Maryland business climate appears to be little changed

January 25, 2004|By JAY HANCOCK

HOW'S the business climate in Maryland? Temperate temperatures, light breezes and 50 percent humidity as far as eyes can see, according to business practitioners.

The latest and last edition of the Maryland Business Climate Survey compiled by the University of Baltimore showed not only gains in hiring and revenue (the business "weather") but also broad optimism about ambient commercial conditions.

For almost a decade the university has asked executives whether Maryland is pro-business or anti-business or somewhere in between.

The last survey, published in November, produced an all-time low (11 percent) of people who said Maryland was bad for business. And it showed close to an all-time high (57 percent, down from the high of 59 percent the previous quarter) in executives who rated Maryland favorably.

What's going on? The obvious independent variable is politics.

Robert L. Ehrlich Jr. is Maryland's first Republican governor since the 1960s, and he has held the line on tax increases and reversed the previous governor's opposition to the Intercounty Connector highway linking Interstates 95 and 270 in the Washington suburbs.

"After this governor got elected, the negatives declined dramatically and the positives increased," says Richard Clinch, director of economic research at the University of Baltimore. "Clearly you have an administration more willing to listen to business and more willing to push a business agenda."

The previous governor was Parris N. Glendening, a pro-environment Democrat. During his tenure, sometimes nearly a third of survey respondents said Maryland was bad for business or anti-business, Clinch said - some of it deserved, some not.

"I don't think Glendening was that bad for the business community," Clinch said. However, he added, "given a choice between helping a business and helping a fuzzy creature, I think he would err on the side of the environment."

But when you talk with business people today, they're focused as much on things that are out of Ehrlich's control as on taxes and regulation.

To be sure, they praise the governor.

"No question about it, Ehrlich is trying to create a very growth-oriented environment," says Alex Doyle, president of Micro Machining Corp., which makes precision metal components for Black & Decker, Northrop Grumman and other big manufacturers. "The legislature is wanting to go in the other direction."

But federal defense-spending trends are of equal or greater importance to Doyle's business these days than anything going on inside Maryland.

Newt Fowler is a partner at the Venable law firm and chairman of the Greater Baltimore Technology Council.

He cheers the reorganization of the Department of Business and Economic Development under Ehrlich appointee Aris Melissaratos, as well as a recent recommendation by an Ehrlich-appointed commission to boost state pension dollars invested in Maryland-based technology startups.

But he also touched on work force quality - a critical issue for all employers - noting that area colleges and universities are doing better at talking with local technology outfits and producing the kind of graduates they need. And he believes that Maryland is finally getting the national recognition it deserves for its technology economy.

"In the tech sector, Maryland's sort of getting on the map," Fowler says. "People are realizing that the greater Baltimore region has a pretty interesting entrepreneurial culture."

"Getting on the map" is something that happens over years or decades, not an election cycle.

If Ehrlich's stance against raising taxes has helped Maryland's business image, then so did Glendening's decision to cut income taxes in the 1990s. If under Ehrlich colleges are doing better at feeding graduates to local employers, surely Glendening's lavish spending on higher education made those graduates more attractive.

In fact, Maryland's business climate isn't so different from what it was five years ago - polls and political symbols notwithstanding.

The state's commercial code is substantially the same. The hated "piggyback" local income tax surcharge still exists and in some cases is rising. Ehrlich's new budget would close corporate tax loopholes involving the transfer of income to Delaware subsidiaries.

Public scoring of the business climate often has as much to do with political tactics as with reality. But, notes Mercantile Bankshares Chairman Edward J. Kelly III, it affects reality, too.

"It determines whether people want to build here, whether people want to come here," he says. "The perception is as important as the reality, and the perception is that the governor has created a more business-friendly environment."

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