Archive for August, 2012

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Labs in the balance: Northern NM

already feeling impact of LANL cuts

Reporter- New Mexico Business Weekly

While the impact of looming federal budget cuts on New Mexico’s economy is still a question mark, a look at Los Alamos National Laboratory’s situation offers a glimpse of what federal budget cuts can bring.

With its $2.25 billion budget, LANL is the economic driver of northern New Mexico. It had a $300 million budget cut in the fiscal year that ends Sept. 30. That led the lab to reduce its staff by nearly 700 regular and contract employees, and caused ripple effects in the area’s economy.

The lab’s reduced budget was a result of the Obama administration’s effort to cut costs across various programs, said Kevin Holsapple, director of the Los Alamos Commerce and Development Corp.

For every lab worker lost, private contractors and subcontractors that do business with the lab shed one employee, according to people familiar with the situation. Some contractors, especially those that do environmental remediation work, have laid off between 30 and 80 percent of their workforce, area business leaders said.

Los Alamos County government has cut its budget by 10 percent, or $5.5 million, this fiscal year. The county has not had to lay off people, but it might if federal budget cuts known as sequestration take effect as planned beginning Jan. 2, 2013. Those across-the-board federal budget cuts are supposed to result in $2.2 trillion in reduced overall federal spending by 2021. New Mexico, with its heavy dependence on federal spending, could suffer more than other states, experts said.

“We expect a flat budget at best for 2013, but we are trying to take action so we are positioned to deal with that uncertainty,” said lab spokesman Fred deSousa. “There is a council of senior lab management that goes through every new hire and every purchase of above $100,000.”

He added that the lab couldn’t say more because “it’s hypothetical to talk about any specifics.”

Employees laid off from LANL and its contractors spend less money, and that ripples through the economy.

“People don’t go to restaurants, and they don’t go shopping,” said Los Alamos County Councilor Sharon Stover.

Liddie Martinez, community and economic development director for SOC Los Alamos, a firm that provides security services to the lab, said her company is reducing its staff of 340 by 31 employees because of this year’s budget cuts.

“The employees have been notified, and we are trying to have a voluntary separation deal approved” by the National Nuclear Safety Administration, one of the federal agencies that oversees the lab’s operations, said Martinez, a member of the executive committee of a consortium of 30 LANL contractors that is challenging proposed cuts to the sprawling laboratory. Several members of the consortium and area business and political leaders recently went to Washington, D.C. to lobby New Mexico’s congressional delegation on behalf of LANL and against sequestration cuts.

“All of the major contractors seem to have been fairly impacted,” said Jeff Lunsford, area general manager for Technology Integration Group, a San Diego-based company that provides computer hardware and services to LANL. Lunsford is vice chair of the LANL contractors’ consortium.

“One company indicated that it had gone from 150 employees to 30, and they were struggling with how to keep even those 30 employed,” Lunsford said. “It feels like the job losses for the subcontractors are one-to-one, and that’s why with sequestration, if it happens, it will be much worse.”

Lunsford said TIG has yet to be affected by this year’s budget cuts.

Kathy Keith, executive director of the Regional Development Corp., a nonprofit economic development organization in Española, said sequestration cuts could cost LANL hundreds more jobs.

“Our concern about sequestration is that it requires 10 percent across-the-board cuts. For every $1 million they lose in a budget cut, it takes an FTE with it. Los Alamos has a $2.2 billion budget this year, so a 10 percent across-the-board cut would mean an additional $220 million,” Keith said. “At least 50 percent of the workforce lives outside Los Alamos County, which means there is an economic impact to all of us.”

Simon Brackley, president and CEO of the Santa Fe Chamber of Commerce, said sequestration cuts at LANL could do serious harm to the area’s economy.

“Northern New Mexico’s economy is completely linked to the health of LANL and to the funding that goes to the lab. That money not only pays the people who work there, but also the suppliers and the security folks, which are local small businesses, many of which depend completely on their contract with the labs,” Brackley said.

“In Santa Fe, our economy has three legs; government, LANL and tourism. If we lose one of the three legs of the stool, we will be in serious difficulty up here.”