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Post-9/11 buildup added billions to Maryland's economy

BusinessDefenseNational SecuritySeptember 11, 2001 AttacksNational Security Agency

General Physics Corp. had already built a strong business training police and fire departments in the use of emergency equipment.

But after the attacks of Sept. 11, 2001, the doors of opportunity opened even wider.

The attacks focused officials at all levels of government on homeland security, and federal money to support it become plentiful. Protecting against terrorist attacks became a high priority for municipalities and federal grants to support the effort became plentiful.

Business at Elkridge-based General Physics increased 400 percent in its homeland security division.

"There was an immediate spike," said Craig Seger, General Physics' vice president of homeland security, environmental and technical services.

As the federal government beefed up its anti-terrorism efforts, Maryland reaped the benefits: increases in federal jobs, research grants and contracts. At a time when other states were struggling through a national recession, the windfall helped Maryland's economy to grow.

"9/11 has led to this huge amount of spending on homeland security and intelligence and a lot of that has been spent in Maryland," said Richard Clinch, director of economic research at the University of Baltimore's Jacob France Institute.

Federal procurement spending in the national capital region grew by 15 percent in fiscal 2002, to $36.1 billion, according to the Greater Washington Research Program of the Brookings Institution. Most of the growth was due to unusually large procurements for homeland security and the new war on terrorism. Federal procurement spending in the region was $81.6 billion in fiscal 2010.

The growth has spread across sectors.

General Dynamics expanded its operations in the state with new offices in Anne Arundel County.

BWI-Thurgood Marshall Airport won federal money to become one of the first airports in the country to try out whole-body-imaging machines.

The director of national intelligence established the Intelligence Advanced Research Projects Activity at the University of Maryland, consolidating three existing agencies into a new unit to develop new ways to gather and analyze intelligence and conduct operations.

Military installations in the state and the businesses that serve them also have benefited. Defense spending in Maryland grew from $11.4 billion in fiscal 2003 to $18.5 billion in fiscal 2009.

State and local officials have worked to make Maryland, which is home to the National Security Agency, a center for cybersecurity training, research and development.

"With the growth in the federal government's investments in cybersecurity, Maryland is a big winner," said Kathleen Snyder, president and CEO of the Maryland Chamber of Commerce.

The total impact of homeland security and defense spending in the state is impossible to quantify. The National Security Agency doesn't publish a budget. And other activity — such as businesses increasing the number of security officers or hiring consultants to create emergency management plans — is difficult to track.

"The effects of 9/11 on the local economy show up in ways that most people don't understand," said Stephen S. Fuller, a professor at George Mason University and author of the Brookings report.

The University of Maryland, Baltimore County research park is home to several companies working in cybersecurity and other intelligence-related fields. University officials said the growth in these types of companies can be linked to the attacks of Sept. 11, even if indirectly.

"I think there's a broad awareness of the challenges and risks related to security and terrorism attacks that wasn't there before 9/11," said Greg Simmons, vice president for institutional advancement at UMBC. "It's hard to draw a one-to-one connection. But there was an effect."

At least some future federal spending in Maryland now is in doubt. In the deal last month to resolve the debt ceiling debate, Washington agreed to cut nearly $1 trillion in spending over the next decade, including about $400 billion from defense.

""The war-on-terrorism uptick in spending is now moderating," Fuller said. "But it is still much larger today than it was before 9/11."

Clinch, of the University of Baltimore, said homeland security may be safer from cuts than other some areas, but still faces reductions.

"The issue with government spending will have to be controlled and some of that will have to come from homeland security," Clinch said.

Seger said his company began to see the decline from 9/11 in 2004, when the strategy for fighting terrorism shifted from how to deal with a terrorist attack once it hits to how to prevent one. There wasn't as much demand for his company's services, which was forced to downsize.

"In the last seven years, we have seen a lot of that influx go away because it couldn't be sustained," Seger said.

But Hanover-based KEYW Corp., which develops technology, still sees opportunities in the fight against terrorism. Ed Jaehne, chief strategy officer at the three-year-old company, said there is room for firms that can keep up with rapid changes in terrorism.

"Counterterrorism and cybersecurity are two of the highest priorities within the intel community," he said. "From a national and global sense those are, sadly, very durable markets. They are not going away."

andrea.walker@baltsun.com

twitter.com/ankwalker

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