Federal spending in Md. falls by $1.2 billion, new report finds

Federal contract, grant and wage spending in Maryland fell $2.6 billion.

Federal spending in Maryland fell by nearly $1.2 billion last year, a nonpartisan research group reported Tuesday — the latest sign that congressional belt-tightening is having an impact in a state long buoyed by the federal checkbook.

The government spent $93 billion in Maryland in the fiscal year that ended in September 2013, representing 27 percent of the state's economy, the Pew Charitable Trusts found.

Maryland ranked third in the nation behind Virginia and the District of Columbia in per capita federal spending.

But the focus on budget deficits that led Washington to set up the deep spending cuts known as sequestration that struck in early 2013 is beginning to chip away at the influx of federal dollars that helped prop up the region's economy during the recession.

When entitlement payments such as Social Security are removed from the equation, and only contracts, grants and federal employee wages are considered, spending dropped by $2.6 billion, according to an analysis of Pew's numbers. When adjusted for inflation, that cut exceeds $3 billion.

Economist Anirban Basu said the numbers indicate a changing future for Maryland.

"No one is suggesting that Maryland should not continue to focus attention on federal contracting and related industries, but these industries will no longer be the economic engines of growth that they have been," said Basu, who runs the consulting firm Sage Policy Group and is advising Republican Gov.-elect Larry Hogan's transition effort.

"Most people agree that Maryland has got to attract more private capital to offset the decline in federal spending," Basu said.

The Pew report provides one of the most comprehensive comparisons of federal spending in the states since the Census Bureau discontinued its benchmark report on spending three years ago.

The Census Bureau, citing budget woes, stopped publication of the nearly 30-year-old Consolidated Federal Funds Report after releasing data for fiscal year 2010.

Economists and researchers said the report's demise created a blind spot that has hampered economic analysis. A website run by the Office of Management and Budget, USAspending.gov, does not include whole categories of spending, such as federal employee wages.

"The loss of this easy-to-use and complete accounting for all types of federal spending is a major blow to our research," said Stephen Fuller, director of the Center for Regional Analysis at George Mason University in Virginia. "Finding this information is difficult and time-consuming, and very few people are able to access" it.

Two nonpartisan groups — Pew and the Massachusetts-based National Priorities Project — are attempting to fill the void. The National Priorities Project unveiled its spending estimates earlier this year in a project called State Smart.

The numbers reported by Pew are similar to those in State Smart.

"We thought for our own purposes that we needed this data and, frankly, we wanted to make sure that policymakers had it as well," said Anne Stauffer, who studies state and federal fiscal policy at the Pew Charitable Trusts.

Maryland, home to more than 300,000 federal employees and several large federal agencies, has long benefited from its proximity to Washington. In inflation-adjusted dollars, federal spending in the state increased from $59 billion in 2001 to nearly $98 billion in 2009 — pumped up by the war on terror, the national military base realignment known as BRAC and stimulus spending.

In 2009 alone, spending jumped almost $19 billion, according to the Census Bureau data.

But overall spending has since declined, particularly within the contracting and grant categories. The Pew report pegged nationwide spending at $3.1 trillion in 2013, down about $50 billion from the 2010 fiscal year.

Maryland contractors received $25.6 billion in 2013, down 6 percent from the year before. Grants, including to research organizations such as the Johns Hopkins University, saw an overall decline of 4 percent, to just under $10 billion.

The state has seen a slight increase in spending on federal employee salaries and wages since 2010, an uptick that analysts say might be explained in part by BRAC or an increase in jobs due to the national health care law.

Jim Palma, a senior manager in the research and information unit of the Maryland Department of Business & Economic Development, said the Pew numbers reflect reductions that state officials have expected for years. He noted that cuts in some categories, such as procurement, have not been as deep in Maryland as elsewhere.

"Federal spending has a big effect on the state, so when it's cut, that has an effect, too," Palma said.

The unemployment rate in Maryland fell to 6 percent in October, slightly higher than the national average of 5.8 percent.

The Pew report comes as Congress is racing once again toward a deadline to fund the government or face a shutdown.

There are signs that the leaders of both parties are negotiating to avoid the shutting of agencies when the current spending authority runs out Dec. 11. Still, some conservatives would like to see government funding used as leverage to roll back President Barack Obama's recent executive actions on immigration.

House Republicans met Tuesday on Capitol Hill to discuss a strategy that would set up a shorter period of funding for agencies involved in immigration enforcement.

While budget deficits have fallen under Obama to the lowest level as a share of the economy since 2007, some Republicans are calling attention to the fact that the national debt hit $18 trillion last week. That's reason enough, they say, to continue to push for fiscal austerity when the GOP takes over control of both chambers of Congress in January.

"Taking care of this generation shouldn't require robbing the next," Republican National Committee Chairman Reince Priebus said Tuesday. "This is why Republicans have fought for fiscal responsibility in Congress."

john.fritze@baltsun.com

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Federal spending in states

Here's a look at per capital federal spending in the highest-ranked states in 2013:

1//District of Columbia//$73,920

2//Virginia//$16,710

3//Maryland//$15,684

4//Alaska//$14,375

5//Hawaii//$13,752

Spending by category in Maryland in 2013:

Retirement benefits: $23.7 billion

Other federal benefits: $15.1 billion

Grants: $10 billion

Contracts: $25.6 billion

Wages: $18.6 billion

Source: Pew Charitable Trusts

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