While most of America was suffering from a prewar economic drought, Maryland's economy enjoyed a relative drenching of cash last year, courtesy of its wealthy, terrorism-fighting neighbor - the U.S. government.
According to figures to be released today by the U.S. Census Bureau, the federal government's spending on goods and services in Maryland increased more than 25 percent in 2002, compared with a 10 percent increase nationwide.
The $13.5 billion in federal procurement spent in Maryland accounted for nearly 7 percent of the state's economy and cemented Maryland's historical position as one of the nation's top recipients of federal money.
The beneficiaries of that increased spending are scattered throughout the state in hundreds of corporations and government agencies, but economists attribute most of Maryland's gain to the federal government's recent preoccupation with homeland security and research into biological terrorism.
Among the jurisdictions with steep increases were Montgomery, Frederick and Harford counties, home to the National Institutes of Health, Fort Detrick and the Aberdeen Proving Ground, respectively.
Some of the money probably filtered through Maryland to other states, by way of the many government-dependent agencies and contractors speckling the Washington suburbs.
But so much federal money was pumped into Maryland last year - an increase of more than $2.75 billion from the year before - that economists are calling it nothing short of a windfall. Maryland's economic growth and employment rate have outpaced the national average for most of the past two years, and federal spending is probably responsible, they say.
In the Baltimore region, only Baltimore County showed a drop (9.7 percent) in federal spending last year, according to the annual Census Bureau report.
"Simply put, the Maryland economy would be in much worse shape if not for the federal dollar," said Anirban Basu, an economist and chief executive officer of the Baltimore consulting firm Optimal Solutions Group.
"Based on this kind of increase, it looks as if Maryland is attracting a disproportionate share of the money," Basu said. "Maybe that's the most significant thing. A lot of Maryland institutions are well positioned to take advantage of the federal government's new focus on homeland security and biodefense."
The federal government spent almost $271 billion on research, defense products and other goods and services in 2002, according to the Census report, and roughly 5 percent of that money landed in Maryland. Only California, Virginia and Texas got larger shares.
The biggest spending increase in the state occurred in Montgomery County, where the National Institutes of Health alone reaped an increase of nearly a half-billion dollars in federal contracts. Since the Sept. 11 attacks and the anthrax mail scare in late 2001, the annual NIH budget for biodefense research has exploded to nearly $1.75 billion - only part of a federal budget for biodefense that is expected to reach $6 billion by 2004.
The Johns Hopkins University is among the primary recipients of NIH research money and is partly responsible for a 41 percent spending increase in Baltimore City, which received $1.5 billion in federal procurement last year.
Spending in Anne Arundel County also surged, in part because of new anti-terrorism efforts at Fort Meade and Baltimore-Washington International Airport, observers say. But Anne Arundel, home to the Electronic Systems sector of Northrop Grumman Corp., benefited most from a $259 million increase in Defense Department contracts.
Other jurisdictions with large shares of defense spending included Baltimore City, with more than $800 million in purchases, and St. Mary's County, where more than $750 million was spent in and around the Patuxent Naval Air Station.
But the Pentagon, which accounts on average for about two-thirds of the government's purchases, was responsible for less than half of Maryland's share of federal spending, according to the Census report.
Among nondefense agencies, the Department of Health and Human Services spent the most in Maryland - more than $2 billion, most of it through the NIH, according to the Census figures. The National Aeronautics and Space Administration spent more than $1 billion, most of it in Prince George's, site of the Goddard Space Flight Center.
Economists say Maryland owes its good federal fortunes to geography - and to the government's proclivity for placing key offices and agencies in its back yard. Regardless, they say, the impact of all that federal cash is hard to overstate.
"It's very important and has a considerable impact in terms of the jobs it supports and the spillover into other businesses," said Daraius Irani, director of applied economics at RESI Research and Consulting at Towson University.
"An increase like this is likely to have a significant impact on the total economy, and it's probably why Maryland was able to outperform the national economy through 2002," Irani said.
