Parris N. Glendening Gov. Parris N. Glendening and Lt. Gov. Kathleen Kennedy Townsend attend a campaign event. (By Bill O'Leary – The Washington Post) Post Stories • Series: Glendening's Record • Glendening Calls on Party • Proving Power of Incumbency

By Peter Behr
and Donald P. Baker
Washington Post Staff Writers
Wednesday, October 14, 1998; Page B1

Gov. Parris N. Glendening (D) and GOP challenger Ellen R. Sauerbrey portray the Maryland economy in such starkly different terms that they might be describing two different places.

Glendening's Maryland is a rapidly improving state that has finally escaped the shadow of federal defense cuts and corporate downsizing and last year recorded its biggest employment gains in a decade. Sauerbrey, by contrast, portrays Maryland as a chronic underachiever that can't keep up with its much stronger neighbor.

"For some reason, Virginia is cleaning our clock," Sauerbrey told a Maryland Chamber of Commerce conference in Ocean City on Monday night.

Although both assessments have some nuggets of fact to back them up, they have produced sharply divergent prescriptions of what the state needs to do to burnish its business climate and attract new jobs: Sauerbrey says that stronger economic growth requires more tax relief, while Glendening has emphasized investing surplus state funds on schools, transportation, worker training and business recruitment.

In a speech today in Baltimore, Glendening will propose a major expansion of the state's recruiting and job training programs, according to sources who have been briefed on his plans.

Ellen R. Sauerbrey Ex-president George Bush backed up Sauerbrey at a recent fund-raiser. (Rick Bowmer – The Post) Post Stories • For Sauerbrey, Past vs. Present • No Drought for the Rainmaker • Message, Money Key in Race

The state's annual $20 million Sunny Day business loan and grant fund, which Glendening has used primarily to stop defections by existing Maryland employers, would be expanded to $30 million and be targeted at large out-of-state tech companies and other firms with high growth potential. Glendening also will propose the creation of a new, $50 million revolving loan fund to assist businesses, the sources said.

Such talk may be too late for Glendening to halt an erosion of his support among corporate leaders, angered by decisions they say send out a bad message to business. These include his extension of collective bargaining rights to state workers and his withdrawal of support for the intercounty connector, a road business leaders want built through Montgomery and Prince George's counties.

Sauerbrey has exploited this discontent by issuing a strong appeal to business executives based on tax and regulatory relief. She said Maryland must be removed from a list of states whose relatively high tax burdens scare away outside companies seeking new places to expand; she holds out New Jersey and Michigan as examples of states that boomed when their governors cut taxes – an analysis some independent economists challenge.

A longtime advocate of tax relief, she has proposed to increase a 10 percent personal income tax cut enacted under Glendening by an additional 14 percent, about half of it earmarked for senior citizens. And she has called for a review of environmental and workplace regulations, saying that Maryland officials need to help businesses meet environmental and workplace rules, not just punish them when they fail to comply.

Sauerbrey found a receptive audience of state business leaders gathering this week for the annual Maryland Chamber of Commerce legislative conference in Ocean City. In fact, many of the chamber's top priorities for the coming year – including a 15 percent income tax cut – appear to come straight from the Sauerbrey playbook. And several people attending the conference agreed with Sauerbrey's view that Maryland's regulatory climate is overly adversarial.

"It's a style of enforcement," said Richard Story of the Howard County Department of Economic Development. Whereas regulators should have "the common goal" of showing companies how to come into compliance, Story said, too many of them merely warn offenders that "you are in trouble" with no regard of "how to fix it."

Sauerbrey's message, however, is at odds with a recent survey by the Greater Montgomery County Chamber of Commerce, in which only 12 percent of the respondents cited taxes as a cause of an increased cost of doing business in the county. The top two factors, they said, were rent and payroll.

Indeed, some analysts question whether Sauerbrey can push her agenda beyond the business leadership, in large measure because Maryland's economy is enjoying an economic rebound – with lower unemployment, strong housing sales and, at least until recently, its strongest job growth in a decade. Although Glendening's policies have played a limited part in the state's gains, economists said, it's hard for Sauerbrey to make the case that the state is suffering.

"By many measures, Maryland's economy is doing as well as it has in well over a decade," said Mark Zandi, chief economist of Regional Financial Associates in West Chester, Pa.

Glendening said his administration's efforts to cut taxes and boost spending on economic development have paid off. "The average worker knows things aren't terrible," he said. "The economic improvement has been significant. All you have to do is look at the bottom line."

A close look at Maryland's performance reveals some support for both Glendening and Sauerbrey.

Glendening points to 1997, when Maryland ranked 16th in total job growth out of 50 states and the District. Sauerbrey counters that last year may have been the exception.

Virginia's economy has advanced much faster than Maryland's. From 1992 to 1997, Maryland ranked 42nd in expanding its full-time, salaried work force; Virginia was 25th, and suburban Northern Virginia was one of the nation's dynamos.

State employment figures also indicate that Maryland's economy has lost some momentum this year, as employers struggle to find skilled workers.

Likewise, the two candidates have mined different tax statistics to make their campaign arguments.

Sauerbrey points out that the state imposes the second highest state and local income taxes on individuals in the nation, averaging $1,019 a person in 1995, according to the latest Census Bureau data. Only eight states have a higher per capita state and local tax burden, counting both individual and business taxes.

Glendening responds that when the state's taxes are figured as a percentage of taxpayers' incomes – measuring Marylanders' ability to pay taxes – then Maryland's standing improves markedly to 18th place. Only 17 states impose a lower tax burden figured that way.

Still, while Maryland's economy holds up, Sauerbrey may have the harder case to make that things could be better, according to analysts. Even with the stock market's tremors and an expanding economic crisis abroad, "Marylanders still feel relatively positive about the economy," said Keith Haller, president of Potomac Survey Research in Bethesda, who regularly polls Maryland residents for media organizations.

There has been a drop in confidence in Maryland in the last few months, Haller said, and the shift mirrors national surveys.

In the most recent state poll two weeks ago, 23 percent of residents responding said they thought the Maryland economy was getting stronger, down from 33 percent in July. But only 16 percent in the recent poll said the economy seems to be weakening, Haller said.

To overcome that perception, analysts said, Sauerbrey needs to convince Marylanders that they would have more job opportunities and better wages if the state could generate more jobs through tax cuts and changes in business regulation that would make Maryland more inviting.

As different as the Sauerbrey and Glendening strategies are, they are both vulnerable to powerful changes far outside Maryland's borders, economic analysts agree.

If the U.S. economy is headed into a slowdown, as it appears to most economists, it will drag Maryland with it, Zandi said. "Job creation, income growth, home sales, house price growth, by every measure, conditions will be much weaker a year from now than they are today," Zandi predicted.

In that case, Maryland could not make additional tax cuts, as Sauerbrey wants, without cutting services – including spending on transportation and education, which are as important as lower taxes to businesses, said Richard P. Clinch, an economist with the University of Baltimore.

A weaker economy, while trumping a Sauerbrey tax cut, would also undercut Glendening's new goal of recruiting major outside businesses to Maryland: They are more likely to be cutting back than expanding.

The trends at work on the Maryland economy are very broad, Zandi said: technological change, globalization, deregulation – things state government has very little control over, particularly year by year. "We can't blame [state] government for what's going to happen," he added.