Md. expects nice chunk of fix-up money

Dollars will stream from federal spigot in wake of Sept. 11

Important facilities here

State's economy is likely to benefit more than most

October 28, 2001|By William Patalon III | William Patalon III,SUN STAFF

Even before the Sept. 11 terrorist attacks, the federal government routinely spent enough in Maryland for the state to dodge the deepest pains of an economy skidding into recession.

But now - with the federal spending spigot about to open wide and billions in bailout money expected to flow - Maryland can expect a bigger share of Uncle Sam's greenbacks than most of the states in line behind it, economists and other business experts say.

Just as work crews in New York City and Washington will be fixing buildings in the months and years ahead, each of the states will be working to repair economies savaged by the terrorist attacks and the anthrax scare that's followed.

Leaders from Congress and the Bush administration are now haggling over an economic rescue package some believe could be worth $100 billion.

"We think we'll be [a beneficiary]," said David S. Iannucci, secretary of the Maryland Department of Business and Economic Development. "There are already indications of increased federal spending in Maryland, at both military and civilian installations."

There's precedent for that to happen, analysts say. Last year, the federal government awarded procurement contracts worth $10.55 billion in Maryland, according to the U.S. Census Bureau.

That was the fourth-highest total - exceeded by only California, Virginia and Texas - and accounted for nearly 5 percent of all federal contracts awarded.

And slightly more than 5 percent of Maryland's work force consists of federal employees, a concentration that follows the District of Columbia, Alaska and Hawaii as the fourth-highest in the nation, according to the Bureau of Labor Statistics.

The federal government accounts for about 7 percent of all activity in Maryland's $185 billion state economy, according to Economy.com in West Chester, Pa.

"One of the biggest drivers of the Maryland economy is Washington," said Jeff Petry, an Economy.com economist who studies Maryland.

Federal facilities

The federal presence is spread about the state. There are military installations such as the Patuxent River Naval Air Station and Indian Head Naval Surface Warfare Center in Southern Maryland, and the Aberdeen Proving Ground (APG) in Harford County.

Other facilities include the headquarters of the National Security Agency at Fort Meade, the Naval Academy in Annapolis and the Social Security Administration and Health Care Financing Administration in Woodlawn.

Maryland boasts some important defense contractors. Maryland-based Lockheed Martin Friday won the contract, worth as much as $200 billion, to build 3,000 of the Pentagon's next-generation jet fighter - the Joint Strike Fighter. While the plane will be built in Texas, Northrop Grum- man Corp.`s Electronic Systems unit in Linthicum will build the radar systems.

When looking at an agency or corporation whose lifeblood is federal money, the direct benefits are usually very clear, while the spin-off benefits can be invisible - though they often are huge.

Aberdeen Proving Ground, for instance, has been testing U.S. and foreign military vehicles for much of this century. After the gulf war, in fact, its engineers and technicians put captured Iraqi tanks through their paces.

At APG, civilian and military personnel number about 15,000, and the military installation pumps an estimated $520 million into the area's economy.

"It helps," said Geoffrey R. Close, a Harford County real estate broker and a former mayor of Bel Air. "People work there [at APG], live here and spend here."

The state economy is very different than it was a decade ago, just before the 1990-1991 recession. Then, like today, federal spending was higher in Maryland than in most other states, and was seen as a key to the state's economic health.

Some experts even said Maryland was "recession-proof," since it was believed that the federal government would keep getting bigger and that outlays would keep growing larger.

Those forecasters were wrong.

At the end of the 1980s, about one-third of all the federal money spent in Maryland was in some way earmarked for the military: If the money wasn't going into the wallets or purses of military personnel stationed in the state, then it was likely headed for the coffers of a Maryland defense contractor building an armored vehicle, machining parts for aircraft or building parts for a rocket.

Unfortunately, the world was on the verge of change and the over-reliance on federal money set Maryland up for a one-two punch that would stagger its economy for several years.

While the story of the 1980s was about big government and a bulked-up military, the story of the 1990s would be 180 degrees different: The federal government trimmed down and military budgets were slashed.

Comparing the periods

The federal cutbacks and military downsizing, along with troubles in the key real estate and financial services sectors, pushed the state into a downturn that was deeper and longer than those suffered by most of the other states.

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