Businesses in military towns brace for sequestration effects

Fayetteville, N.C. - Like many who make their livings in the commercial strip outside Fort Bragg, Mike Thomas has no doubt the $85 billion in automatic spending cuts will hurt sales at his used car lot and rim shop.

The vast majority of his customers work on the base, and smaller paychecks mean less money for the four-wheel drive Jeeps, chrome wheels and sound systems that are his specialty.

While it remains too soon to measure the exact impact for small businesses that thrive on the civilians employed at the nation's largest military posts, owners already are bracing for the damage. Pentagon officials say the automatic budget cuts that took effect March 1 will result in one-day-a-week furloughs for 800,000 civilian employees across the U.S. starting next month, bringing a 20 percent cut to their paychecks. Soldiers' salaries are exempt from the cuts.

About 14,500 of those are at Fort Bragg, the sprawling U.S. Army base outside Fayetteville, N.C., where the commanding general on Friday announced additional cuts that include the closure of a dining hall and selected recreation centers that serve soldiers and their families. About 38 percent of all economic activity in the surrounding county is tied directly to military spending, a total impact of about $5.5 billion a year.

Hand-painted signs at Auto Express, the shop about a half-mile from the base's main gates where Thomas is the general manager, offer special discounts and financing for U.S. Defense Department employees.

In addition to the budget cuts - known as sequestration - deadlock in Congress could trigger a full federal shutdown later this month. Thomas expects the cuts will have an impact on his business similar to the military buildup before the 2003 invasion in Iraq, when sales dropped by about half as Bragg's 82nd Airborne deployed overseas.

"Our business is about 90 percent military," he said. "This is a military town. It is going to affect us all. When there's a cut, people are scared to spend. I've yet to speak to anybody who thinks this is a good idea."

In addition to the employee furloughs, Pentagon officials also are weighing cuts to military contracts, training, construction and maintenance.

Alabama's Fort Rucker is the Army's primary base for training helicopter pilots. With 5,850 military personnel and another 6,328 contractors, the massive base is the economic hub for three cities outside its gates: Enterprise, Daleville and Ozark.

Susy Guzman said she already is seeing the effects of budget uncertainty reflected in fewer diners at Brasas Brazil, her family restaurant in Enterprise. The business is popular with military contractors who work as flight instructors, helicopter mechanics, maintenance workers and administrators.

"You can tell people are being cautious because there is uncertainty, they are wondering if their wallets are going to be affected," Guzman said. "It will be a snowball effect here ... first the smaller businesses, like restaurants, but then it just grows."

There are those looking on the bright side, however. Slimmer government paychecks could send more people looking for quick cash to pawn shops and payday loan businesses.

At the Advance Till Payday cash advance store in Oak Grove, Ky., manger Judy Backlund gets a lot of her business from nearby Fort Campbell. The Army prohibits soldiers from using the short-term, high-interest loans, but she deals with plenty of civilians and contractors who work at the post.

Backlund said she's already getting calls from people who are worried about stretching their salaries if they are furloughed. Cash advance stores have been criticized for their high fees and interest rates, though the industry has said it's a necessary option for people who can't get a personal loan from traditional banks.

"It's not an answer to all your problems, but it's better than nothing," Backlund said.

One of her employees, 33-year-old Vanessa Nohelty, is the wife of a Fort Campbell soldier. Although military salaries are exempt from the budget cuts, Nohelty said the cuts could threaten many of the programs and services on which spouses rely.

Nohelty said she is waiting to hear from Fort Campbell about the effect on childcare, sports programs and counselors that help soldiers after they return from deployment.

"Are we going to get to keep all those programs?" she questioned. "Are they going to have as many counselors?"

Link Melley is the co-owner of Norfolk, Va.-based Freedom Furniture and Electronics, with 15 stores in military markets, including outside Fort Campbell. In business for 30 years, Melley said military customers account for 90 percent of his business. Many of his 220 employees are military spouses and veterans.

He said the anticipation of these budget cuts has led to a downturn in sales for more than a year. He worries he may have to reduce his staff.

"Typically when there is a deployment, the stress and anxiety is just at one base," he said. "This has been across the board, every service, every base in the country. ... I have never ever seen the anxiety level this high."