If Congress allows the country fall over the “fiscal cliff” in January, Maryland government would take a relatively modest direct hit, but the impact could be more dire for private-sector jobs and the tax revenue they generate for the state.
That’s the assessment of a new memo prepared by the administration of Gov. Martin O’Malley (D) that offers a preliminary take on what will happen if Congress does not act to prevent deep, across-the-board spending cuts set to go into effect Jan. 2.
The memo, a copy of which was obtained by The Washington Post, says the federal “sequestration” would reduce grant funding to state and local governments in Maryland by more than $100 million, with education and social services programs among those seeing reductions.
The memo prepared by state budget officials notes that the figure is “relatively modest” compared to the $9.3 billion in federal funding contained in the state’s current fiscal year budget.
Many of the largest federal grant programs, including several welfare and most highway funding, are exempt from the cuts, the memo says.
The memo goes on to warn, however, that Maryland’s economy is “especially vulnerable to the retrenchment of federal spending” because 5.6 percent of Maryland jobs are federal, compared to an average of 2.2 percent nationally. Many additional Maryland jobs in the defense and other industries exist because of the federal presence in the region.
The state’s Board of Revenue Estimates has projected that the federal sequestration could reduce Maryland’s wage and salary base by $2.5 billion and its employment by 12,600 jobs. That would translate into a loss in tax revenue to the state of about $200 million, the O’Malley administration memo says.
The memo also notes that a report by the Center for Regional Analysis at George Mason University suggests that direct, indirect and induced job losses could be much higher than predicted by state analysts — approaching 100,000.
“Job losses of this magnitude would send Maryland into a recession,” the memo says.