Green Bank Academy - Creating & Managing a Green Bank
Hagerstown breakfast discussion 12.5.12 for public
1. The “Fiscal Cliff” – Impacts on Western Maryland
Working Together: The Path Forward
December 5, 2012
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2. Summary
• Maryland - The Products of our Partnership
• Our “Skin in the Game”
• Urgent Need for Fiscal Order
• Elements of the “Fiscal Cliff”
• Downsides to Alternatives to the “Fiscal Cliff”
• Helpful Strategy and Advocacy
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3. Where We Are Today…
Creating Jobs is Our #1 Priority
30,300 new jobs in 2011
Unemployment rate driven down to lowest level in three years
Expanding Skills & Opportunity
#1 Best Public Schools in America in 2011 – 4th Year in a Row
A Safer Maryland for Families
Lowest Crime Level Since 1975
Smart, Green and Growing
Achieved 2-Year Milestone Targets for Reducing Pollutants into
the Chesapeake Bay
A Healthier Maryland
Expanded Health Care to 309,000 Previously Uninsured
Marylanders Since 2007
“…Progress on one of these fronts requires progress on all....”
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4. Making Government Work
Fiscal Responsibility
Meeting Spending Affordability Committee Guidelines for 6 years
A balanced approach to budgeting that includes $7.5 billion in cuts
(including proposed FY2013 budget)
An improved fiscal climate that led to higher fund balances at the
end of FY2011
A Triple A bond rating certified by all three rating agencies
Maryland is one of only 8 states; ratings re-affirmed in 2012
"The rating reflects what we view as the state's diverse, broad-based economy,
which has historically outperformed the national economy...The stable outlook
reflects what we view as Maryland's economic strength and historically strong
financial and debt management policies. We believe the state has proactively
responded to recent structural budget imbalance and we would expect it to
continue to focus on achieving balance"
- Standard and Poor’s, upon reaffirming MD’s AAA bond rating, February 2012
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7. INNOVATION:
ASSETS
#1 in Federal R&D Obligations (per capita)
#1 concentration of PHD Scientists and Engineers
#2 in Technology and Science
#2 U.S. Chamber of Commerce Innovation Ranking
#3 Kauffman New Economy Index
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8. LARGEST PROCUREMENT CONTRACT
RECIPIENTS, 2010
Recipient of Contract(s) Total, All Contracts
LOCKHEED MARTIN CORPORATION $1,630,871,661
JOHNS HOPKINS UNIVERSITY $954,432,026
SAIC, INC. $916,726,538
NORTHROP GRUMMAN CORPORATION $817,647,521
CLARK ENTERPRISES, INC. $577,411,784
TEXTRON INC. $568,626,191
BAE SYSTEMS PLC $558,452,434
INTERNATIONAL BUSINESS MACHINES $518,766,628
COMPUTER SCIENCES CORPORATION $502,516,796
HONEYWELL INTERNATIONAL INC. $427,408,907
Source: USASpending.gov
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9. JOBS CREATED BY PROCUREMENT
CONTRACT SPENDING, 2010
Direct Indirect Induced Total
Non-Defense 98,212 30,315 51,692 180,219
Defense 73,086 28,095 33,913 135,074
Total 171,298 58,410 85,605 315,293
The 315,293 jobs created or supported by Federal procurement contract
spending in Maryland in 2010 represented 9.4 percent of all jobs in that year.
Source: IMPLAN Analysis of USASpending.gov data by DBED
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10. Employment Impacts of Federal Spending in
Maryland, 2010
Spending Type Resident Direct Indirect Induced Total Jobs
Employees Jobs Jobs Jobs Created
MD Federal
218,416 - - 218,416
Government Jobs
Fed-Employed
314,296 - - 149,202 149,202
MD Residents
Contractor Jobs 171,298 58,410 85,605 315,293
Grant-Funded
79,648 18,307 40,177 138,131
Jobs
Total Jobs 314,296 469,362 76,717 274,984 821,042
Note: To avoid double-counting, resident employees are not counted in the jobs total.
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11. CONCLUSIONS
• Federal spending was responsible for an estimated
821,000 jobs in Maryland in 2010.
– These represented 24% of all jobs
– But note that numbers are estimates based on a model
• By all measures, Maryland is a major R&D center
for the Federal government.
• Maryland ranks 4th in total federal procurement
expenditures, although it ranks 19th in population.
– Federal contracts are an important source of jobs in
MD (almost 10% in 2010)
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12. Federal Highly Skilled Federal Research &
Assets Workforce Procurement Development
17 286,422
$26B $1.57B
Federal workers
Military
$24.2B Procurement $$ Federal R&D Grants
installations
Wages
77 171,994 4th $9.7M
Non-military Employed in MD
installations $22.6B Total Procurement SBIR/STTR Funding
State GDP [7.6%]
60 140,417 180,219 21,455
Federal Labs Jobs supported by Jobs created by Jobs created R&D
MD-based federal procurement $$ Grant Spending
workers
Source: Maryland Department of Business and Economic Development
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16. Under Current Policy Projections, Debt Climbs to
Nearly 200% of GDP in the Next 25 Years
1987-2011 2012 2022 2037
Average
Spending
Medicare 2.5 3.7 4.5 6.7
Medicaid 1.2 1.7 3.0 3.7
Social Security 4.4 5.0 5.4 6.2
Discretionary & Other Mandatory Spending 10.3 11.6 7.8 9.6
Nondefense (3.7) (4.1) (2.8) *
Defense (4.2) (4.3) (3.2) *
Other Mandatory (2.4) (3.2) (1.8) *
Interest 2.4 1.4 3.7 9.5
Total Spending 20.8 23.4 24.3 35.7
Revenues 17.9 15.7 18.5 18.5
Deficits -2.9 -7.7 -5.9 -17.2
Debt 44 73 93 199
Source: CBO. Other Mandatory consists of: federal civilian and military retirement payments; unemployment compensation; programs for the poor;
veterans’ benefits; and other spending. CBO does not separately forecast Nondefense, Defense, and Other Mandatory for 2037.
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17. Unprecedented Uncertainty:
The Elements of the Fiscal Cliff
• Sequester
• Expiration of tax cuts
• Expiration of payroll tax holiday
• Expiration of extended unemployment benefits
• AMT increases
• “Doc Fix”
• Continuing Resolution (CR)
• TANF expiration
• Debt Limit
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18. Budget Control Act and Cuts
• Round 1 of BCA is already in effect – to
reduce spending by $900 billion over 10
years.
• If sequester hits, Round 2 would take effect -
$109 billion in defense and non-defense
spending of about $55 billion from each.
• About 18% of federal grants to states subject
to across-the-board cuts in FY 2013 if
sequester isn’t avoided.
Source: Pew Center on the States, “The Impact of the Fiscal Cliff on States (Nov. 2012) 18
19. Fiscal Cliff Would Hit Northeast & Midwest Hardest
(Total employment, % change from baseline forecast, 2014)
-1.4 to -1.9
-1.9 to -2.1
-2.1 to -2.6
U.S.= -2%
Sources: Census Bureau, Moody’s Analytics 19
21. Downside Risks of Alternatives to the
Fiscal Cliff
• The current rate of growth in spending is likely unsustainable
for federal & state governments & will be cut in any grand
budget agreement.
• There is broad agreement of the need for tax reform that lowers
rates to make us more competitive & reduces tax expenditures
but any review of tax expenditures will involve those
provisions that are most beneficial to states.
• There are likely to be further cuts to the discretionary grant
programs on which states depend as the savings from limiting
entitlement growth & reforming the tax system are unlikely to
be big enough to hit debt targets.
• Infrastructure spending by the federal government will
decline, especially transportation.
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22. Top 10 Tax Expenditures
(2013, in billions of dollars)
Rank Tax Expenditure Cost
1 Exclusion of employer payments for health insurance 181
2 Provisions that benefit states 105
Deductibility of state & local income, sales & property taxes (69)
Exclusion of interest on public purpose state & local bonds (36)
3 Deductibility of mortgage interest on owner occupied homes 101
4 Treatment of 401(k)-type retirement plans 73
5 Treatment of capital gains 62
6 Treatment of employer pension plans 52
7 Exclusion of imputed rental income 51
8 Deductibility of charitable contributions 49
9 Deferral of income from controlled foreign corporations 42
10 Accelerated depreciation of machinery & equipment 33
Source: Fiscal Year 2013 Budget of the U.S. Government, Analytical Perspectives, Table 17-3.
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23. Keeping $200B in the Economy
• Critically important for Congress to extend middle
class tax cuts for 98 percent of Americans and 97
percent of small businesses.
• A typical middle class family of four could see its
taxes rise by $2,200.
• We need as much certainty in the economy as
possible to maintain continuous activity – which
translates to continued job creation in Western
Maryland.
• If Congress acts quickly, we can prevent a hit to
consumer spending which is roughly 70% of the U.S.
economy.
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25. Other Contributors to
Downside Risks
• The current CR & the TANF
authorization expire March 27
• Next year the following programs will
need to be reauthorized:
– Elementary & Secondary Education Act
– Workforce Investment Act
– Defense programs
– Farm programs
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26. Actions to Avoid or Mitigate
Downside Risks
• Track & influence proposals & legislation that avoid the
fiscal cliff
– See, for example, Framework for a Grand Bargain to Avoid
the Fiscal Cliff
• Using must-pass legislation as a vehicle for priorities that
will generate state revenue, such as Marketplace Fairness
• Establishing a Tax Reform Task Force (Governors)
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27. Framework for a Grand Bargain to Avoid the
Fiscal Cliff
• Require new Congress to produce a debt reduction package that
would reduce federal debt by $4 trillion over a decade.
• Turn off the fiscal cliff & impose a legislative “backstop” that
would automatically become law if the new Congress failed to
pass the package.
• Enact a 2013 down payment of tax & spending changes in the
lame duck to offset some of the fiscal cliff & as part of the larger
package.
• Deficit reduction should not further reduce funding for “non-
defense discretionary programs,” which is already slated for deep
cuts in the years ahead in order to meet the austere “caps” (or
ceilings on the total amount of funding) the Budget Control Act
placed on funding for these programs.
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