In budget, ‘everybody’s bleeding’

Friday, Jan. 23, 2009

In budget, ‘everybody’s bleeding’

Proposed spending cuts expected to squeeze some industries more than others

As business leaders scrutinized proposed state budget cuts on Thursday, Ivan Lanier, a lobbyist for the Frederick County Chamber of Commerce, was bracing for lengthy talks right to the end of the session into April.

“It’s very early in the game,” said Lanier, of Greenwill Consulting Group in Grasonville. “Our fight here is against any proposed reduction that will have an effect on transportation projects and aid to local business and nonprofits. … Things will look a lot different as we move through the session. Everything’s certainly in play right now.”

Gov. Martin O’Malley’s budget proposal, unveiled Wednesday, closes a roughly $2 billion gap anticipated for fiscal 2010, which starts July 1, in part by suspending spending mandates that require set funding for state programs.

Through the Budget Reconciliation and Financing Act of 2009, programs such as tourism, the Agricultural and Resource-Based Industry Development Corp. and the Maryland State Arts Council would face reductions. From young farmers to biotech startups, many in the business community would feel the pinch.

The budget proposal calls for 700 layoffs throughout many agencies. The Department of Business and Economic Development’s fiscal 2010 budget, which includes federal funding, is proposed at $113.5 million, down 9.7 percent from fiscal ’09.

Biotech and other technology industries saw proposed funding increases in areas such as stem cell research, but some high-tech agencies are also tagged for cuts. While the Maryland Technology Development Corp. budget would remain at $22 million, the agency is now being asked to pitch in $1 million from its reserve funds.

“The programs that fund entrepreneurs have taken a cut in the proposed budget,” said Renée Winsky, president and executive director of Tedco. “We’ll be able to make it with our reserve funds this year. But as that pot dwindles, who knows what we’ll be able to do in 2011? Everybody’s bleeding. We’re doing what we can.”

Agriculture funds on the chopping block

The agriculture development program is facing a cut of $1.3 million. The agency helps young farmers with loans and grants. For example, in October it helped dairy farmers Eric and Holly Foster’s artisan cheese business in Easton by securing $43,000 in grants, including $11,000 from the state.

Likewise, the Maryland Soil Conservation District is set to receive $400,000 less than expected this year. With 24 districts in the state, the program helps farmers pay for environmental efforts such as animal waste management facilities. In 2008, farmers snagged $26 million in grants through the program, up from $20 million in 2007, according to the agency’s annual reports.

Executive director Lynne Hoot said that with less money in fiscal 2010, farmers who are facing a more difficult financial year will likely cut back on voluntary environmental protection efforts.

“We’re the people that help the farmers, and we’re tightening our belts a lot,” Hoot said. “The farming economy is such that with their profit margins, they can’t afford to do more. In good years, we see a lot more preservation.”

Major transportation projects still have green light

Ronald W. Wineholt, vice president of government affairs for the Maryland Chamber of Commerce, said the most important news is that O’Malley is keeping the money for projects such as the Intercounty Connector to move forward.

When Wineholt first saw the proposal, he put out a quick analysis on the Maryland Chamber of Commerce’s blog as a “warning” of what was coming. Later, when he saw the full plan, he noted some of the proposed cuts he feared were absent, such as money for the ICC, which may be funded with a bond instead of general fund cash.

Wineholt was also concerned about funding for a drinking and driving program and for education. Instead, the funding sources were amended and actually increased.

“It’s a lot to chew on and we’re still sifting through it,” Wineholt said. “We may have more to say by next week after we’ve had a chance to evaluate it. The level of the budget appears appropriate in light of the economic circumstances we’re in. We just want to make sure there are no surprises.”

Kathleen Snyder, president and CEO of the Maryland chamber, said cuts should be based on the impact to business investment or private-sector jobs.

“There’s going to be pain for everyone,” Snyder said. “We want to make sure Maryland has the ability to come out of the recession faster than other states.”

Carville B. Collins, a partner with lobbyists DLA Piper of Baltimore, said some of the cuts may make Maryland seem a less attractive place to do business. He cautioned the cuts could reduce services businesses rely on.

“A year ago, we had $1.5 billion in tax increases enacted and hoped and thought it would fix the problem going into this session,” said M.H. Jim Estepp, president and CEO of the Greater Prince George’s Business Roundtable. “But that was before the country went into a recession. It’s important to not make cuts to programs that improve the quality of life or generate revenue.”

Booming tourism industry may get $1 million setback

While many municipal tourism bureaus rely heavily on local funds, portions of their budgets anticipate state contributions, which are proposed to drop by $1.1 million.

With roughly 8 million people visiting 193 restaurants and 10,000 hotel rooms each year, Ocean City Department of Tourism officials think their aggressive $3.2 million advertising campaign has been working. Their television ads, reaching as far as New York, are funded in part by a roughly $190,000 grant from the state tourism bureau that CEO Donna Abbott wants to retain.

“Our advertising budget is still pretty small compared to our competitors,” Abbott said. “When it’s a tough economy, the thing you don’t want to do is pull back in advertising. Tourism is really our only industry in Ocean City.”

In other Maryland hot spots, Georg Jean Zimmerman, president of the Kent County Chamber of Commerce, said tourism is one of her area’s top three revenue generators and that any cuts to tourism would hurt the Eastern Shore. Blaine Lessard, co-owner of the Southern Maryland Business Center in Waldorf, said the same regarding Southern Maryland’s burgeoning tourism.

With tourism in full swing last year, Baltimore opened its 757-room Hilton Convention Center in August and expects five more hotel openings in 2009, according to the Baltimore Area Convention and Visitors Association. The economic impact of the 2008 hotel bookings, which exceeded expectations, is estimated at $422 million.

“I understand the difficult times we are in, but cutting tourism dollars that provide a return on investment that is 10 to 15 times greater than every dollar spent is hard to agree with,” said Phil Coffey, senior vice president and general manager at Gaylord National Resort and Convention Center at National Harbor in Prince George’s County.

“Maryland’s tourism budget already falls below the national average spent by other states, and proper funding is critical to sustain our current levels of tourism,” Coffey said. “This sector creates thousands of jobs and a tremendous amount of tax revenue. For instance, in just the first six months of operating our hotel, we’ve generated more than $9.7 million in tax revenue that goes directly to benefit the citizens of Prince George’s County and the state of Maryland.”

Nonprofits still hustle to survive downturn

In the nonprofit sector, Glen O’Gilvie, CEO of the Center for Nonprofit Advancement in Washington, D.C., is trying to reach out to the organizations that may be hit by the $6 million in cuts to the Maryland State Arts Council.

The center, which serves more than 800 nonprofits in the region, is asking those organizations to consolidate their financial management and bookkeeping operations to reduce expenses. Joint human resources operations would then operate out of the center.

O’Gilvie said the center also supports government leaders continuing to provide safety net services such as shelters and rehabilitation services in this lean time.

“Nonprofits have to be prepared to do more with even less,” he said.

Proposed Budget cuts, Fiscal 2010

-Tourism Development Board: $1.1 million

-Maryland State Arts Council: $6 million

-Maryland Agriculture and Resource Based Industry Development Corp.:

$1.25 million

-Soil Conservation Districts: $400,000