July 5, 2022

Virginia’s Feast on U.S. Funds Nears an End

While the rest of the country experienced a corrosive recession, unemployment in Arlington County, home of the Pentagon, never rose above 5 percent. Nearby Fairfax County, with a cyberintelligence industry that took off after the Sept. 11 terrorist attacks, gorged on government contracts to private companies.

“It was easy, and people got comfortable,” said Stephen S. Fuller of George Mason University, an expert on the regional economy. “They haven’t come to terms with the fact it isn’t going to be as easy.”

The Washington metropolitan area, especially Northern Virginia, is in line to experience the largest economic hit of any region from the $85 billion in spending cuts that President Obama made official late Friday.

Because the automatic cuts, known as sequestration, fall unevenly across the country, many Americans are greeting them with a shrug. Their nonchalance is heightened because the 2.4 percent lopped from a federal budget of $3.55 trillion is relatively small and will not happen all at once. Moreover, Congressional Republicans have accused the White House of exaggerating the impact for political gain.

But in Northern Virginia the cuts will be deeply felt, economists said, assuming there is no political deal to undo them, a dimming prospect. The White House said the Defense Department would furlough 90,000 civilian employees based in Virginia, the most of any state, reducing their salaries by 20 percent this year.

The ripple effect, as those employees pare expenses, put off car purchases and delay buying a home, is expected to be large. Some economists predict that Virginia will slip into recession.

“No more movies, no more out-to-dinners, no more fun,” Robin Roberts, a civilian budget employee in the Defense Department, said as she waited for the 595 outside the Pentagon for the ride home. She and her husband, who is retired, have canceled their summer vacation. They switched to a cheaper phone plan. “It’s just pay the mortgage, pay the utilities, no more frills.”

Americans far from Washington who say government spending is reckless and unsustainable may not shed a tear for its suburban counties, 6 of which are among the 10 richest in the country, according to the census. But that prosperity has largely rained down on government contractors; federal employees, especially younger ones, depend on their middle-class wages.

“Most of my paycheck goes toward child care,” said Sarah Stein, another rider of the 595. “We’ve cut out what we can cut, and we’re going to be in trouble.”

Ms. Stein’s husband lost a job two years ago and now works for much less repairing automobile wheels. Ms. Stein said she earned $64,000 in a civilian Pentagon job and pays $24,000 in child care for her two daughters, ages 3 years and 10 months.

The Pentagon has told civilian employees to plan on taking 22 days off without pay. Ms. Stein said she would not be able to save on child care even on the days she is home. “We still have to pay for five days a week, whether we go or not,” she said. “People are just very worried.”

The Center for Regional Analysis estimates that federal spending drives 37 percent of the Northern Virginia economy, largely spending on contractors that soared in the past decade.

“It was mostly on the war on terrorism,” said Dr. Fuller, the director of the center. “It was a spending bubble that made this economy grow two percentage points faster than the national economy.”

But as the federal government began cutting back two years ago — with foreign wars winding down and Congressional Republicans fighting spending — a regional slowdown that followed may be a taste of the future.

Virginia employment rose in December by only 0.8 percent, half the growth in the nation as a whole, said Christine Chmura, an economist in Richmond.

“If the sequester occurs as it’s currently stated, I would expect the state of Virginia to go into a recession,” she said.

The Pentagon’s share of the cuts is the largest of any. Robert F. Hale, an under secretary of defense, said on Feb. 20 that the Pentagon would cut $4 billion to $5 billion through civilian furloughs and $40 billion in purchases from the private sector.

Some business owners and people facing furloughs said the cutbacks were manageable, even a good thing. Moe Jafari, whose company Human Touch in McLean does technology work for the military, said he saw a new cost-consciousness in the government that pleased him.

“They’re looking at budgets that are not unlimited,” said Mr. Jafari, whose contracting includes work for the Space and Naval Warfare Systems Center in Charleston, S.C. “We see the government for the first time having discussions with us in ways we never thought. They’re looking at saving money. They’re starting to act like businesses.”

Even some government employees facing furloughs spoke of the 20 percent dock in salary as a sacrifice to a greater good. “The rest of the country is suffering and needs help; this is the least we can do,” said Mort Anvari, a civilian employee of the Army.

He and others who said they could manage their lower earnings were older, with savings and without children to support.

Mary Ann Fontana, who works for the secretary of the Air Force, said, “We older ones feel — at least I do — to help the country, it’s fine.” But “the real worry are the young ones,” she added, lower on the government pay scale and living paycheck to paycheck.

Matthew Bourke, a public affairs specialist with the Army, fits that description. He is looking for a part-time job to make up the loss to his salary. “I’m talking the restaurant business, a server, a food runner, anything,” he said.

“If you know something, let me know,” he said before jumping on his bus.

Article source: http://www.nytimes.com/2013/03/03/us/politics/virginias-feast-on-us-funds-nears-an-end.html?partner=rss&emc=rss

The Media Equation: At Gannett, Furloughs but Nice Paydays for Brass

After explaining that revenues at the newspaper giant continued to be soft and the outlook was uncertain, Robert J. Dickey, Gannett’s president of U.S. Community Publishing, said, “I know furloughs are very hard on you and your families and I thank each of you for the continued commitment and great work.”

Mr. Dickey made it clear that not only did the company’s executives feel their pain, they would share the sacrifice, noting that he too would take a furlough and that Craig A. Dubow, the chief executive, and Gracia C. Martore, the president and chief operating officer, “each will be taking a reduction of salary that is equivalent to a week’s furlough.”

But as it turns out, the buck stopped just short of Mr. Dubow and other executives. Mr. Dubow had agreed to lower his salary by 17 percent through 2011, but then again, last month he received a cash bonus of $1.75 million for 2010 and Ms. Martore received $1.25 million. For 2010, they were also awarded stock, options and deferred compensation that would bring their combined packages to $17.6 million if the company and its stock hits certain targets.

A company spokeswoman pointed out that 70 percent of their compensation was noncash and dependent on future performance. In fact, the top six executives at the embattled publishing company would receive 2010 compensation packages of more than $28 million if the company does very well, which seems unlikely, but the symbolism remains.

The savings from two years of mandatory furloughs for the rest of Gannett employees: $33 million. Well, that didn’t go very far, did it?

This is not a story about incompetents feeding at the trough, although a lot of Gannett employees would say that is precisely what the story is about. Yes, revenues have declined at the company four years in a row and the stock price is down more than 70 percent, but even divine intervention could probably not fix all that is wrong with Gannett and publishing in general. The company has 23 television stations, but with 82 newspapers, many of them dailies in small and medium-size cities, the company was bound to be clobbered by a recession on the one hand and a systemic flight from advertising in newspapers.

Gannett’s flagship, USA Today, is a once-robust national newspaper but has lost 20 percent of its circulation in the last three years. About a week ago, I was at the Marriott in Detroit, and as I stepped over the newspaper at my door as I usually do, I then wondered why. It occurred to me that everything in that artifact that would be useful for me — scores from the teams I follow, a brief on big news and a splash of entertainment coverage — I had already learned on my smartphone and tablet before leaving the room. Gannett is aware of the challenge and has moved aggressively into mobile, with six million downloads of its apps, but those marginal revenues will not fill the hole created by challenges to its core business.

In terms of financial engineering, Mr. Dubow and his crew have done a good job with a bad hand. Last year, revenue was down only marginally, and according to the company operating cash flow was $1.3 billion, up 19 percent from 2009, while debt was reduced by $710 million, to $2.35 billion.

That’s a testament to what the Street would call “aggressive cost management.” But out in the rest of the world, we know that generally means dumping bodies overboard, and Gannett is a high achiever when it comes to downsizing. In the five years that Mr. Dubow has run the company, its work force has gone from 52,000 employees to just over 32,000.

Most of its employees are nonunion, so the leadership is free to manage as it sees fit, including telling some people their careers are over and telling the people that remain not to come to work.

“It has been incredibly galling to watch them lining up for these big compensation packages while they have squandered every opportunity to make the kind of changes necessary for the company to survive,” said an employee of USA Today. (She and others I spoke to said that there would be retaliation if they spoke for attribution.) “Meanwhile, we have had furloughs three years in a row, so you can’t help but feel exploited and angry.”

E-mail: carr@nytimes.com;
Twitter.com/carr2n

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