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Connecticut's military alliance with Uncle Sam

Defense contracts underpin the Connecticut economy. But state officials and business leaders, aware that too much dependence on military programs entails some risk, are striving to attract more diverse industries. THE helicopter is the workhorse of the United States military, almost as common these days as the Jeep. It flies combat missions, ferries soldiers into battle, evacuates the wounded, hauls generals from place to place, even -- as in Beirut a year ago -- carries frozen dinners from ship to shore.

This popularity spells prosperity for the Stratford-Bridgeport area of Connecticut. The Sikorsky division of United Technologies Corp. (UTC) is the world's largest maker of military helicopters. The Stratford, Conn., facility builds the US Army Blackhawk helicopter (also the Air Force and Navy versions of the Blackhawk), mainstay of the military helicopter force in the 1980s.

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Sikorsky president William F. Paul wants to keep it that way. So do Sikorsky's 12,500 employees. As long as the chopper remains the vehicle of choice of the US and other friendly armies around the world, Sikorsky workers and subcontractors will clock in, build these high-performance aircraft, and collect their pay. Their families will buy homes and cars. Grocery store cash registers will ring. Stratford-Bridgeport will prosper.

Up in central Connecticut, UTC's Pratt & Whitney aircraft engine division, with 25,000 workers, is the principal employer in Hartford, the state capital. The whole city was affected when Pratt & Whitney lost a military jet engine contract to General Electric last year. If the military does not need as many jets or prefers a different engine, Greater Hartford feels it.

To the west, economists and corporate planners say, UTC's Hamilton Standard plant in Windsor Locks is responsible for 7,484 jobs and the economic well-being of a wide area of western Connecticut. And along the Connecticut coast, in Groton, the Electric Boat division of General Dynamics Corporation has a similar impact on the northern Connecticut economy. It produces Ohio-class Trident submarines and Los Angeles attack submarines for the Navy.

Shopkeepers, barbers, doctors, dentists, plumbers, homebuilders -- one way or another, virtually every profession benefits from defense spending in Connecticut. To an extraordinary extent, Connecticut counts on the US military's reliance on it to build weapons, vehicles, and electronic gear. Economists figure that one out of five manufacturing jobs in Connecticut depends on defense spending.

Most of the state's defense industry can be found in a triangle bounded by Bridgeport-Stratford on the south, Greater Hartford in the center, and New London-Groton on the east. That is where the prime contractors are. In between and off to the sides are the shops of hundreds of subcontractors that make parts and components for the main defense contractors.

Connecticut leads the nation in the amount of per capita military money that flows to it, and it is high on the list of states in prime contracts awarded by the Defense Department. Defense companies lead the state in employment and are a source of wealth that hundreds of subcontractors, suppliers, and consultants plug into.

With 50,203 employees and a $1.5 billion payroll (1983 figures), UTC is far and away the leading employer in the state; one-fourth of United Technologies worldwide employment is in Connecticut. The multinational conglomerate (``High technology is the common denominator of all we do,'' says the company slogan) also supports 4,104 vendors in the state, paying out $793 million for their services and products.

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American defense spending has been rocketing ahead since the late 1970s, and the Reagan administration appears intent on keeping up the growth. But recent history also shows that defense spending goes in waves in the US. A wave peaked after the Korean war, another after the Vietnam war. By the late 1980s a peak could be due. That raises a crucial question for Connecticut residents and planners: Does the state rely too heavily on defense industries?

From a moral point of view, opinions about the state's ``military-industrial complex'' and the making of weapons of war vary enormously. From an economic point of view, however, the issue is less emotional. Connecticut, economists say, is indeed highly reliant on defense contracts at present, and its big corporations want more contracts in the future. But neither the corporations nor the government are blind to the cyclical nature of this industry, and both have been taking steps to guard against the pulling of the plug by Washington one day. One reason that United Technologies has diversified widely -- moving into elevators, refrigeration equipment, and electronic systems for buildings -- is to hedge against those cycles. The state, moreover, is trying to recruit nondefense industries and has an aid package ready for communities hurt in the event of a defense-spending downturn.

Dr. Edwin L. Caldwell, chief economist of Connecticut Bank & Trust in Hartford, notes that the state's economy is much more diversified today than it was just after the Korean war. At that time, half of the state was involved in manufacturing and most of that was defense-related. Now, he says, the percentage of employment in the manufacturing sector has fallen to 30 percent -- ``so, right off, you have a better cushion.'' Nevertheless, Dr. Caldwell admits, ``if the defense establishment faces cuts, the state would feel it.''

Before determining whether the state is too reliant on military industry, statistics bear examination, says Stephen A. Ross, a professor of economics and finance at Yale University in New Haven.

Because a number of corporate headquarters are located in the state, many defense contracts may, in fact, be awards to a Connecticut address, Dr. Ross says, and much of the actual employment and spending occurs at plants in other states. Moreover, he says, those defense statistics represent prime contracts awarded. States such as Massachusetts have numerous firms -- especially high-tech firms -- busy with different aspects of defense work though this is not their prime business. Thus, their defense work does not show up in the prime contractor tables, though they are heavily dependent on the military budget, too.

For the present, Connecticut's ability to fill the bill for military weapons and services is bringing in new business all the time. At the Data Resources economic consulting firm in Lexington, Mass., economist Mark Laurintano, who is involved in analysis of regional economies, says, ``The indication from Washington is that Connecticut defense spending hasn't peaked -- at least as far as the state's share of the current contracts. Even if a slowdown occurs, there is a substantial lag in contracts, so it wouldn't affect the state for three or four years.'' A recent study published by the Defense Department indicates that Connecticut will continue to lead the nation in per capita defense spending through the 1980s.

Peaks and valleys are not uncommon in the state's defense industry. At the height of the Vietnam war in 1968, prime contract awards in Connecticut amounted to $2.1 billion. In 1970 they plummeted to $1.1 billion, rising again in 1974 to a new high. Caldwell attributes this rise partly to a big boost in the inflation rate. Prime contracts stayed at about the same level through 1977, then began the big rise they are still experiencing.

Caldwell also points out that New England in general will benefit in the years ahead ``as defense spending shifts in favor of procurement of hardware and against payroll, operations, and maintenance of defense establishments.'' Connecticut is a hardware state. About half the defense spending here is for procurement, Caldwell says, the highest percentage among the states.

``Whatever the importance of defense spending to the state's economy now,'' Caldwell continues, ``it will be more so as the '80s move on because it is expected to grow at an average annual rate of nearly 8 percent in real terms, whereas no one can imagine total output growing at more than 4 percent.''

David Driver, director of marketing for the Connecticut Department of Economic Development, admits that reliance on defense spending is a ``two-edged sword'' for the state. He notes also that too-high reliance on manufacturing -- brass, textiles, rubber, and defense -- is an unhealthy situation. The Department of Economic Development has a conscious policy of ``not going after defense companies in recruitment. We have plenty,'' he says. ``If one came to us, we'd help it, but we haven't targeted defense companies for recruitment. Our strategy is to keep the economy diversified so that we achieve an economy that can absorb any fluctuation that reduced defense spending can produce.''

The state has a package of incentives that can be employed by areas of Connecticut hurt by defense cutbacks or the loss of contracts. Dale van Winkle, head of the government relations office of United Technologies, observes that the Connecticut public is very supportive of the defense industry.

``Some years back,'' Mr. van Winkle recalls, ``there was much more public comment on the reliance of the state on defense industries. In the most recent recession, many people were happy that the defense industry maintained employment rates. We are still in that appreciative period.'' Chart: Defense spending in leading states. (In billions of 1983 dollars)

1983 1989 (projected) Pct. change '83-'89 per capita 1983 California $54.4 $84.7 9.3% $2,183 Texas $27.0 $37.9 6.7 1,764 New York 22.0 32.9 8.2 1,259 Pennsylvania 14.7 21.5 7.7 1,240 Florida 14.7 22.1 8.4 1,386 Virginia 13.7 18.5 5.9 2,464 Illinois 13.2 19.3 7.7 1,150 Ohio 13.2 19.4 7.9 1,215 Massachusetts 10.3 16.6 10.2 1,785 Connecticut 8.9 13.2 7.9 2,854

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