From The Frederick News-Post:
Even though the federal government avoided a shutdown last week — at least temporarily — continued uncertainty in the nation’s budget process could hurt Maryland’s economy.
Congress agreed Thursday night to a spending bill that will keep the government funded and running through Dec. 22, but the short-term extension may not do much to ease concerns in a state where so many workers and jobs are tied to federal spending.
About 15 percent of the state’s workforce are federal employees or contractors, said Daraius Irani, of Towson University’s Regional Economic Studies Institute.
During sequestration threats in 2013, Democratic U.S. Sen. Ben Cardin’s office estimated that there were 300,000 federal workers in Maryland.
“A government shutdown would have disastrous and hard-hitting impacts on Maryland families,” U.S. Sen. Chris Van Hollen (D) said Thursday. “A shutdown disrupts many crucial government services, from lifesaving medical research and food safety inspections to Head Start programs educating our children. It’s also estimated that it would cost our economy over $6 billion a week. Instead of last-minute deals and short-term extensions, I urge my Republican colleagues to work with us on a long-term plan to move our country forward.”
A May study by The Stephen S. Fuller Institute for Research on the Washington Region’s Economic Future, based at Virginia’s George Mason University, said federal procurement spending in Maryland’s Washington, D.C., suburbs amounted to $14.9 billion in 2016.
There are about 9,000 government and private jobs tied to the Fort Detrick campus, which is the county’s largest employment center, said Helen Propheter, director of the Frederick County Office of Economic Development.
There were 3,661 federal jobs in Frederick County in June, according to the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages. That figure does not reflect the total number of federal workers who live in the county but work elsewhere.
And government funding can be seen in other areas of the county’s economy as well.
“Our entrepreneurial activity and the commercialization of technology transfer within our small business community also rely on funding from the federal government,” Propheter wrote in an email.
Many other county residents work for the federal government or large contractors, and many homes have two incomes that rely on federal funding, she said.
Those factors make Maryland’s economy vulnerable to budget uncertainty.
Any disruption to the normal business cycle will have some effect on the region’s economy, said Jeannette Chapman, of the Fuller Institute.
“Businesses and people like things to be predictable,” she said.
The short-term effect of any potential government shutdown from failing to agree on a federal spending bill would depend on how long it lasts and whether federal employees receive back pay after it’s over, she said.
If a shutdown is short and workers get back pay, whatever economic activity is lost would likely get shifted to the time after the shutdown ends, she said. But a longer shutdown could lead to more permanent shifts in economic behavior.
If potential shutdowns become a “normal” part of the budget process, businesses will start to make adjustments for it, Chapman said.
One advantage to the budget uncertainty is that companies that deal with the federal government might examine how they could better work with the private sector, Irani said.
“I think people are thinking about that,” he said.
Decisions at the federal level can have substantial effects in Maryland.
In March 2017, the state’s Board of Revenue Estimates revised its general fund projection for fiscal 2017 downward by $35.3 million, based largely on expected losses of income tax withholding and sales taxes related to a federal hiring freeze. The estimates have since increased slightly.
At a legislative preview breakfast on Thursday, Delegate Carol Krimm (D-District 3A) held up a chart showing that federal funds support 29.8 percent of all state spending.
“So, everything you’re hearing now that’s going wrong in Washington is critical to the state of Maryland,” said Krimm, who is a member of the House Appropriations Committee.
On top of federal budget uncertainty, the state is starting off the budget year with a $250 million budget gap.
Federal budget troubles could have other effects. Last year, the Legislature approved provisions allowing the governor to transfer money from the state’s “Catastrophic Event Account,” based on possible federal decisions.
The authorization lets the state fund Maryland Public Television and Meals on Wheels in the event of federal cuts and would fund law enforcement agencies if their federal money is cut off for refusing to participate in federal immigration laws.
Another authorization would give some funding to Maryland family planning providers, including Planned Parenthood, in case of federal cuts.
In the coming year, lawmakers may look to replace federal funding with state dollars to support Chesapeake Bay projects and low-cost children’s health insurance.
Maryland Sen. Ron Young (D-District 3) said State House committees have been meeting all summer to try to prepare for what the federal budget process brings.
“We could have a really tumultuous year depending on what happens in Washington,” Young said.