The Annapolis Sheep Shearers

PETER A. JAY

November 18, 1993|By PETER A. JAY

Havre de Grace. -- We've heard a lot lately about Mexico's business climate. What about Maryland's?

Ask that question to top executives at many major companies, including firms already here and those which have recently decided to leave or stay away, and they will emphatically tell you it stinks.

As that's a politically explosive assertion, most of them won't say it publicly. Their timidity is unfortunate. If they would speak up for themselves instead of keeping quiet or hiding behind surrogates, they would help push this important debate front and center, where it belongs. But they won't take the heat, which is one reason business itself is largely to blame for its considerable problems here.

In the mid-1980s, there was a rough consensus that Maryland's business climate was average -- not especially good, not especially bad. As the state's economy was roaring along spectacularly, it didn't seem to matter very much at the time.

But government policies that were irritants in good times can become major handicaps in bad. Today the Maryland economy is sputtering and needs help, but the state is generally seen as more hostile to business than ever. The retired chairman of one major Maryland firm rates the state's business climate today as one of the ten worst in the nation, and well below that of any of the half-dozen nearby states with which it competes.

This perception is so well established that the various tortured arguments offered to offset it are poignant, not persuasive. Typical was the release last week by the University of Baltimore's Regional Economic Studies Program of a consultant's report on big-city tax burdens.

The report depicted Baltimore as the next thing to paradise for a mid-sized business -- at least in comparison to Philadelphia, Los Angeles, Detroit, Newark and so forth. All that was missing was a follow-up television commercial showing a tycoon pondering relocation of his plant, reading the study in question and then striking his head with his fist and shouting ''Baltimore! Now why didn't I think of that before?''

On one level, it's perplexing that Maryland's reputation as a place to do business has slipped so sadly. The state's bonds are still rated AAA, safest in the nation. The governor constantly declares himself to be pro-business, and obviously believes he is. The legislature's Democratic leadership, with or without Clay Mitchell as speaker of the House, doesn't seem especially radical. So what's the trouble?

As much as anything, what worries business about the state right now is its lack of fiscal and political stability. The state's structural budget problems, while clearly identified, have yet to be addressed. Annual budgets teeter precariously, propped up by Keno and unreliable revenue estimates, while the administration sends up one giant new spending program after another. Even if these are shot down, as the latest $332 million school-aid proposal is expected to be, they add to the air of uncertainty.

(The minority report of the governor's school-funding commission, signed by commission members Laurence Levitan, Sheila Hixson and Henry Heller, calls the announced proposal educationally flawed and fiscally dishonest. As it specifies no new revenue sources, the three dissenters note, the only way to fund it would be through yet another gigantic tax increase.)

Maryland already has a high personal tax burden. Its regulatory bureaucracy tends to be contentious rather than cooperative. Its unemployment-insurance rates and worker's-compensation costs are higher than those of most nearby states. These are annoying aspects of life here, but if they were constants -- meaning not expected to get any worse -- a business could plan for them as it does its other fixed costs.

The trouble is, they're not constants. There's no ceiling in sight. Big programs, such as those Governor Schaefer is addicted to, mean ever-bigger budgets, and ever-bigger budgets mean an ever-bigger appetite for government revenues. In Maryland, businesses large and small have learned that their state government looks at them not as job-producers to encourage but as sheep to be shorn.

It doesn't have to be this way. Virginia, North Carolina and to a lesser extent Delaware have forged pro-growth, pro-business records that have made them attractive to companies considering relocation. In Maryland, by contrast, economic-development officials tend to blather vaguely about ''quality of life,'' because on the basis of hard numbers their state can't compete.

Under the ''pro-business'' William Donald Schaefer, Maryland's state government has grown relentlessly. In a year, voters will elect a new governor, but at this point there's little reason to expect that Mr. Schaefer's successor will want to, or be able to, restrain the public sector so that the private sector can grow.

In the past, many Maryland business leaders have avoided open criticism of government policies -- and thus forfeited any serious influence on them -- because they feared it would cost them their ''access'' to policy makers. Well, no doubt they've enjoyed their ''access'' over the last seven years. Now maybe it's time to do a little cost-benefit analysis to find out if it was worth the price.

Peter A. Jay is a writer and farmer. His column appears Sundays and Thursdays.

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