Federal spending on contractors in Maryland fell last year for the second time in a row, a troubling trend for a state dependent on government business.
Procurement spending dropped $1.3 billion, or 6 percent, in the fiscal year that ended Sept. 30, 2007, the U.S. Census Bureau said in a report set to be released today. Such spending had declined 3 percent the year before. The figures are adjusted to account for inflation.
Federal dollars to contractors, which include such items as computer services and radar systems, totaled $21.1 billion last year. That was the equivalent of three-quarters of the state's budget, and economists say the money is one of the keys to Maryland's wealth because it creates high-paying jobs.
The University of Baltimore's Richard P. Clinch said that such a significant drop is troubling - particularly when procurement rose nearly 5 percent nationally.
"This is a very worrisome trend," said Clinch, director of economic research with the University of Baltimore's Jacob France Institute. "And this may be supported by what you're seeing in terms of these horrific fiscal estimates of the deficit in Maryland. ... We will not avoid recession if procurement continues to fall."
Clinch said there was the possibility that there were errors in the federal statistics caused by problems tracking where in the country contracting work is getting done. But he doubts that could account for the entire drop.
Though it has weathered current financial turmoil better than the country as a whole, the state has seen its unemployment rate worsen in recent months. Maryland's jobless rate was 4.5 percent in August, up from 3.6 percent a year earlier.
Defense procurement, which accounts for half the government's contractor spending in Maryland, dropped only slightly, according to the Census Bureau. Agencies reporting large procurement declines here include the Department of Health and Human Services, down $400 million; Homeland Security, down $545 million; and Transportation, down $583 million.
Loren Thompson, a defense industry analyst with the Lexington Institute, a think tank in Arlington, Va., doubts that defense contracting is anything but up in Maryland. Besides the difficulty tracking where the work is done, the timing of budget obligations could be creating a misleading impression, he said.
