The Navy plans to retire two of three cruisers at Pearl Harbor under a leaner defense budget — a move that, along with other cutbacks, is expected to have a negative effect on Hawaii’s economy.

Officials at the Pentagon confirmed that the USS Port Royal — the newest cruiser in the Navy inventory and one with ballistic missile shoot-down capability — is expected to be decommissioned in fiscal year 2013.

The USS Chosin, which is in Pearl Harbor shipyard receiving $112.5 million in repairs and upgrades, would be retired in 2014.

In a statement submitted Tuesday to the Senate Armed Services Committee, Defense Secretary Leon Panetta said the Pentagon is "retiring seven lower-priority Navy cruisers that have not been upgraded with ballistic missile defense capability or that would require significant repairs."

The Defense Department’s budget request for 2013, released Monday, sets out $487 billion in cuts over the next 10 years. Also affected would be the towering Sea-Based X-Band Radar, a regular visitor to Hawaii’s shores.

The U.S. Missile Defense Agency said it plans to sideline the $1 billion one-of-a-kind missile tracker by placing it "in a limited test and contingency operations status" to save $500 million over five years.

The other cruisers slated for decommissioning out of the 22 in the Navy fleet include the Cowpens, Anzio and Vicksburg in 2013, and Gettysburg and Hue City in 2014. Those ships are based elsewhere.

The Navy also said it is going ahead with a "hull swap" that would shift the destroyer USS Russell from Pearl Harbor to San Diego for a $200 million modernization in early fiscal 2013, while the USS Halsey, based in San Diego, will temporarily move to Pearl Harbor to be manned by the Russell’s crew.

The Navy said it will save $35 million in the Russell work move — $23 million in higher port rates for Pearl Harbor and $12 million in travel, lodging and per diem expenses for off-island labor.

The Russell modernization, which was expected to be done at Pearl Harbor, would have placed big demands on the on-island surface ship workforce and required additional mainland labor.

"It’s just more work that Hawaii will not be getting. It hurts," said Robert Lillis, president of the International Association of Machinists Local 1998, which represents mechanics in Hawaii’s private ship repair industry, of the ship retirements and work shift.

Business and ship repair officials also expect one or both of Pearl Harbor’s two frigates to be retired, adding to the uncertainty about the number of ships and work that will remain here.

"The fear is, we have 11 surface ships; with the potential cuts, it may go as low as eight," said Charlie Ota, vice president of military affairs for the Chamber of Commerce of Hawaii. "With only eight (ships) remaining, it takes away a number of (military personnel) plus dependents. So local spending (is affected)."

Private contractor BAE Systems Hawaii Shipyards performs surface ship jobs for the Navy at Drydock 4 using an on-island workforce of about 650.

Fewer ships means less work. "That’s a concern — less ships to maintain and repair," Ota said.

Offsetting some of those military losses in Hawaii could be the addition of more than 1,000 Marines from Okinawa, the movement of another cruiser to Pearl Harbor and the arrival here of a Navy high-speed vessel — possibly one of the former Hawaii Superferries, officials said.

The Sea-Based X-Band Radar, which will be available if needed, the Pentagon said, made more than a dozen visits to Hawaii since 2006. Ford Island had become its unofficial home port, and millions of dollars in work on the radar was done here.

The SBX, as it is known, most recently docked in Pearl Harbor in December.

Pam Rogers, a Missile Defense Agency spokes­woman, said, "There’s not a lot I can tell you right now" about the ballistic missile tracker’s future. "We’re sort of in preliminary stages now of planning the outcome of the SBX," she said.

In late 2010 Pearl Harbor Shipyard announced it was embarking on a decade-long, $1.86 billion warship modernization program to upgrade the three cruisers and six destroyers at Pearl Harbor.

The work was to be part of a more than 20-year Navy-wide program to modernize and extend the lives of its 22 Ticonderoga-class cruisers and 62 Arleigh-Burke destroyers at a cost of $16.6 billion.

But the Navy has found more problems than it anticipated with the upgrades. Pearl Harbor shipyard started a $220 million modernization on the cruiser Chosin in January 2011, with the first six-month phase expected to cost $71 million.

Work anticipated to be done in July now is stretching into March of this year, at a cost of $112.5 million, the Navy said. The shipyard said in an email that "additional work has been discovered throughout the availability which has required additional time to complete." The shipyard did not specify the nature of the additional work.

The Port Royal, commissioned in 1994, received $20 million in repairs starting in late 2010 to address cracks that were discovered in the aluminum alloy superstructures on all 22 of the Navy’s cruisers.

The Navy also spent $40 million to fix damage from the Port Royal’s 2009 grounding off Hono­lulu Airport’s reef runway and $18 million on refurbishment immediately before the warship ran aground.