Much of that gain came from a 13 percent, or $520 million, jump in defense spending to $4.84 billion.

"Overall defense spending nationwide has increased and Hawai'i of course has seen an increase as well," said Pearl Imada Iboshi, the state's chief economist. Defense "continues to be an important part of our economy and a very stable part of our economy."

The military spending gains came from increased spending on services, supplies, construction, and research and development. Total defense payroll expenses rose $130 million to $1.64 billion despite a dip in the number of active-duty military, dependents and civilian defense workers statewide.

Higher defense spending is being driven in part by projects such as the construction of support facilities for C-17 cargo planes at Hickam Air Force Base and work at the Pacific Missile Range Facility on Kaua'i. However, the 2003 figures don't include the impact of recent developments such as housing renovation contracts and Army plans to convert the 2nd Brigade of the 25th Infantry Division (Light) at Schofield Barracks into one of six Stryker brigades.

During the past four years defense spending has risen more than $1 billion statewide.

That means more defense contracts.

"The only thing that has been growing is defense spending," said Michael Schmicker, a spokesman for Navatek Ltd., which designs advanced ship hulls for the U.S. Navy. "I think that companies working in the defense-related areas are going to have a happier near-term future."

About 90 percent of Navatek's annual revenue, or $15 million, comes from defense contracts.

Overall, Hawai'i ranked sixth among all states, with $8,961 in federal per-capita spending, behind Alaska ($12,244), Virginia ($11,163), Maryland ($10,464), New Mexico ($9,995) and North Dakota ($9,033).

Hawai'i ranked second among the states in per-capita defense spending ($3,566). That was behind Virginia ($4,425), and ahead of Alaska ($3,556), Connecticut ($2,453) and Maryland ($2,071).