Maryland Comptroller Peter Franchot says Maryland has become too dependent on the federal government and must focus more on strengthening its private sector as the state faces a possible credit downgrade over the national budget dispute. “We have become uniquely tied at the hip or joined at the hip to the federal government,” Franchot said at a Board of Public Works meeting Wednesday.
He said the budget negotiations should serve as a “wake-up call” for Maryland lawmakers “to rededicate ourselves to a business climate that inspires, promotes and rewards private-sector investment in Maryland.”
“It is certainly a sobering illustration that what happens in Washington, D.C., frankly has a huge impact not just on states, but particularly in Maryland,” Franchot said. “We as a state simply can’t allow ourselves to become complacent and allow the federal government to become the economic engine of first and last resort in Maryland.”
Maryland’s proximity to Washington has provided the state with a “safety net” through the recession, he noted. The state ranks second in the nation for per capita federal spending on procurement and fourth for per capita federal spending on salaries and wages, according to the Labor Department.
But the spigot has run dry, with Congress sparring over whether to raise its maxed-out borrowing capacity — and slash funding that helps states pay for Medicaid, highway construction and other programs — or allow the country to default on its debt. Either outcome would jar Maryland’s economy, and the credit rating agencies have taken note, the state’s chief budget analyst told a Senate panel Tuesday.
Maryland’s Aaa credit rating is at risk for a downgrade from Moody’s Investors Service, depending on the outcome of the federal debt negotiations.
The agency plans to reassess Maryland’s borrowing capacity by Aug. 12, State Treasurer Nancy Kopp said Wednesday.
In the meantime, the state has postponed plans to refinance roughly $200 million in old debt until the markets “firm up,” Kopp said.
When the state planned the refinancing, “We all thought Congress was moving along strongly … and would act like they have in the past, which is like adults,” she said.
