Donald Fry: Are lawmakers closing the ‘disconnect’ over business climate?

By Donald C. Fry

Improving Maryland’s business climate is constantly on the minds of corporate leaders and economic developers. What was promising about the 2010 election cycle was that the topic was also on the minds of recession-wary candidates for office, virtually all of whom pledged to make job creation and economic growth a top priority if elected.

So, as many of those candidates head home from their first post-election session of the Maryland General Assembly, how did they perform collectively to strengthen job creation and our state’s economic competitiveness?

Prompted by conflicting published surveys in 2010 that ranked Maryland anywhere between 3rd and 45th in the nation for business climate, corporate leaders and economic developers in our state cited what they saw as a “disconnect” between state government leaders and the business community over the nature of Maryland’s business climate.

Many elected officials and government bureaucrats have traditionally contended that our state’s significant strengths in technology, education, workforce, and quality of life make Maryland attractive enough, as is, for existing businesses to expand here and for business operations elsewhere to locate here.

Business leaders and economic development experts, however, contend that there is much room for Maryland to improve and be more competitive as a business location.

Did lawmakers heed business advocates’ calls to make job creation and economic growth their Number One policy priority now and in the foreseeable future?

One way to divine the answer is gauge how actions by the 2011 General Assembly stack up against the eight core pillars for economic growth compiled by the Greater Baltimore Committee last year during a 10-month series of focus groups, discussions, and feedback sessions.

Participants included former secretaries of the Maryland Department of Business and Economic Development, more than 50 Maryland business leaders, and state-wide economic development directors.

Briefly, the eight core pillars for economic growth are:

• Government leadership that unites with business as a partner;
• A workforce that is highly educated and meets Maryland’s business needs;
• Regulatory policies that are streamlined, stable and predictable;
• A tax structure that is fair and competitive;
• Competitive costs of doing business;
• Superior transportation infrastructure with a dedicated and reliable funding source;
• Strategic and effective state investments in business growth; and
• A business marketing strategy that is aggressive, coordinated, long-term and well-funded.

Here are some early observations on the 2011 session and the core pillars.

State investment in economic growth. Maryland lawmakers, who normally are highly skeptical of tax credits, showed signs that they are beginning to grasp that state investment is an essential strategic element for achieving a competitive business environment. It took them until the last day of the session, but they managed to pass an amended version of Governor O’Malley’s Invest Maryland legislation to leverage tax credits into $75 million in investment funding from the private sector to create jobs and promote development of the state’s bioscience and technology industries.

Ironically, while embracing this major tax-credit legislation, the House also passed a bill that would have destabilized the state’s entire menu of tax credits. Thankfully, the bill died in a Senate committee. Contradictions aside, let’s hope that Maryland’s lawmakers are ready to embrace, not diminish, what business and economic development experts already know – effective use of tax credits is among the most successful tools for nurturing business growth.

Tax structure. Lawmakers’ proposals to institute policies to increase corporate taxes and personal income taxes on high-income earners never left their respective committees this session. Maryland legislators must continue to resist tendencies to target corporations or particular business segments as the sources of first resort for new revenue.

Treating business as a partner. Lawmakers continued the state’s procurement program for minority business participation and created a task force for cybersecurity innovation. However, a bill to develop a small business growth initiative died in committee. On balance, however, lawmakers appear eager to embrace new, collaborative strategies for economic growth.

Regulatory policies. A bill was moving through the House to expedite permitting processes and remove barriers to construction activity. Action on it, however, was deferred, although it is possible that an Executive Order implementing the expedited processes will be issued to accomplish the intent of the legislation. Nevertheless, lawmakers’ recognition of the need for regulatory processes that are mindful of businesses’ sense of urgency is welcomed by the private sector.

Transportation infrastructure. While sending a number of positive signals relating to business climate on other issues, legislative leaders chose not to move legislation supported by a statewide coalition of business advocates that would have generated more than $500 million in additional annual revenue to the state’s depleted Transportation Trust Fund and would have protected the fund from future executive and legislative raids.

Most lawmakers say they agree that Maryland must address its more than $40 billion shortfall in funding for highway, transit, port and airport projects that are planned but not budgeted for construction. But a majority cannot, as yet, be persuaded to vote for a measure to raise the magnitude of funding that is needed to rectify two decades of legislative indifference to a seriously eroding transportation trust fund.

On this issue – an unfulfilled critical core pillar for economic growth – one thing is abundantly clear. Strong, active leadership from the governor is required to resolve the state’s transportation funding crisis.

The business-legislative “disconnect” over business climate hasn’t evaporated. But noteworthy encouragement emerged from the General Assembly this session. The changing of a culture is never easy. In a legislative body, it requires a series of incremental steps and successes. Despite an improving economy and signals that our message is getting through, it is incumbent on the business community to urge elected officials not to lose sight of the election-year mantra they promised to pursue — jobs, jobs, jobs.

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