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But the economic drain could still be significant.
A George Mason University study of the sequester and its related budget cuts since 2011 estimates that Minnesota’s economy could shrink by $1.6 billion, resulting in the loss of 16,033 jobs, more than a quarter of them in the defense sector.
Minnesota defense contractors, who earned nearly $2 billion in 2011, could face revenue losses of $349 million each year of the sequester, according to an analysis by the Center for Security Policy in Washington.
The larger ripple effect
The impact is already being felt, said Chip Laingen, who heads the Defense Alliance of Minnesota. A defense industry networking event in Minneapolis next month likely won’t see any of the usual Defense Department representatives. Pentagon officials cited the need to cut back on travel, he said.
Meanwhile, a recent Minnesota Management and Budget report estimated a potential $117 million reduction in grants and programs subject to the sequester, though that figure could be slightly diminished by the Jan. 1 fiscal cliff deal that delayed the sequester budget cuts for two months.
Among the major targeted programs in Minnesota this year: $14 million from special education; $12 million from the Title I education program; $10 million from low-income energy assistance grants; and $2.5 million from the Job Corps.
But even if Minnesota has less to worry about than other states, the biggest impact could come from the predicted slowdown in the national economy. “That’s going to ripple into Minnesota’s economy,” said state budget director Margaret Kelly. “That may show up in future revenue forecasts.”
And even if the sky doesn’t fall for everyone, it certainly will for some. “To the individual who loses his or her job,” Kline said, “that sky is falling.”
Kevin Diaz • 202-383-6120