This paper describes a procedure for developing a State Variable Model for the Allison T406 gas turbine engine. This linear model is useful for designing controllers using modern control techniques. The engine and V-22 rotor system is modeled around an operating point by using four state variables and one input variable. For a given power setting, it is observed that two linear models are sufficient to represent the engine dynamics over the entire flight envelope. A relationship between surge margin and the state variables is also developed. It is demonstrated that these linear models are useful in designing an estimator for accommodating hard sensor failures.