Colorado’s space industry faces challenges from flat government spending, growth of competitors for commercial markets and an aging workforce, according to a report to be published Tuesday by the Brookings Institution’s Metropolitan Policy Program.

The state’s $8.7 billion space industry employed more than 66,000 in 2011 between the military and commercial sectors and generates 3.8 percent of the state’s economic output, making it a “critical driver for Colorado’s economic growth because of the industry’s links to the telecommunications, software and advanced materials industries, the report said. The space industry’s growth in recent years helped to offset some of the effects of the recent recession, adding 3,300 jobs when the rest of the state’s job market was contracting.

Colorado Springs plays a major role in the state’s space industry, accounting for 26.5 percent of the industry’s private-sector jobs in the state and 35.1 percent of all space jobs, or more than 23,000 workers, mostly associated with military commands and contractors. The report highlights two Springs-based companies, Braxton Technologies and Intelligent Software Solutions, as well as the local operations of Lockheed Martin for helping install, operate and protect so-called “smart-grid” technologies with electric utilities.

Among the challenges Brookings highlights in the report is a lack of connections between industry players in the Colorado Springs and Denver area, partly resulting from the military space emphasis in the Springs and the commercial focus of industry players in Boulder and Denver.

Brookings recommends that the space industry and state government work together to consolidate and maximize the state’s position in the space industry even as federal spending on space declines; take advantage of commercial opportunities in new space and related markets; strengthen innovation; and become a leader in producing emerging space technologies. The report also recommends the state work to expand the availability of venture capital and other investment in the space industry through an investor conference and increase the supply of labor for the industry.

“Colorado’s goal over the next five to 10 years should be simple and bold: Become the dominant center of innovation for the global space economy,” Mark Muro, senior fellow and policy director for the Brookings Metropolitan Policy Program and lead author of the report, “Launch, Taking Colorado’s Space Economy to the Next Level,” said in a press release. “Achieving that goal is going to require a new, more commercial and entrepreneurial mindset as well as unprecedented commitment and collaboration at a moment of stepped up competition.”

The report will be discussed Tuesday during a forum at the History Colorado Center in downtown Denver hosted by Brookings with the Colorado Space Coalition and the Colorado Office of Economic Development and International Trade. The forum will include a keynote address from Gov. John Hickenlooper.

The report “affords us the opportunity to capitalize on the strengths of Colorado’s aerospace sector and develop strategies to collaboratively address the challenges facing the industry,” Hickenlooper said in a press release. “This joint effort will help us communicate directly with industry to develop a strategic plan” to confront those challenges.

Contact Wayne Heilman: 636-0234 Twitter @wayneheilman