The Department of Defense this week announced furloughs will likely start April 26 for its civilian employees due to the federal budget cuts that began March 1. Workers could be furloughed up to 22 days for the remainder of the fiscal year — the equivalent of a 20 percent pay cut that would slice around $43 million from the depot’s 2013 payroll.
Such a cut would ripple through the local economy, resulting in less spending at area businesses and reduced sales tax revenue for municipalities, some economists say.
Clester Burdell, spokeswoman for the depot, said Tuesday that the facility will comply with the DOD’s guidelines regarding the furloughs.
“Tough choices are being made, but they are being made in a thoughtful and deliberate manner that best supports the depot’s mission,” Burdell said.
In addition to the furloughs, depot officials have said the contracts of 370 temporary employees set to expire March 30 will not be renewed. The furloughs would affect the depot’s more than 3,000 permanent employees. The depot is Calhoun County’s single largest employer.
Burdell said the depot has a projected $216 million payroll for the 2013 fiscal year — a payroll that takes into account the loss of temporary employees but not the furloughs.
“Furlough was not considered in this amount ... it cannot be quantified until specific work hours and number of affected personnel are known,” Burdell said.
However, a 20 percent pay cut from the current payroll would result in around $43 million less for the depot’s workforce.
Ahmad Ijaz, director of economic forecasting with the Center for Business and Economic Research at the University of Alabama, said such a cuts would have a direct effect on discretionary spending in the local economy.
“It would mostly affect retailing and restaurants in the area ... things like that which are not necessary like grocery spending,” Ijaz said.
Ijaz said spending on new automobiles and houses could also decrease.
Robert Robicheaux, chairman of the department of marketing, industrial distribution and economics at the University of Alabama at Birmingham, agreed with Ijaz about the initial economic impact from reduced pay at the depot.
“It would be a significant impact if indeed incomes are cut by that amount,” Robicheaux said. “The first sectors impacted would be with discretionary spending ... things people can do without.”
Wayne Reaves of Pell City, who owns nine Jack’s restaurant franchises in Calhoun, Talladega and St. Clair counties, said he was concerned about how the cutbacks might impact his businesses.
“Anytime that you reduce the number of jobs in an area, it has an impact on sales,” Reaves said. “Are we concerned about it? Yes. Will it impact us? Yes.”
Ijaz and Robicheaux also said that with retail and restaurants being affected, local municipalities would lose sales tax revenue.
“Many municipalities are dependent on sales taxes and many might find it difficult to support their road programs or other projects,” Robicheaux said.
Ijaz said that an extended drop in local spending would create an indirect effect on other jobs in the area.
“Retailers and restaurants might have to lay off people and that makes things worse,” Ijaz said.
Kevin Riggan, general manager for Sunny King Honda, said he was not concerned about cutbacks, however.
“We don’t worry about our surroundings, we just get out and sell cars,” Riggan said. “We don’t worry about what we cannot control.”
Staff writer Patrick McCreless: 256-235-3561. On Twitter @PMcCreless_Star.