Virginia continues to surpass Maryland in government work But federal spending expected to climb locally

January 18, 1998|By Greg Schneider | Greg Schneider,SUN STAFF

For federal government work, the cliche has long been that Maryland gets the "life" sciences such as medicine and the Census while Virginia gets "death" -- namely, the Pentagon.

Both states count government as their biggest industry, but Virginia's portion is flourishing and Maryland's is treading water.

"The death sciences have paid off better," said Stephen Fuller, a George Mason University professor who tracks federal spending the Washington metro area.

It's not that Maryland is fading from the financial glare of the nearby federal capital. Money continues to flow to big employers such as the National Security Agency and the National Institutes for Health. With that comes contracts to companies that provide everything from food for bureaucrats to radars for fighter planes.

Experts say that after a bad 1996, fiscal 1997 probably saw federal spending in Maryland climb at a reassuringly mediocre rate. Next year, they say, is likely to stay about the same.

Maryland ranks fourth nationally in government spending on wages, salaries and procurement, according to fiscal 1996 figures, the most recent available. California is first, followed by Virginia and Texas.

The feds spent about $7.3 billion on salaries and wages in Maryland that year, and $8.5 billion on goods and services from vendors in the state.

The combined total of about $15.8 billion was down roughly 3 percent from 1995. Add welfare and other entitlements, overall federal spending held steady at $37.1 billion.

Federal contracting alone was down 6 percent, though, the first drop since 1993.

Most experts say the 1996 dip was a fluke caused by the government's temporary shutdown at the end of 1995, which caused delays in contracts and gaps in payrolls.

Figures for fiscal 1997 won't be available for several months, but observers expect levels to be back up to about those of 1995.

Virginia also suffered a bit during 1996. Salaries and wages held steady at $12.3 billion, but procurement dropped to $14.5 billion from $16.6 billion.

Nobody bothered to tell Northern Virginia, though. Numbers there continued to rise. The value of federal contracting just in Fairfax city and county and in Alexandria added up to almost $7.8 billion -- within reach of the $8.5 billion total for all of Maryland.

"Maryland's Washington suburbs have not been very successful holding onto, much less increasing, their government contracts, whereas Northern Virginia has just been wildly successful," said Charles McMillion, chief economist for MBG Information Services, a Washington business analysis firm.

Defense spending alone increased by $1.6 billion in Northern Virginia in 1996. In Southern Maryland, it decreased by $400 million, said Fuller of George Mason.

Maryland's Washington suburbs did create 12,000 new jobs of all types that year, he added. But Northern Virginia created 40,000.

There are several theories as to why the Old Dominion is winning the race for Beltway cash.

"The simple reason is that the agencies that have had increases in procurement and who buy the kinds of things we produce in this region happen to be in Northern Virginia," Fuller said.

The end of the Cold War, for instance, led the military to stop buying so much of the hardware that Maryland once produced and to buy more of the software and services offered south of the Potomac.

NASA's Greenbelt facility is a major agency on the Maryland side, and "NASA's been hard-hit. It's reducing both staff and procurement," Fuller said.

The Bureau of the Census, the National Institute of Standards and Technology, the Nuclear Regulatory Commission, the National Oceanic and Atmospheric Administration, the Food and Drug Administration, the National Institutes for Health -- all in Maryland -- have "very tight budgets" compared to the still-wealthy military, he said. What's more, they are not the types agencies that tend to produce a lot of local spinoff jobs.

TC Others see a difference in the political preferences of each state.

"The Virginia state Legislature and governor made a very focused effort to encourage companies to come over that way," said Larry Davis, a partner in the Rockville consulting firm of Aronson, Fetridge & Weigle. "I participate in a lot of industry groups, and even the industry groups appear to be a lot more active over there."

That's one way to look at it. Another is that Maryland's leadership has recognized the fickle nature of federal largess and decided to diversify.

"For the last 10 years there has been a major effort in Maryland to shift its customer base to the private sector and to reduce its dependence on the federal government," said McMillion.

While such a shift can be painful, it has the potential for long-term payoffs. "The good news is that 1997 has been a fairly good year for the Maryland economy despite the weak federal procurement and the shift away from federal government [contracting]," McMillion said. "So in some ways Maryland seems to be doing quite a good job in shifting away from federal dependence."

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