By Erin Cox, The Baltimore Sun
6:46 PM EDT, September 27, 2013
Maryland lost about 21,000 jobs as a result of the automatic federal spending cuts known as the sequester, state officials say, and they expect another 4,000 federal positions to evaporate over the next two years.
New state estimates peg the job losses at a higher level than had been anticipated, and put the total wages lost by Maryland workers this year at $1.6 billion.
"We assumed that sequestration would be avoided," said Andrew M. Schaufele, director of Maryland's Bureau of Revenue Estimates. "Our best-case scenario is gone."
As Congress remains deadlocked over the federal budget, state officials say the automatic spending cuts that took effect in March continue to trickle through Maryland's economy. By the time all the cuts take effect next year, Schaufele said, Maryland will lose $2.1 billion.
Some put the figure higher.
Much of the loss cited by the state represents anticipated hiring that did not materialize.
Stephen Fuller, director of George Mason University's Center for Regional Analysis, said most estimates don't account for federal contractors who lose government work but are able to redeploy employees to private clients. And not all industries report job losses connected to federal spending.
Fuller said employment numbers in the District of Columbia and its Maryland suburbs show contractions — the loss of 7,400 computer system design jobs, for example — that don't appear to be explained by anything other than federal cuts.
The Maryland suburbs, the district and Northern Virginia lost 26,500 jobs in July, according to his analysis. Though the Maryland losses were lower than those in the district and Virginia, he said, "the entire region's economy has been dead in the water."
"That just doesn't happen unless some of the federal contracts weren't let for next year," Fuller said. "It isn't normal, so who do you blame?"
Maryland Comptroller Peter Franchot said about a third of the state's economic activity is tied to the federal government, and congressional debate about spending has created instability out of a relationship that once gave Maryland an edge.
"We are heavily reliant upon Washington's direct, indirect and induced economic benefits," Franchot said. "With a battle looming over the nation's debt limit and the threat of a federal government shutdown in the weeks ahead, what had once been among Maryland's greatest assets for economic stability has become a severe liability."
Federal employment in Maryland peaked in September 2011, according to federal Labor Bureau statistics used by state officials.
"That's when they started discussing" sequestration, said Schaufele, of the state Bureau of Revenue Estimates. "The private sector began to react."
State officials said many of the lost jobs represent expansions among defense contractors and the federal government that would otherwise have taken place.
The next phase, however, will be federal positions permanently lost as sequester cuts seep throughout government agencies.
Schaufele and unions for federal workers both expect the bulk of those to come from the Department of Defense, which has shouldered much of the budget cuts.
"We're not talking furloughs any more," said Joseph Flynn, national vice president for District 4 of the American Federation of Government Employees. "We're talking cuts, job loss."
Fuller, the George Mason economist, said there is a bright spot for Maryland's economy relative to the other states dealing with federal cuts: The lingering impact of the sequester will be less than other parts of the country because Maryland's federal sectors — the Social Security headquarters in Baltimore, the National Security Agency at Fort Meade and the cybersecurity industries — are also expected to grow.
"Maryland is going to be in much better shape than Virginia, or even places like California where they had a lot of manufacturing," Fuller said.
The bulk of the cuts will take effect by the first quarter of 2014, Fuller said.
"And then," he said, "it's going to be pretty much history."
Estimated sequester impacts in Maryland
21,000 jobs already lost
4,000 federal jobs expected to be cut by 2015
$1.6 billion in wages lost by Maryland workers
$2.1 billion total economic impact from sequester
Source: Maryland Bureau of Revenue Estimates
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