The Reliance of the California Economy on Federal Contract Spending

California, the largest state economy in the nation, benefits from billions of dollars of federal contract spending each year. Chmura Economics & Analytics estimates that 1.8% or 280,364 of California’s jobs were directly supported by federal contract spending in fiscal year (FY) 2013. Metropolitan areas such as San Diego and industries such as manufacturing and professional and business services have a higher level of dependency on federal contract spending. Leaders in those regions and industries need to be prepared for future reductions in the federal budget.

Based on the latest data from the General Service Administration, total federal contract spending in California was $632.2 billion from FY 2000 to FY 2014—the largest amount for all states.¹ Among all federal agencies, the Department of Defense (DOD) plays an oversized role in federal contract spending in California—in FY 2013, DOD contract awards amounted to $34.0 billion or 71.4% of all federal contract spending in the state.

State and community leaders of California need to understand the role of federal procurement spending in the state economy to prepare for future budget cuts. Since 2011, the threat of drastic cuts in the federal budget has surfaced several times, from the debt ceiling crisis in mid-2011 to the Budget Control Act of 2011, which gave rise to the “sequestration” cuts in 2013. The government shutdown in October 2013 further exacerbated the risk of budget uncertainty. To learn more about the role federal procurement spending plays in the state of California as well as its impact by region and industry sector, download our full white paper here: Whitepaper: The Reliance of the California Economy on Federal Contract Spending.

¹ Federal government contract awards represent awards granted to the private sector. Here we treat the phrases “federal contract spending,” “federal procurement spending,” and “federal contract awards” as interchangeable.