Defense Spending

Military spending on prime contracts, from weapons research and development to construction projects, has for years been concentrated among a handful of states. In 1997, four states--California, Virginia, Texas, and Florida--accounted for 40 percent, or $81 billion, of all Defense Department prime contract awards and compensation. Between 1988 and 1997, changes in the prime contract awards occurred throughout the United States. California experienced the largest decrease. States with the largest decreases had major reductions in prime contracts for equipment. In some states, gains in prime contracts for services lessened the impact of significant decreases in equipment prime contracts.

GAO noted that: (1) the award of DOD prime contracts in the United States declined from $164 billion to $107 billion from 1988-1997; (2) there were large declines in equipment and research prime contracts, while service prime contracts have become a more significant portion of total prime contracts; (3) meanwhile, DOD compensation decreased from $111 billion to $97 billion; (4) four states--California, Virginia, Texas, and Florida--accounted for $81 billion, or about 40 percent, of DOD prime contract awards and DOD compensation in 1997; (5) over the period 1988-1997, changes in the prime contract awards have occurred throughout the 50 states, and California has experienced the largest decrease; (6) states with the largest decreases had major reductions in prime contracts for equipment; (7) in some states, gains in prime contracts for services lessened the impact of significant decreases in equipment prime contracts; (8) defense dollars are generally associated with employment and other economic benefits to the states; therefore, Congress and other decisionmakers are also often interested in measuring defense spending against state population and income tax contributions; (9) large variances occur within these measures; and (10) for example, DOD prime contract awards and DOD compensation per dollar of personal tax contributions in 1996 ranged from $.78 per dollar in Hawaii to $.04 per dollar in several states.