Governor's Remarks to the BRAC Commission

Governor's Remarks to the BRAC Commission

AUGUSTA - Below are the prepared remarks delivered by the Governor today in Boston at the regional BRAC Commission Hearing. The first set of remarks is specific to Portsmouth Naval Shipyard. The second set of remarks is an economic analysis of the Pentagon's listing of Maine's facilities.

DEFICIENCIES OF NON-RADIOLOGICAL ENVIRONMENTAL COST ANALYSIS FOR PORTSMOUTH NAVAL SHIPYARD

Mr. Chairman, Members of the Commission, good afternoon, I am Governor John Baldacci of Maine.

The Portsmouth Naval Shipyard is one of the oldest industrial facilities in Maine and the nation. You would expect to find a history of environmental contamination issues at the yard. There is a budgeted plan that provides $94 million, over several years, to initiate their clean-up. According to the DoD's report, there remains a need for an additional $47.1 million in environmental restoration costs.

My Department of Environmental Protection has determined that at least an additional $100 million in clean-up costs will be incurred to comply with legal requirements before transfer of the facility for re-use.

The DOD report states these costs are not included in total closure costs because they would be expended whether the shipyard closes or not. This assertion is inaccurate and misleading at several levels. DERA costs will be significantly affected by a closure in at least three ways:

First, the completion of clean-up of these sites will be accelerated in compliance with the BRAC schedule. Based on Maine's experience with significant environmental clean-up projects, including military facilities, we estimate additional costs of up to $23 million due to this factor alone.

Second, the DERA costs underestimate, and in some cases do not account for, cleanup costs required under federal and Maine law. We estimate that these additional remediation costs will be about $32 million.

Third, clean up of a site under existing law involves not only the US Environmental Protection Agency (EPA), and the property owner, but the Maine Department of Environmental Protection (DEP). Any state, including the State of Maine, will require thorough clean-up of a heavy industry site which needs to be made safe for public use. Based on a review of the DoD analysis and Maine's own experience, we estimate this additional cost at $30.6 million. Further site studies, already legally required, are estimated at $5.2 million. And the costs of maintaining the facility safely during the closure process will add another $31.2 million to the total.

Prior national experience has shown DERA costs to be chronically underestimated. Environmental clean-up costs following closures of Pease Air Force Base in New Hampshire and the Mare Island Nuclear Shipyard have dramatically exceeded original estimates. The estimated cost to complete clean up at Mare Island now stands at $225 million. At Pease, $135 million has been spent on clean up to date, with an estimated $46 million required for completion.

Based on this experience, it is not unreasonable to assume that DoD estimates of environmental clean-up at the Portsmouth Naval Shipyard are dramatically and unrealistically low.

For all of these reasons, the $47 million DERA estimate can only be viewed as seriously flawed, and cannot be separated from the incomplete assumptions on which it is based. The determination of whether a closure proposal saves money in the required timeframe must take into account the full cost of closing the facility.

DoD substantially deviated from BRAC selection criterion eight by applying an unrealistic DERA standard to a nuclear shipyard closure. If closed, the Portsmouth Naval Shipyard will not have an equivalent end-use.

They compounded this error by dropping environmental costs from payback consideration, even though the law requires the Department to consider them. DoD reasoned that its obligation to eventually clean-up an active installation eliminates environmental costs from payback calculations.

In practice, there is great difference in whether a base remains open or is closed pursuant to BRAC. If the property remains a DoD base, environmental costs are typically recorded in DoD's annual financial report as a financial liability. These liabilities are rolled over from year to year. If there is no money in the services' budgets to do cleanups, they are not performed. However, if a base closes, DoD must remediate environmental damage, usually by the time of property transfer to a third party.

It only makes sense to account for clean-up costs in base closing payback considerations. These are real costs. Taken together with other DOD cost errors, these clean-up costs of closing Portsmouth will eliminate all projected savings over the time horizon used in the BRAC process.

I appreciate the opportunity to speak with you today. I know you will apply the standards for the BRAC process rigorously and fairly. When you do, I am certain you will conclude that DOD has seriously underestimated the environmental clean-up costs for the Portsmouth Naval Shipyard by more than $100 million. This represents a substantial deviation from criterion number eight. It is further evidence that the proposed closure is not in the national interest.

Testimony #2

Chairman Principi, members of the Commission, I am Governor Baldacci of Maine, and I thank you for the opportunity to address the economic impacts on Maine people of the Department of Defense's BRAC recommendations. In the time available to me, I will speak first to the statewide impacts of the DOD plan; second, to their relative impacts in Maine, compared to other states; and lastly, to some flaws in the DOD analysis and the inaccuracies of its numbers.

The citizens of Maine have a long and distinguished history of service to our nation in times of need. In the 1863 Battle of Gettysburg, the 20th Maine Regiment led by General Joshua Chamberlain turned the tide at Little Round Top and, in the view of many historians, literally saved the Union. Today, Maine has one of the highest rates among all the states in deployment of National Guardsmen and women. Maine's population accounts for less than 1/2 of one percent of the nation, yet the state has consistently sent 2, 3, or even 5 times its share of servicemen and women in times of war. We did so during the Civil War, both World Wars, Korea, Vietnam, Desert Storm, Iraq, and Afghanistan. In each we suffered disproportionate casualties.

Today, speaking on behalf of all Maine people, let me say that we wish to continue to serve the nation as best we may; and we will.

In establishing "economic impact" as one of the criteria for the BRAC evaluation process, the Congress has created a dilemma for the Commission. No base closure or realignment will be without its economic impacts, at times positive, at other times quite negative. How then is the Commission to make "economic impact" a meaningful consideration?

Certainly, the most reasonable approach is to consider not the mere presence of economic impact, nor necessarily its absolute magnitude, but its relative size among affected areas. No region should be asked to improve the nation's military efficiency by bearing a disproportionate share of the economic costs. Yet this is exactly what the DOD plan proposes. Its recommendations and their consequences will amount to a federally-induced, major economic recession in Maine - one deeper than the DOD figures would lead you to believe, and one from which the people of Maine will be years in recovery.

STATEWIDE IMPACT

From the extreme northernmost point of Maine to its southernmost tip of Kittery, the statewide impact of the DOD plan will be massive. The closure of any single installation would be painful; the closure of three together will be felt throughout the Maine economy for years to come. Closing the DFAS center will hurt an already struggling northern region. Closing Portsmouth and realigning Brunswick will compromise all of southern Maine.

PORTSMOUTH

Earlier today Governor Lynch described the impact of closing Portsmouth Naval Shipyard in Kittery. The southern Maine / New Hampshire economy will lose some 12,000 jobs.

In Maine's southern-most county of York, more than 4% of all workers will become unemployed as a result of the DOD plan. And since Shipyard pay levels are nearly twice the average in the region, the percent of total wages being removed from the regional economy will be even greater - fully 12% of all wages paid in the 20-mile region, and 11% of all wages in the 30-mile region. These are numbers one would expect to see only in times of severe recession.

The thousands of workers who will lose their jobs at the Shipyard have highly specialized skills that do not transfer readily to other industries. Many are advanced in their careers and have spent decades tailoring their skills to meet the Navy's needs. Their skills are today unmatched, yet there are not businesses or industries in the region capable of absorbing thousands of newly jobless Shipyard workers.

Long-term projections suggest that traditional manufacturing jobs in southern Maine will continue a pattern of decline. Helping five thousand Shipyard workers adapt their skills to new industries while supporting their families will be an unprecedented undertaking for our state. The lack of immediate job opportunities in the area inevitably will force some workers and their families to leave Maine.

BRUNSWICK

We would like to give you a similar assessment for the impact of Brunswick in the mid-coast region of Maine, but we have been unable to obtain the necessary information from the Navy. We have very little information on which positions will leave, which will stay, which buildings will be mothballed, and which will be available for reuse. We know that DOD estimates a loss of 4,655 jobs and $135 million in wages and salaries in the region. This alone suggests that the economic impact will be far reaching; however, the impact of the realignment will be magnified by local economic conditions that DOD did not consider.

The mid-coast Maine economy is today struggling with major workforce reductions at Bath Iron Works (BIW), the state's largest defense contractor and builder of Navy destroyers, next-door to Brunswick. In 2004 and 2005, BIW laid off 675 workers from jobs paying some of the highest wages in the region. Over 500 individuals are currently collecting unemployment insurance and face limited prospects for re-employment. The skills and occupational qualifications of the BIW workers are very similar to those employed at Portsmouth. Flooding the regional labor market with thousands of workers with similar skills will further handicap their re-employment prospects in Maine and New Hampshire.

LIMESTONE

The DFAS Limestone center is located in Aroostook County, one of the most economically challenged regions in the nation. The unemployment rate in Aroostook is currently 7.5%, and out-migration is a chronic problem, due largely to its remote location and the decline of traditional agriculture and forestry. DFAS is among the area's largest employers, and its average wages are 50% higher than the rest of the county.

The DOD's decision to close DFAS Limestone, in fact represents a double closure. The 1994 closure of Loring Air Force base had a devastating effect on the local economy. At the time of the BRAC closure, the facility employed 4,500 military and 1,100 civilians.

While the region has not fully recovered from this painful blow, DFAS Limestone has been the cornerstone of that effort and has provided area residents with well paying jobs with benefits. The DFAS job losses will increase the number of unemployed in the region by more than 1/3. When indirect jobs are included, our economists calculate 550 to 600 total positions will be eliminated, increasing the number of unemployed Aroostook residents by more than one-half.

There will also be a severe de-population effect in a county with a long history of out-migration; the loss of 360 well-paying DFAS jobs will deepen this problem. Workers who relocate to find work will take family members with them.

In sum, the total direct and indirect effect on wages in Maine from the loss of these three facilities will be the equivalent of losing the state's entire farming, fishing, forestry and logging industries. In terms of employment, it will be the equivalent of losing either the state's paper manufacturing industry, or the hotel and motel sector of Maine's tourism economy. It will be nothing short of a catastrophe!

Under the DOD plan, the nation as a whole is asked to sacrifice some 26,000 direct jobs in order to improve overall military efficiency. Among the 50 states, there are 22 net gainers of direct jobs, and 28 net losers. The job losses will be difficult in each state; but some states will feel the loss more deeply than others.

Of the 28 net losers, only three states will lose more than 4,000 direct jobs: Connecticut, Maine, and Alaska. Maine will lose 6,938 jobs directly, second only to Connecticut. In terms of the number of civilian job losses, Maine is second only to Virginia. And if you add in the indirect job losses calculated by DOD, Maine will lose a total of 13,418 jobs, 2.1% of the state's total employment in 2002, second only to Alaska's 2.4%, and far greater than that of any other state in the nation.

These dire numbers do not, however, paint a complete picture of the DOD plan's impact all across Maine. Job losses will be difficult for every state; but the size of many other states' economies will help them soften the blow. Maine has a small population and a small workforce compared to other states. Of the three states losing more than 4,000 direct jobs, Connecticut will lose civilian jobs equivalent to 0.5% of total employment, Alaska will lose 1.1%, and Maine will lose 1.7%, by far the highest percentage of any state in the nation.

Further, the sub-state area impacted by the DOD plan in Maine is far larger than that of any other area in the country. Other high impact areas tend to be small both in absolute size of labor market and relative to total state employment. The economic area absorbing the bulk of Maine's impact represents over half of the state's total employment.

By any measure, Maine is being asked to carry a grossly disproportionate burden of the reductions. For our state, the DOD plan will be nothing less than a federally induced, major recession. Total estimates of civilian job losses are the equivalent of a 1.5 percentage point increase in Maine's unemployment rate. Our best estimate of the percentage of total wage and salary earning that will be lost is even higher: 3.5%. Indeed, 13,418 direct and indirect jobs, the total that DOD predicts Maine will lose, will be eight times greater than the job losses of the 2001 recession, and ever larger than the devastating recession of 1990-91.

All this, as I say, is based on the DOD's own analysis. It is especially distressing to me to report, however, that this analysis appears seriously flawed, and not a reliable basis for the Commission's decisions in these most serious matters. Let me point briefly to just two of the significant problems we have encountered in trying to figure out for ourselves what the full economic impacts of the DOD plan will be.

The first is incomplete information. We lack, for example, critical information about the proposed realignment of the Brunswick Naval Air Station. The DOD analysis removes 2,420 military jobs from an authorized manpower level of 3,275, a reduction of 74%. However, our information is that current military personnel assigned to BNAS total 4,410. If the same proportion is to be reduced from the higher figure, the direct loss will be 3,260 jobs, equivalent to a complete shut down of the base using DOD figures.

Nor is it clear just what military personnel will be left at Brunswick - neither how many, nor what their roles will be. This is crucial to understanding the economic impact of the plan. The DOD analysis leaves 825 military employees at the base, but they may have little or no positive role in the local economy. If the only military left are reservists doing training, there is almost no economic benefit to the community, as reservists and guard personnel are counted in the employment of their home regions and not where they are stationed.

Second, the economic impacts estimated by DOD are only a partial picture of what will actually happen. Critically, the DOD analysis for bases like Brunswick ignores the related effects on population migrations. In their analysis, it is as if all the military personnel were to leave, but their families were to stay behind. This is a particularly acute issue in the case of Brunswick, where up to 5,700 dependents of military personnel will leave the area under the proposed realignment.

Taking these losses into account, the employment impacts at Brunswick could range from 5,800 to 7,500 job losses - in comparison with DOD's estimate of 4,300 - as much as a 74% increase. These figures also ignore the potential loss of some portion of the nearly 6,000 military retirees who live near BNAS.

A similar problem exists for the analysis of Portsmouth. Taking into account analyses of both the Maine and New Hampshire economies, the effects could be 15% higher than DOD estimates when population migration is taken into account.

In summary, then, we find that the DOD plan is founded upon flawed economic and financial data which, if implemented, will have the effect of a federally-induced, major economic recession throughout the state of Maine. And I ask, is this the act of a grateful nation to a state that has, throughout its history, given so much to the nation's highest purposes?

Again, on behalf of the people of Maine, I would like to thank you for your time, attention, and consideration.

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