More News

A key state economic development fund was among the casualties of this year's budget ax, but officials said it could have been worse.

The Maryland Economic Development Assistance Authority and Fund, which has been used for more than $160 million in loans, grants and other aid to help companies expand or relocate to the state since forming about a decade ago, was reduced by $6 million in both this fiscal year and next year. The new fiscal year begins in July.

Legislators initially targeted the program for a $10 million cut each year. Officials with the state Department of Business and Economic Development, who refer to the program as their "workhorse" fund, lobbied hard to save part of that money, said DBED Secretary Christian S. Johansson.

"It was really an 11th-hour effort on our part," said Johansson, who was just sworn in by Gov. Martin O'Malley last week. "We didn't have much time to make our case."

He thanked legislators such as Senate President Thomas V. Mike Miller Jr. (D-Dist. 27) of Chesapeake Beach for working to restore some of the funds.

"The challenge was when I asked legislators if they knew what we were doing, I found DBED had not done a good enough job in telling them why what we are doing is very important for economic vitality for their constituents and their communities," Johansson said. "So what we have done is try to educate them on what we do."

While it's understandable that legislators would search for every penny to cut in these tough economic times, the reductions for the development fund were disappointing and shortsighted, said Donald C. Fry, president and CEO of the Greater Baltimore Committee.

"It would have been better if the legislature could have retained more money in that program," he said. "These funds are investments in the economic growth and future prosperity of our state."

In competing against states such as Virginia for projects such as the Hilton Hotels headquarters, Maryland still has tremendous assets going for it, such as its highly educated and trained work force and education system, Fry said. "When you have setbacks, hopefully you will regain those in the future," he said. "You have to emphasize the strengths you do have."

Cutting the fund will slow Maryland's progress toward recovery, said Kathleen T. Snyder, president and CEO of the Maryland Chamber of Commerce. But she was confident about Johansson's understanding of economic development.

"During tough times, it would be wiser to maintain or increase spending on programs that generate more investment and more jobs in Maryland," Snyder said. "The Maryland chamber will continue to work with [Johansson] to encourage companies to expand in Maryland."

The program's beneficiaries include telecommunications company Comcast Corp. and Rockville biotech Novavax. The latter company received a $200,000 conditional loan in 2007 when it moved its headquarters from Pennsylvania to Rockville.

Rahul Singhvi, president and CEO of Novavax, said the loan helped persuade the company to establish its headquarters in Rockville.

"I wouldn't say it was a critical part of our financing," he said. "But if nothing else, it sends a message that you're welcome."

The company increased its employment to about 100 before seeing a reduction to some 70 employees due to the economy, Singhvi said. Novavax recently formed a joint venture with Cadila Pharmaceuticals Ltd. of India to develop and market vaccines, pharmaceuticals and diagnostic products in India. Cadila is investing about $8 million over three years in the joint venture.

Reductions to stem cells, arts

The General Assembly settled on a $3 million cut for stem-cell research next fiscal year after some wanted more trimmed.

The state arts council also saw its funds reduced by $3 million.

In addition, the program that started last fall to help subsidize small employers' health insurance costs was reduced by $13 million. The program has not had as many businesses sign up as officials expected, largely due to the economy, said Nicole Stallings, chief of government relations and special projects for the Maryland Health Care Commission.

Some business owners have said the requirements are too restrictive. Legislators passed a bill that would expand eligibility, such as by allowing businesses with up to 19 employees to participate.

Because of the influx of federal economic stimulus funds, there was little resolution of the state's ongoing structural budget deficit, Snyder said. That will make the fiscal 2011 budget "extremely difficult" to deal with next year, she said.

For Johansson, the state budget process was a baptism by fire.

"Coming in at this time, in all honesty, was probably the worst time and best time to come in, because it has energized this department in making sure we really focus on educating Annapolis on the value of what we do," Johansson said. "If we don't have proactive outreach communicating our programs and initiatives, we can't be as effective as we need to be for our policy and programs."