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Review Might Alter Military Spending Here

As 2005 drew near, the defense industry and its supporters were keeping a watchful eye on the Pentagon’s plan to close military bases across the country.

And while the Defense Department announced plans to close 22 major bases, the San Diego region escaped largely unscathed. The area will lose 1,630 jobs at the Naval Medical Center in Balboa Park, but gain 1,170 from the relocation of 10 minesweeping ships based in Texas.

Now 2006 dawns, and again the industry looks to the Pentagon to see what’s in store. This time, locals are not as nervous. Changes could be in store, but none appears as worrisome as a potential base closure had been.

In February, Defense Secretary Donald Rumsfeld will release a congressionally mandated review of Pentagon priorities. It will be the first time the quarterly report has accounted for the military’s post-Sept. 11 focus on a more mobile force, capable of fighting in the Global War on Terrorism, not the Cold War.

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Defense analysts say everything is up for grabs when the review , technically called the Quadrennial Defense Review, or QDR , is released.

The report will help Pentagon planners identify spending priorities for the next 20 years. Major weapons programs could be cut. Or not.

“One can see the QDR having some effect,” said Frank Hewitt, the president of ComGlobal Systems Inc., a San Diego-based technology company, “but I’m not sure that we’ll see a major impact in Southern California.”

Hewitt, who sits on the board of directors of the National Defense Industrial Association, a defense trade group, said the review serves as an internal planning mechanism for the Pentagon and could have more implications for public policy than for the local job market.

Roughly 80 major and minor military facilities make defense the No. 2 industry in San Diego County, which was home to 113,000 active-duty military personnel in 2003, the most recent figures available. The region took in $13.4 billion in Defense Department procurement, salaries, pensions and benefits in 2003, according to the San Diego Regional Chamber of Commerce.

For years, the Pentagon’s budget has been steadily increasing. In the last five years, it’s jumped 45 percent, from $290 billion to $420 billion.

The five largest defense contractors , Lockheed Martin Corp., Boeing Co., Northrop Grumman Corp., General Dynamics Corp. and Raytheon Co. , have seen a 72 percent increase in total revenue since 2000.

That’s trickled down locally. Defense spending in San Diego nearly doubled between 2000 and 2003. But what future budgets hold for the county isn’t known.

Senior Pentagon officials have said cuts should be expected in the next fiscal year. Deputy Defense Secretary Gordon England put cost-cutting estimates as high as $32 billion.


Budget Due In February

Questions will be answered when President Bush releases his 2007 budget in February.

Hewitt said he expects to see some money funneled away from defense to help pay for the reconstruction of the hurricane-ravaged Gulf Coast.

That doesn’t mean local companies aren’t growing. Dwayne Junker, the chief operating officer at Epsilon Systems Solutions Inc., said he expects his defense-related technology company to add 75 new employees next year , rising to 400 employees , and see total revenues grow nearly 60 percent.

Shifting defense priorities could have a positive impact here, said Mike Woiwode, the president of the San Diego Military Advisory Council.

But he cautioned that cuts are inevitable, in part because of the military’s rising personnel costs.

“If you can’t get rid of the personnel,” Woiwode said, “and you probably can’t increase the budget because of the deficit, then the money left over to buy things is smaller.

“The pressures are clear.”

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