Brady legacy eye on future Test is whether business-friendly changes hold up; Strong economy a factor; Rightward political tilt seen keeping attention on growth; Business climate

THE BALTIMORE SUN

Three years ago, Maryland's economy was listless. Gung-ho businessman James T. Brady was the new economic development secretary. And Gov. Parris N. Glendening was saying, "We need to send a message that says: You need to do business here."

Now the economy is humming but not booming. Brady resigned last week, partly over differences with the governor. And Glendening is saying that "business interests must be balanced with education, health, public safety and other priorities."

The iron no longer seems hot for business-driven policy changes in Maryland.

"The governor and his advisers don't feel under as much pressure to reduce taxes and make overtures to the business community as they did four years ago," said Matthew Crenson, a political science professor at the Johns Hopkins University.

"The economic atmosphere has changed. The governor has eliminated some of the pressure that operated on him."

Many people -- business executives included -- credit the changed attitude partly to improvements wrought by Glendening and Brady.

Maryland is moderately cutting personal income taxes, which were deemed a business deterrent.

The state is more aggressive and focused at recruiting and keeping companies.

Environmental and safety regulators have reportedly eased up on arbitrary and hostile enforcement.

"I think that the state really is a much better place to do business," said William Couper, president of NationsBank Corp.'s Greater Baltimore operations.

Brady, he added, "didn't achieve his entire agenda, but he put a lot of points on the board."

At the same time, business people still see room for improvement.

As Maryland's neighbor states escalate corporate come-ons, business advocates here want more tax cuts, less red tape and less government generally.

And they fear that, as the booming national economy has buoyed Maryland's own performance above the tolerable level, the political will to execute those changes has faded.

Three years ago, "there was a sense of crisis" about Maryland's business climate, said Alex Doyle, president of Micro Machining Inc. in Baltimore. "Probably the level of urgency has dropped off somewhat. But at the same time there are some serious problems that still need to be addressed."

Much will become clearer in November. Glendening is up for re-election, opposed by his 1994 Republican opponent, Ellen R. Sauerbrey, as well as challengers from his own Democratic Party.

The degree to which business climate becomes a campaign issue -- and how voters respond -- will set the course through 2002.

"This election to some degree is going to be a test of how much desire there is for more fundamental change in the way Maryland deals with the respective roles of government and business and the private sector," said Champe C. McCulloch, president of the Maryland Chamber of Commerce.

If Maryland hews to history, the perceived importance of being business-friendly may be fading along with the unemployment rate.

Economic anxiety spiked more than a decade ago as manufacturing jobs evaporated and onerous banking regulations diverted additional jobs into Delaware and other places.

But the Reagan-era defense-spending and real estate booms numbed the hurt, and those warning about the business climate became a generally ignored minority.

Short memories

"People in Maryland have short memories," said Robert O. C. "Rocky" Worcester, chief of Maryland Business for Responsive Government, a conservative group founded in the 1980s fit of concern.

Part of it has to do with Maryland's economic and demographic makeup. Despite Baltimore's reputation as an industrial base, Maryland ranks almost last among states for manufacturing jobs as a proportion of total employment. And it ranks near the top in its reliance on government jobs, according to figures supplied by Regional Financial Associates, a West Chester, Pa., economics research firm.

"Maryland is very largely a bedroom community, benefiting enormously from federal jobs in the District of Columbia," said Charles McMillion, chief economist for MBG Information Services, Washington business research and forecasting firm.

"And as bedroom communities look at business development and economic growth with a skeptical or critical eye, the culture has not been supportive of economic development."

McMillion credits the Glendening administration with successfully addressing both economic issues and "quality of life" concerns, such as environment and education, that traditionally have occupied the Washington bedroom towns.

Glendening's "Smart Growth" policy of steering development into already built-up areas is "one of the ways that development was made more palatable in communities around the state," he said.

Growing complacency

But some Marylanders think Smart Growth is essentially a nice name for business restriction. And they worry about growing complacency about business conditions that will vanish only when the next recession comes.

"We're doing great now, and we damn well should be" as the national economy expands, Brady said last week. "The test of economic development is not in the great times.

"It's in the times that we've struggled, and we have suffered disproportionately in those times. The fundamental economic development assets have just not been there."

In 1995, when Glendening took office, Maryland still hadn't regained the jobs it lost in the recession of the early 1990s and was adding employment at only a little more than 1 percent annually.

Manufacturing and banking were bleeding, and federal jobs stood in the bull's eye of congressional deficit-cutters.

Glendening had only narrowly beat Sauerbrey, a conservative Republican who hammered at the economy issue and promised to cut personal income taxes by 24 percent.

"That discontent among local business firms sort of set the stage for Ellen Sauerbrey in 1994," Crenson said, and it was a key

issue in that year's election.

Glendening appointed Brady, cut income taxes 10 percent, made regulators more business-friendly and worked to make Maryland's work force job-ready.

Meanwhile, the economy recovered, federal employment stabilized and federal spending flowed with new volume. Maryland added jobs at a 2 percent rate last year, about the same as the country, and concern about the business climate has abated.

In 1995, when Glendening took office, 42 percent of companies surveyed by the Maryland Business Research Partnership were positive about the state's business climate; 22 percent were negative and 34 percent neutral.

In 1996, before taxes were cut, only 35 percent were positive; 46 percent were neutral and 18 percent negative. Last year, after the cut, the proportion of positives had risen to 44 percent. Negatives stayed at 18 percent, and neutrals were 37 percent.

Business attitudes have also improved toward specific areas such as regulations and taxes, said Richard Clinch, program director of the partnership, which receives part of its finances from the state. And the good will isn't just generated by the halo effect of a bubbling economy, he maintained.

"I don't think you would be less likely to say that a state regulation hindered you just because the economy is growing," he said. "People won't say that the permitting process is better just because the economy is better."

But Glendening has also antagonized business -- and Brady -- by initially resisting tax cuts, by granting union bargaining rights to state workers, by opposing what business leaders deem key transportation projects and by failing to gain the General Assembly's approval for a Baltimore Gas & Electric Co. holding-company structure.

Change at the top

As Glendening's term draws to a close, "I'm encouraged with a lot of what I see in the legislature," Doyle said. "I'm discouraged with a lot of what I see coming out of the administration, particularly with Brady taking his leave. The business community would be very open to a change at the top."

Pointing to Sauerbrey's near-success in 1994 and a big increase in registered Maryland Republicans, some analysts detect a rightward tilt in Maryland politics that might help preserve attention to job creation and economic health -- even in good times.

Others predict that continued pressure from Virginia, North Carolina and Delaware will keep Maryland's attention focused on business recruitment and retention -- no matter who's in office.

Or they think that it should.

"You could always fall victim to the 'Let the good times roll' attitude," McCulloch said. "The problem that Maryland elected officials have is that Maryland has had the good times for so long that the population in general has forgotten the economic success isn't something that just happens."

Pub Date: 5/03/98

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