Bloomberg News

Virginia Leads Swing States at Risk Over Cliff: BGOV Barometer

September 04, 2012

Virginia Leads Swing States at Risk Over Cliff

Lockheed Martin Corp., based in Bethesda, Maryland, won the most in contracts, $2.41 billion, for work in the state. The company is the No. 1 U.S. defense contractor. Photographer: Chris Ratcliffe/Bloomberg

For some swing-state voters, the presidential election may come down to who they want holding the net if their economies go over the fiscal cliff.

The BGOV Barometer shows that the battlegrounds of Virginia, Colorado and Pennsylvania are among 19 states and the District of Columbia that depended on U.S. government contracts for more than 3 percent of their 2011 gross domestic product. The states are vulnerable to $1.2 trillion in automatic 10-year budget reductions, called sequestration, that will begin in January if Congress and the White House fail to agree on a deficit-reduction plan.

President Barack Obama and his Republican challenger, Mitt Romney, need the 42 electoral votes represented by Virginia, Colorado and Pennsylvania as they compete for the 270 it takes to win. Their lines of attack on the automatic cuts, which along with tax increases make up the fiscal cliff, may help determine the outcome in those swing states.

“It’s going to increasingly become an issue in this election,” said Todd Harrison, a senior fellow at the Center for Strategic and Budgetary Assessments in Washington. “Both sides want to run against sequestration.

“Maybe that’s what this boils down to,” Harrison said in an interview. “Whose approach do you prefer for avoiding sequestration?”

The government spent more than $500 billion on federal contracts in 2011. Agencies awarded $58.9 billion in orders that year for work performed in Virginia.

‘Tentacles Everywhere’

Federal awards represented 14 percent of the economy in the state, home to the Pentagon and headquarters of top federal contractors such as McLean-based SAIC Inc. (SAI:US) The company was the top recipient of awards in Virginia, receiving $3 billion for work in the state. SAIC performs computer and engineering services for agencies including the Department of Defense.

Federal awards support economies outside the state, so a contract in Virginia might have implications for a lawyer or consultant in Ohio or Texas, Ric Brown, the state’s finance secretary, said in an interview. “It has tentacles everywhere,” he said.

Contractors performing work in Colorado won $10.2 billion in U.S. awards last year, which represented 3.8 percent of the state’s economy. Lockheed Martin Corp. (LMT:US), based in Bethesda, Maryland, won the most in contracts, $2.41 billion, for work in the state. The company is the No. 1 U.S. defense contractor.

‘Held Hostage’

Agencies last year awarded $17.7 billion in contracts for work in Pennsylvania. The state relied on the awards for 3.1 percent of its economy. Bechtel Group, based in San Francisco, was the top recipient of contracts in the state with $1.99 billion in awards.

The three swing states also have direct federal employees and military bases that require additional government funding. Nevada, Florida, Wisconsin, Ohio and Iowa -- swing states with 69 electoral votes -- may be less vulnerable because they derived less than 3 percent of their economy from federal contracts.

Even so, any state that counts on federal dollars is “held hostage by federal policy makers and the dysfunction about reaching a compromise or consensus on the budget at the federal level directly impacts the states,” David Adkins, executive director of the nonpartisan Council of State Governments in Lexington, Kentucky, said in an interview.

To contact the reporter on this story: Danielle Ivory in Washington at divory@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net


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Companies Mentioned

  • LMT
    (Lockheed Martin Corp)
    • $183.93 USD
    • -1.46
    • -0.79%
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