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Friday, March 1, 2013

More than government jobs at risk with sequester deadline in rearview mirror

MILFORD – The clock struck midnight Friday and no jobs disappeared at Tech Resources, Inc. But, as he looks to the future, company president Paul Vermette fears that if federal sequestration cuts are allowed to stand, the business itself may vanish into thin air.

“If the government can’t figure out what the hell’s going on, we could very well be out of business,” Vermette, head of the Milford-based defense contractor said this week. “It won’t affect us in a week from now or a month from now, but a year from now we aren’t going to be there if they can’t figure it out.” ...

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MILFORD – The clock struck midnight Friday and no jobs disappeared at Tech Resources, Inc. But, as he looks to the future, company president Paul Vermette fears that if federal sequestration cuts are allowed to stand, the business itself may vanish into thin air.

“If the government can’t figure out what the hell’s going on, we could very well be out of business,” Vermette, head of the Milford-based defense contractor said this week. “It won’t affect us in a week from now or a month from now, but a year from now we aren’t going to be there if they can’t figure it out.”

After months of heated debate, the so-called sequester went into effect Friday, promising $1.2 trillion in automatic budget cuts over the next 10 years to defense and domestic programs. Federal economists, who project $80-$85 billion in cuts by the end of Fiscal Year 2013, estimate the cuts could force as many as 2 million job losses across the country, including 6,000 government jobs in New Hampshire.

But, if they are allowed to stand, the cuts, to be rolled out starting in the next several months, will also dig into the local employment ranks, threatening layoffs and closures at military contractors and suppliers, among other companies across the state, New Hampshire business owners said this week.

“There’s no question, it definitely presents a threat,” Christopher Way, interim director of the state Division of Economic Development, said Thursday in the hours ahead of the cuts. “You hear from businesses that are not hiring, not engaging in new activities. ... That’s not good at all for the economy of the state.”

The sequester, which has drawn attacks from both sides of the aisle, first emerged in 2011 as part of a federal debt-ceiling negotiation. Under the deal, members of Congress agreed the cuts would go into effect in Jan. 1, 2013 if lawmakers didn’t agree to a plan to reduce the national deficit. With the 2013 deadline fast approaching, lawmakers agreed in December to delay the onset of the sequester until March 1. But, after two months, the new deadline passed Friday with no deal in place, triggering the first round of cuts.

According to White House figures, as many as 1,000 New Hampshire defense employees could face furloughs under the sequester, reducing total pay by about $5.4 million. And state schools could lose up to $1 million, as well, resulting in 1,000 fewer students and 10 fewer schools served, according to federal projections.

“You have to see it against a backdrop on reductions that have already taken place,” said Nashua Superintendent Mark Conrad, who reported the local schools could lose more than $300,000 in special education and professional development funds, among others. “It’s just one more financial difficulty that we have to address.”

Still, the overall effect of the sequestration in the Granite State pales in comparison to others across the country, according to analysts across the country.

The 6,000 jobs projected to be lost make up about 1 percent of the state workforce, according to Dennis Delay, an economist with the N.H. Center for Public Policy Studies. Further, federal spending makes up a smaller part of the local economy (3.1 percent) than most other states, leaving New Hampshire with less to lose from the budget cuts, Delay said this week.

Those conclusions mean little, however, to local employers, who have already felt the effect of the sequester.

At Tech Resources, which depends entirely on federal contracts for its revenues, officials eliminated several positions last year and they temporarily instituted a four-day work week for their 30 remaining employees as contracts stalled in advance of the sequester, according to Michael Barrett, the company’s director of advanced programs.

“All we heard from our bigger customers was there’s too much uncertainty holding up your program,” Barrett said.

And across the river at Nanocomp Technologies in Merrimack, which lost half of its federal contracts last year, officers laid off about 15 percent of its workforce, leaving about 55 employees, according to company president Peter Antoinette.

“It tends to be smaller companies like us, with less than 100 people, that really feel the impact,” Antoinette said. “We tried to do (the downsizing) as minimally as we could, but it’s never easy.”

Looking forward, business leaders see more trouble on the horizon as the budget cuts roll out.

Officials at BAE Systems, one of New Hampshire’s largest employers, could lose up to 4,000 workers nationwide if the sequester rolls out in full, according to spokeswoman Kristin Gossel.

And Axenics, a Nashua-based company that makes specialty equipment for use in steel, Teflon and thermal-bonded plastics, among other areas, will likely have to slow plans to expand into the aerospace industry, which would have added jobs, according to Michael Bontatibus, a company spokesman.

“Locally, we had plans to expand our business, but now the government’s not buying aircraft,” Bontatibus said. “So, we can’t go out and hire new individuals. ... It’s a tough time.”

To make up the lost contracts, local companies, like Axenics, are looking to extend into other industries and other markets.

Around the state, dozens of aerospace companies, who recently formed an Aerospace consortium, are working to build their client base in Europe and other parts of the globe, according to Way, the state economic development director.

“There’s a lot more opportunities that are happening globally,” he said. “When one door gets pushed a little bit, we have to look at other doors.”

But, as they try to expand, many companies are finding a marketplace crowded by businesses looking to make up for the sequester cuts.

“We’ve tried to pivot as aggressively as we can into the commercial market. ... But, everybody’s got the same strategy,” said Antoinette, president of Nanocomp Technologies, which develops sheets, tapes, wires and yarns made of carbon fibers for military, transportation and other uses. “It’s not like the economy is robust and roaring.”

Instead, many companies are left to wait, hoping federal lawmakers can settle the matter before the cuts go fully into effect.

U.S. Sens. Kelly Ayotte and Jeanne Shaheen and other federal lawmakers have repeatedly called for Congress to resolve the matter before the cuts

“Too many are struggling to find work right now and it’s Congress’ job to do everything we can to help businesses grow and hire new workers,” Shaheen said this week.

But, with Congress paralyzed by partisanship, local business owners aren’t as hopeful. “At some point, the federal government has to become functional again. They can’t just keep up their arguing and get nothing done. I don’t run my business that way,” said Vermette, of Tech Resources in Milford.

“You’re always hopeful they can make something happen, but we’ll have to see,” added Antoinette, of Nanocomp Technologies. “The worst thing that could happen is if there’s another delay put in. That will just put everything on hold again. ... Smaller tiered companies like us won’t be able to survive unless they can find another way.”

Jake Berry can be reached at 594-6402 or jberry@nashuatelegraph.com. Also, follow Berry on Twitter (Telegraph_JakeB).