Weak spots found in economy Study says state needs to work on 'governance.'

April 24, 1991|By Jon Morgan | Jon Morgan,Evening Sun Staff

Though it is the only state to score straight A's for the last three years, Maryland still has a few things to learn about economic development, according to a "report card" study of the nation's states.

Only Maryland and Connecticut received straight A's in the fifth annual report by the Washington-based Corporation for Enterprise Development, a non-profit economic consulting and research firm.

The study, released yesterday, grades economic performance, business vitality, development capacity, and state policy.

"What we see in Maryland is it continues to be one of the strongest state economies in the nation," said Mitchell Horowitz, director of the study for the consulting firm.

The state is feeling the effects of the recession in heightened joblessness and slower growth, but the situation is worse just about everywhere else, he said.

However, the state still faces some "fundamental challenges," he said.

Overall, the report noted Maryland's relatively low unemployment and poverty rates and high job quality. The February unemployment rate in Maryland was 6.5 percent, up from 6.1 percent in January.

However, the study said the state's economy shows a wide disparity between urban and rural areas.

It said new companies are forming at a fast rate here and growing, but that businesses that sell their products outside the state are performing below average.

Although Maryland "aced" all four of the study's broad categories, it received its only F in the sub-category of "governance," which includes fiscal and tax policies.

"Maryland exhibits a leading effort in every development policy category except governance -- where a lack of regulatory and economic development governance drags it down," the study said.

Horowitz said, "A lot of Maryland's success has been its location, so close to Washington and the federal government."

To continue to succeed, Maryland must build on its base of a big federal payroll and the concentration of high-technology laboratories and other research assets, he said. More needs to be done in "commercializing" the federal jobs here, making use of technology and putting forth a clear strategic vision to guide economic development, he said.

Maryland also received C's for structural diversity, financial resources, and for "business competitiveness," all sub-categories in the study.

Gov. William Donald Schaefer said: "Maryland once again is the leading state in economic development.

"We cannot take our successes for granted. We must seriously examine funding levels and our continued commitment to the economic development programs and policies that have made Maryland a national leader," Schaefer said.

He also sought to blame the legislature for the F, saying his proposals to reform taxation and limit land use would have addressed concerns in this area.

Four other states made the "Honor Roll" of those receiving all A's and B's this year: Connecticut, Minnesota, New Jersey and Pennsylvania. Louisiana, Montana and West Virginia trailed the field with D or F grades on each of the four indexes.

Overall, the Northeast was declared "internationally competitive, but [with] weaknesses showing."

The South, home to much of the nation's growth in the last decade, was criticized for economic development policies that focused on tax breaks and giveaways. The study said the region is trying to recover from "a disastrous foray into discount merchandising."

The Plains states were found to be suffering from a lack of economic diversity. The Mountain West region was compared to PTC a corporation ripe for takeover with "divisions" of poor-to-average performers, two hot spots (Utah and Nevada) and one underachiever (Colorado).

The industrial Midwest was found to have a number of turnaround economies that have adjusted to bad economic times and enjoy high state-policy grades. The Pacific Coast area was found to be booming, with strong fundamentals and only a few weak spots.

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