It's lucrative to be within shouting
distance of the nation's capital.
Maryland ranked third among states in per person federal spending in
the 2005 fiscal year, the U.S. Census Bureau said yesterday. That
added up to $11,936 for every man, woman and child.
In total, the federal government pumped nearly $67 billion into the
Maryland economy, the Census Bureau said. That includes everything
Uncle Sam spent here, from salaries for the 125,000 federal jobs in
the state to grants for various programs.
By far the biggest chunk - about $22 billion - went to the vast
number of federal contractors, such as defense manufacturers,
technology firms and consultants, that have set up shop here to be
near the nation's capital.
That works out to be the second-highest per capita spending among
the 50 states and more than triple the national average.
That level of spending for goods and services, called procurement,
means that the state's economy is ever more increasingly tied up
with the fate of the federal budget.
Even accounting for inflation, the federal dollars flowing to
contractors in Maryland increased 80 percent between fiscal 2001 and
2004 in the spending ramp-up for homeland security and the Iraq and
Afghanistan wars.
The state also stands to benefit far more than most in the coming
military base restructuring, which is expected to send thousands of
jobs to the Baltimore area in the next several years.
"We have become a state that is more - not less - dependent upon the
federal government," said Richard P. Clinch, director of economic
research at the University of Baltimore's Jacob France Institute.
The federal largess helped make Maryland the richest state in the
union last year, but there's a downside.
Economists warn that when the federal government restrains spending
to deal with the budget deficit, the state will feel it more keenly
than most. Even in fiscal 2005, the growth in procurement spending
here slowed to just 1.5 percent.
"The federal government's not a bad thing to hitch your wagon to,
certainly better than being an automotive supplier right now,"
Clinch said. "But clearly this does come at a cost."
Maryland got a taste of that in the recession of the early 1990s.
Because of a cutback in defense spending, the state got hit harder
than most, with the impact rippling to companies such as home
builders, Clinch said.
"Defense is definitely more important to Maryland than it would be
to most states," said Loren Thompson, chief operating officer of the
Lexington Institute, a think tank that focuses in part on military
issues.
Now, after big increases in defense spending in recent years, change
is on the horizon. The Bush administration expects that growth in
defense spending will begin leveling off in the fiscal year that
began this month, Thompson said. The plan calls for spending to be
flat from fiscal 2010 through 2013, other than increases to account
for inflation, he said.
But that pain could be deferred locally - or at least blunted - by
the national military restructuring. Many of the jobs for the base
realignment and closure process, known as BRAC, will cluster around
Fort Meade in Anne Arundel County and Aberdeen Proving Ground in
Harford.
"Whatever happens to federal government will be mitigated somewhat
by BRAC," Clinch said. "You're going to be adding 10 to 20 percent
to the Maryland economy above quote-unquote normal growth."
There's a bit of a fudge factor in the federal spending numbers. The
budgets of the National Security Agency and other classified federal
activities are not included, to the best of the Census Bureau's
knowledge, and the Fort Meade-based NSA is a major employer and
spender.
"It's a safe bet that hundreds of millions of dollars are being
spent there every year," Thompson said.
On the other hand, he said, it is likely that some of the
procurement dollars that Maryland gets credit for are really getting
funneled by local companies to offices or subcontractors in other
states. The Census Bureau agrees, though it says it tracks to the
best of its ability where government money ultimately ends up.
After procurement, retirement and disability payments make up the
largest category of federal spending in Maryland, accounting for a
little more than one dollar in every five. Salaries and wages add up
to one out of every six dollars.
Virginia was No. 1 in money to contractors, with $5,104 in federal
spending per person - about $1,200 per person more than Maryland.
Washington, which the Census Bureau does not rank, would be far and
away the top recipient if it were a state, with federal spending on
goods and services at nearly $23,000 per person.
