With federal sequestration all but certain to kick in Friday, business executives this week said they need a decision as soon as possible from Congress on spending cuts so they can figure out how to respond, rather than deal with continual delays.
That was their message Monday to U.S. Sen. Benjamin L. Cardin, who conducted a roundtable discussion on the effect of sequestration, the $85 billion in budget cuts that are to begin taking effect Friday. The gathering was at the Prince George’s Economic Development Corp. offices in Largo.
Maryland’s contracting companies and workforce stand to be particularly hit by the cuts, as the state has 60 federal facilities and 17 military installations, Cardin (D) of Pikesville said. Base operation funding at Maryland’s Army and Air Force installations faces $105 million in cuts. Some 140,000 federal civilian employees in Maryland would face furloughs and potential pay cuts, and students and small businesses would be among those hurt by the cuts, officials said.
But business leaders said the longer Congress forestalls such cuts into fiscal 2013, which ends Sept. 30, the less time their companies will have to make up for the resulting contract losses, which many believe are inevitable.
“You do us no favors by pushing things back unless there’s a solid way to fix this,” Timothy J. Adams, CEO of contractor Satech in Largo, said.
Congressional delays might mean contractors would have only five months instead of seven to make their own spending cuts, which could result in the loss of jobs, he said.
“This country is a surviving country. If we know what to do, we can respond. What we can’t respond to is the unknown,” said Susan Ballard Hirsch, president of Government Services Integrated Process Team in Largo.
She also chided Congress for being able to miss its own deadlines without financial consequences when such incompetence could cost a business a contract. Others said members of Congress should be forced to take a pay cut when they miss deadlines.
Cardin tried to reassure the executives that the state’s congressional delegation is united in working for a substitute for sequestration, including tax hikes for those with more than $1 million in personal income and phased-in military cuts as U.S. soldiers return from Afghanistan. He also said Congress’ best option is to deal with sequestration, the budget and the expiring debt ceiling around the same time so it does not have to keep coming back to these issues.
Andre Rogers, CEO of Enlightened in Washington, D.C., said sequestration would force him to fire workers. But he agreed with Hirsch and Adams, saying if Congress cannot figure out alternatives, it should let the cuts happen.
“The innovation within this room can figure out a way to deal with it,” Rogers said.
Cardin said stories such as Rogers’ are important to help “put a face on” the issue.
“As painful as a bad decision will be, it’s better than no decision at all,” Cardin said.
Other executives, such as Randall Echols of Advanced Powder Solutions in Mitchellville, also expressed concern over whether the government could redress situations that might arise from loan defaults as a result of canceled obligated contracts.
Government contractors are “very right” to be worried about sequestration, said House Minority Whip Steny Hoyer (D-Dist.5) of Mechanicsville during a conference call with reporters Tuesday.
“They’ll have to figure out how to keep their facilities as stable as possible,” Hoyer said, adding that many businesses might find that the government will decide to not pay for their programs, should the sequester occur.
“Contractors who are doing absolutely critical work for national security are going to be negatively affected,” he said.
Hoyer described the situation in Washington as a “willful disregard for operating government in a rational manner.”
Sequestration will have a dramatic impact on local companies, Janice Freeman, president of the African-American Chamber of Commerce of Montgomery County, told Rep. John Delaney at a gathering of mostly black business executives Monday. Many businesses in the county and state contract with the federal government or subcontract with contractors, she said.
“That’s why we have to speak up,” Freeman, who owns a small real estate services business, said during the meeting with Delaney (D-Dist. 6) of Potomac at the Universities at Shady Grove in Rockville. About 30 people attended.
“Schools need to do more to prepare students for the workforce,” she said. “We have these needs, and we especially can’t be cutting education.”
Military contractor R4 of Eatontown, N.J., which has offices in Maryland, has a number of federal contracts that could be affected, said Sterling Crockett, an executive with R4 and founder of Sterling Construction Services of Rockville.
“Fortunately, a lot of work we do is considered essential,” Crockett said of R4’s military contracts.
Sequestration will affect Maryland more than most states because it is the most dependent on federal government spending, after Alaska and Washington, D.C., Delaney said. The federal government needs to provide more incentives to create private jobs, said Delaney, the founder and chairman emeritus of commercial financing company CapitalSource of Chevy Chase, who unseated longtime Rep. Roscoe Bartlett (R) in November’s election.
“I think Maryland will respond well to the challenge,” he said, adding that the state’s strengths in education, innovation and quality of life bode well for companies’ ability to grow private jobs.