the difference? The short answer is, we don't know because DoD has not made the details of their methodology public. We can, however, speculate as to the cause. First, we use a different base year, 2002, for our calculations than did the DoD, which used 2003. There has been a slight draw down at Cannon during 2002 and 2003 so using 2003 as the base year will result in a smaller impact. However, to the extent that the draw down was in anticipation of BRAC, we believe using 2002 as the base year gives a better appraisal of the true impact. Second, there are undoubtedly slight differences in our methodology vs. that used by DoD. Indeed, given the imprecise nature of both DoD’s and our estimates, it would be surprising that there were not some differences in the estimates.

With out more detail about DoD’s methodology, it is difficult to evaluate whose estimates are more accurate. For the time being, until we know more about how DoD developed their estimates, we stand by our calculations.



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