Job shocks: When lightning threatens again

Colin Hartman
Joe Larson

Published November 1, 2005  | November 2005 issue

When it comes to major job loss, what happens to communities when it looks like lightning might strike twice?

Two communities in the Ninth District were facing just such a scenario. Both saw a major job dislocation in the early 1990s, and each was threatened again this summer. In both cases, the communities worked overtime to make sure the lightning missed them.

In the village of Newberry, located in Luce County in the Upper Peninsula of Michigan, locals faced the proposal by the state Legislature to close Newberry Correctional Facility, eliminating some 225 jobs, or almost 8 percent of jobs in the county.

Rapid City, S.D., was forced to ponder life without the second-largest employer in the entire state. Ellsworth Air Force Base, located just northeast of the city, had been fingered for full closure by the Pentagon's Base Realignment and Closure (BRAC) commission, affecting as many as 5,000 military and civilian jobs.

Both communities had been down this road before in the early 1990s. Not so coincidentally, both upheavals involved the organizations and facilities currently on the chopping block. Happily for both communities, each managed to avoid the latest hazard to its job base. But each episode offers a glimpse into how communities adapted and performed after the original employment decline, as well as the mindset of each county as it faced the prospect of yet another lightning strike.

These two examples are a bit unique: Each was government based, which meant that each had some political capital to leverage on its own behalf—successfully, it turns out—in hopes of avoiding proposed job cuts.

(Editor's note: Despite the large, original layoff in each region, none of the counties involved showed up as a "shocked" county—having lost more than 3 percent of its annual employment—from 1990 to 1993 as discussed and analyzed elsewhere in this series on county employment.)

The unwanted spotlight

For Rapid City, the threat of job loss from Ellsworth Air Force Base is almost becoming old hat. Located just across the county border from Rapid City in Meade County, Ellsworth garnered national attention in May when BRAC listed the base for full shutdown.

It's not the first time. Fighting for the base's survival has been an ongoing process for the state and region over last decade and a half. In that time span, Ellsworth defenders have successfully kept the base off of the closure list during earlier BRAC rounds in 1991, 1993 and 1995; but each time the base saw cutbacks. From 1991 to 1996, military personnel dropped by some 3,300.

Persistent base downsizing has made people realize that "the air base is at risk," said Rapid City Council member Bruce Rampelberg, who is also chairman of the Ellsworth Task Force, a committee whose sole purpose was to prevent the base's closure. "You learn to pay attention and be as supportive as you can" to the base.

Today, Ellsworth is home to half of the Air Force's B-1 bombers. Had Ellsworth closed, its fleet would have been consolidated at Dyess Air Force Base in Texas. Community and base supporters said that would have left the fleet strategically vulnerable.

"Logic is logic," said Rampelberg. "It's stupid to put all your eggs in one basket."

Maybe ironically, Ellsworth contributes a large number of eggs to the job basket in the Rapid City region—which is why the region fought so hard to change the commission's recommendation. Still, the area has weathered past cutbacks reasonably well because of strong growth in other sectors. In spite of steady job losses at the base, total employment in Pennington County (home to Rapid City) and Meade County (home to the nearby base) rose 25 percent from 1990 to 2000. Strong job growth occurred in retail, FIRE (finance, insurance and real estate), services, transportation and construction—each of which added about 1,000 or more jobs. Retail added some 6,000 jobs, FIRE more than doubled and construction grew by almost half, according to data from the U.S. Department of Commerce's Bureau of Economic Analysis (BEA).

Ultimately, BRAC removed Ellsworth from the list of base closures, to the celebration of the entire state of South Dakota. But the threat of Ellsworth's closure also put the community to work on what it would do if the unthinkable happened.

The region has created an economic growth plan that leaders hope will generate up to 1,500 new jobs a year. Spearheaded by the economic development group Black Hills Vision, the plan looks to diversify the existing economy and attract new jobs. "There are enough good things going on here to create jobs," said Rampelberg.

Prison break

In light of the community's past performance after a big job shock, there might be cause for greater celebration in Newberry, a village of about 2,600 located in sparsely populated Luce County in the eastern U.P., which saw the Newberry Correctional Facility spared from state funding cutbacks that would have mothballed the facility.

Newberry had been down this path before, and with this particular facility. For the better part of 100 years, it was the state's biggest mental health facility and the county's job anchor. But in 1992, after earlier cutbacks, the facility was closed, permanently laying off 340 employees.

The economic effect was large and immediate. Some involuntarily retired early while others left town or were transferred. The county's unemployment rate reached 13 percent toward the end of 1992, according to local reports. The pain subsided in 1995, when the state adapted the Newberry facility into a state prison. Prison employment quickly rose, and by the next year countywide employment hit a record 3,385, according to BEA figures.

But then this summer the state Legislature proposed shutting down the Newberry prison as well as a smaller prison in Manistique in neighboring Schoolcraft County to help close a state budget deficit. It was a rally call not only for Newberry residents, but the entire Upper Peninsula. Beverly Holmes, village manager of Newberry, said closing the state prison there "would have a ripple effect across the U.P."

The local response was to try to stop the closure at all costs. The village government, corrections officers, and the entire community—supplemented by supporters from across the U.P.—successfully lobbied elected officials at the state capital to reconsider. In early September, the Legislature submitted a budget that included money to keep the Newberry and Manistique facilities open.

The Luce County economy would have had a long row to hoe had the closure proposal gone through. The mere prospect was enough to hurt local businesses. A local car dealer reported that he lost several prospective sales with prison personnel immediately after the proposed closure was announced, and several businesses laid off employees in the summer. Newspaper accounts suggested that the number of homes for sale quickly increased, as some residents looked to beat the rush to sell had the closure gone through.

There was also talk of needing to expand and diversify the local economy to protect itself from such a major shock in the future. The community had just such a chance after the mental health center closed in 1992. Although locals remember hard times following the closure of the mental hospital, government data on jobs and income suggest that a burst of entrepreneurial activity took place.

Coincidentally or not, from 1991 to 1995 (the time between announcements of the original facility's closure to its reincarnation as a state prison) total employment and per capita income grew strongly. What's more, BEA data suggest that the facility's original closure led to a subsequent jump in entrepreneurship. From 1991 to 1995, the number of people in the county employed as nonfarm proprietors grew by almost 30 percent.

It might seem like heresy—and local officials were skeptical of government job figures—but the facility's conversion to a state prison might have removed the entrepreneurial spark necessary to diversify the local economy. From 1996 (when the prison got to full employment) to 2000, county employment actually fell by 15 percent; proprietorships also declined, as did income.

From 1992 to 2003, overall county employment inched up a little over 8 percent, or about 0.75 percent annually. That suggests a stagnant economy, with little diversification, and local officials didn't disagree on this point.

"A lot of business is geared toward lumber or things like grocery stores. There isn't a whole lot of other business," according to Terry Stark, chairman of the Luce County Board of Commissioners. Said another local official, "You can't even buy a pair of shoes in Newberry."

As the saying goes, maybe necessity was the mother of Luce County's invention for that brief period in the 1990s. For most people in Luce County—and in Rapid City as well—they're quite glad not to have to find out the hard way after avoiding another lighting strike.

Colin Hartman and Joe Larson are fedgazette interns.
Editor Ronald A. Wirtz contributed to this article.