Recession throws another punch at staggering city

PHILIP MOELLER

February 06, 1991|By PHILILP MOELLER | PHILILP MOELLER,SUN BUSINESS EDITOR

There is no good time for a recession, but the current downturn may prove devastating to Baltimore and more painful to Maryland than most people realize.

Despite our well-earned reputation over here in Medialand for being almost gleeful purveyors of gloom-and-doom, delivering a negative message about our economic fortunes is not enjoyable.

Yet, while public and private sector leaders say privately that they understand how bad things could get here, there is far too little public discussion of the need to consider new strategies and ways of doing business.

The city's unemployment rate reached 9.8 percent in December, according to the monthly jobless report issued last week. Even the metropolitan area's unemployment rate, at 6.8 percent, was uncomfortably above the national level, and the broader state economy was in the unusual position of being no better than the U.S. either.

In fact, Maryland's ballyhooed resistance to recession has been shattered. Government employment in the state has long been viewed as a cushion against downturns, given that federal, state and local government jobs account for 20 percent of the roughly 2.2 million jobs in Maryland.

But government employment was not a source of job growth last year and won't be this year either. Rather, we're being told to expect layoffs at the state level and in a number of local jurisdictions as well.

The state's No. 2 safeguard against downturns -- defense spending -- has also been rendered inoperative by federal spending cutbacks. The considerable cost of the gulf war will not show up in major payments to Maryland defense companies. And, although many companies in the state did play sizable roles in producing some of the major weapons systems being used in the gulf, any reordering of depleted inventories would not flow through to the private economy for some time.

The bottom line is that state employment has already fallen roughly 6 percent below year-ago levels. That drop has been masked by an unexplained decline of nearly 3 percent in the work force during the same period, according to Charles McMillion, an economist and senior fellow with the Institute for Policy Studies at the Johns Hopkins University.

The unemployment rate is the ratio of those looking for jobs to those in the labor force, a group composed of people with jobs and people looking for jobs. So, having a smaller work force meant that the state's unemployment rate was not dropping in tandem with the actual job losses that were occurring. Now, however, those job cutbacks are showing up as large monthly increases in unemployment.

What's more, matters are expected to get worse. January was a very tough month for the national economy, as nearly 300,000 jobs disappeared. Figures for the state, which lag a full month behind U.S. reports, should show substantial increases from the weak December showing.

February started out horribly with formal layoff announcements to 1,200 Westinghouse employees tied to the canceled A-12 attack-aircraft program. You get the picture.

They do in Annapolis, that's for sure. Gov. William Donald Schaefer rolled out an austere budget last week that could be cut further by a state legislature with a perceived voter mandate to avoid higher taxes.

Recommendations by the Maryland Commission on State Taxes and Tax Structures, headed by attorney Robert Linowes, look to be one casualty of the recession. Its far-reaching proposals to reform state taxes, adding some $800 million a year in revenues from new and altered tax programs, are expected to be shelved until happier economic times return.

Inasmuch as the Linowes commission recommendations would provide hundreds of millions of dollars in new revenues to Baltimore, the city's hope for major fiscal relief from Annapolis seems to have also been put on the shelf.

What makes this prospect so upsetting is that the city seems finally to be getting its act together in coming to terms with what has been a continuous budget crisis.

Last week, almost lost in the news about the gulf war, state budgets and adverse economic news, the city quietly released a document called a "Preliminary Strategic Financial Plan for the City of Baltimore."

(It's not clear that the city wanted to release the report so quietly, and officials in City Hall continue to struggle with how to effectively communicate. But that's a mountain to climb another day.)

For one of the few times since Mayor Kurt L. Schmoke took office three years ago, the city has taken a look at the economic writing on the wall and, instead of whining about it, has tried to produce a plan that includes a realistic fiscal agenda.

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