Question

In 2005, the Department of Defense announced its Base Realignment and Closure (BRAC) plan outlining which military bases were going to be shut down. This plan immediately caused great concern among the congressional representatives in whose districts the bases designated for closure were located. Suppose that a military base that employs 10,000 people was closed down. Describe the different sectors of the local economy that would be affected by the shutdown.

Answer 1

The loss of related jobs, and efforts to replace them and to implement a viable base reuse plan, can pose significant challenges for affected communities. However, while base closures and realignments often create socioeconomic distress in communities initially, research has shown that they generally have not had the dire effects that many communities expected. For rural areas, however, the impacts can be greater and the economic recovery slower. Early planning and decisive leadership from officials are important factors in addressing local socioeconomic impacts from base realignment and closing

Community Economic Impact Analyses
A shift to a smaller employment multiplier will show a much reduced total employment loss from closure. Using data from military base closings between 1971 and 1994, one 2001 study estimated multipliers of less than one and concluded that employment impacts were mostly limited to the direct job loss associated with military transfers out of the region. On average, the study found that per capita income was little affected by the closures. Base closings in communities that have been declining economically for some time, however, may produce impacts different from (and possibly more severe than) those of base closings in communities where growth and economic diversification are more in evidence. The relative strength or weakness of the national or regional economy also can strongly influence the magnitude of community effects from base closure or realignment and the length of time for economic recovery. Evidence from earlier base closures suggests that the impacts can be less than expected because, unlike many other major employers, military bases may be relatively isolated economic entities, purchasing base needs outside the community and spending income at the base rather than in the local community.

Local communities are also concerned about the fiscal impacts borne by local governments, especially rural governments. Revenue from property taxes, sales tax, licenses and permits, and state and federal aid is influenced by population gains and losses. With population loss, and related changes to local income, base closures can affect the ability of local governments to raise revenue and support existing services. Similarly, with significant population increases, a community may find greater demand for public services (e.g., transportation, schools, public safety, water and sewerage) without the necessary revenue to support the additional demand. Even where increased revenue can contribute to mitigating the impact of base expansion, the planning and adjustment costs impose other burdens on communities and residents. Local government expenditures and services can also be affected by closure and realignment, depending on the extent to which the military base is integrated into the community’s fiscal planning. Here as well, statistical assumptions can lead to significant differences in estimated impact. For example, an economic development analyst estimated that the closure of Hanscom Air Force Base would mean the loss of about $200 million in defense contracts to Massachusetts’s firms. Another analysis estimated the same losses at $3 billion. A review of impacts on local government revenue and expenditures, however, generally confirmed that these impacts were, like those impacts affecting the economy, not as severe as had been originally projected. The announcements of previous BRAC Commissions have been greeted in affected communities and elsewhere by significant concern over the potential consequences of closing or significantly realigning a military installation. Military bases in many rural areas, for example, provide an economic anchor to local communities. Even where the local and regional economy is more diversified, military bases provide a strong social and cultural identification that can be shaken by the announcement that a base is closing or being downsized. Not only can there be an immediate impact from the loss of military and civilian jobs, local tax revenues also can decline, leaving counties and communities less able to provide public services. School districts with a high proportion of children from military families can experience significant declines in enrollment. With these effects can come related reductions in state and/or federal funding.