WASHINGTON – The $45.1 billion the federal government spent in Maryland in fiscal 2000 translated to $8,513 per person in the state, the third-highest level of per capita federal spending in the nation.
Maryland also had the fifth-highest defense spending overall in the nation, at $8.6 billion, according to the Census Bureau’s annual Consolidated Federal Funds Report released this week.
But while overall spending was up, both nationally and in the state, defense spending in Maryland dropped, from $8.8 billion in 1999. Analysts said they were not overly concerned about the drop, noting that the state has enough private development and research business to help it weather a storm.
“This doesn’t portend anything bad,” said Mike Hayes, director of military and federal facilities for the Department of Business and Economic Development.
The census report compiles federal spending across the country in just about every category, from federal workers’ salaries to Medicare payments and from road-building contracts to food stamp payments. It does not include foreign aid or payments on the national debt.
Maryland trailed only Alaska and Virginia, which got $9,456 and $8,859 respectively per capita.
“This has an enormous impact on our economy,” said Anirban Basu, director of applied economics at RESI, an economic studies institute at Towson University. “The federal spending in Maryland is the single most important reason for the high incomes in this state.”
Total spending in Maryland increased from less than $42 billion in fiscal 1999 to $45 billion in 2000. While military spending decreased, retirement and disability benefits were up from $10.8 billion to $11.4 billion and non-military salaries and wages rose from $5.4 billion to $6.5 billion.
The shift away from military spending could mean a lot to counties such as St. Mary’s and Anne Arundel, home to the Patuxent River Naval Air Station and the U.S. Naval Academy, respectively. Overall federal spending was stagnant in Anne Arundel over the last year, while St. Mary’s saw spending drop 18 percent, the only county in the state to see a decline.
Defense spending was still strong enough to help St. Mary’s County maintain the highest federal spending per capita in the state, at $20,308.34 per person, but the gap with No. 2 Baltimore City narrowed sharply.
Hayes said the decreases in funding coincided with the end of a number of large-scale research projects at the Patuxent River station.
“It will always be the case that the kind of research and development they do down there will be cyclical,” he said.
Meanwhile, Baltimore City and Montgomery and Prince George’s counties, all of which are more dependent on biotechnology and medical research, received some of the largest gains in spending. Montgomery County alone got $1.1 billion more, to $10.4 billion.
“Although we don’t want to rely too much on the federal government, it’s statistics like that that we like to see,” said Henry Bernstein, assistant director of the Montgomery County Department of Economic Development.
He said the increased money is not only good for federal agencies such as the National Institutes of Health, but also for private business in the county.
“The spin-off multiplier effect of this kind of investment is almost incalculable,” Bernstein said.
Basu agreed that federal agencies have fostered an environment that has helped stimulate private economic growth in Maryland.
“This concentration of human capital is the key to economic growth,” he said. “We’re seeing the crossover from institutional research to private entrepreneurship. Increasingly, federal researchers have embarked on their own into the private sector.”
Basu also said the shift from defense spending to health research could be a positive development for the state.
“There are some risks to relying too much on defense spending in the long run,” Basu said.
But he said the presence of research-oriented agencies such as the NIH, the Food and Drug Administration and the National Aeronautics and Space Administration have allowed Maryland to “attract the best and brightest from all over the world.”
“That’s the reason Montgomery County is most impacted,” he said. “NIH is the most important source of government dollars in the state of Maryland.”
Hayes noted that while other states with high defense spending mostly contain military bases, Maryland is unusual because its bases are used predominantly for testing and research and development. He said that’s why there is no reason to be worried about decreases in military spending.
“I think Maryland is in a very good position while the Defense Department goes through its present transition,” Hayes said.