Military spending in San Diego dips due to federal budget cuts but remains strong, report says

The military supports nearly 357,000 local jobs and represents $61.3 billion of San Diego County’s economy, according to the 2025 Military Economic Impact Report released this week.

The annual report, released by the San Diego Military Advisory Council and the UC San Diego Rady School of Management, found that defense spending accounts for 22.2% of the county’s gross regional product. This is a decline of 3% from 2024, owing in part to federal budget cuts.

“San Diego’s defense community continues to be one of the most dynamic and stabilizing forces in our economy,” said Lisa Ordóñez, dean of the Rady School.

The 2025 report records $39.3 billion in direct defense spending, including $19.8 billion in defense contracts awarded to more than 2,000 companies. Payroll for active-duty, reserve and civilian employees totaled $15.1 billion, while retirement and veterans’ benefits rose to $4.3 billion.

“San Diego’s military presence remains a key driver of economic growth, innovation and collaboration,” said Michael Meyer, associate teaching professor at the Rady School and faculty lead for the report since 2021. “Even with modest shifts and uncertainties in federal budgets, the data show how resilient and deeply connected the defense sector is to our region’s workforce and technology ecosystem.”

In whole, defense supports more than 1 in 5 jobs locally — directly employing nearly 143,000 active-duty, reserve and civilian personnel, as well as indirectly supporting 214,000 jobs through contracting, logistics and local business activity.

SDMAC has partnered with the Rady School to produce the annual report for nearly two decades.

“This collaboration helps decision-makers in San Diego, Sacramento and Washington, D.C., understand how critical the defense sector is — not only to national security but also to local innovation, workforce development and quality of life,” said David Boone, SDMAC president and CEO and a retired Navy rear admiral. “Our report concludes that even amid evolving federal spending patterns, the defense sector remains one of San Diego’s most stable and forward-looking engines of growth.”