Maryland’s economy is facing potential turbulence due to federal job reductions and spending cuts, according to a recent Moody’s Ratings report. Senate President Bill Ferguson (D-Baltimore) cautioned that the state must prepare for what he termed a “Maryland recession,” given its heavy reliance on federal employment and funding. “This will be acutely felt by the state of Maryland, and we have to be honest about how hard this is going to be,” Ferguson stated.
The Moody’s report highlights three primary concerns: Maryland’s dependence on federal employment, existing budget deficits, and concentrated federal grant funding. With approximately 160,000 federal employees in the state and an additional 250,000 Maryland residents working in Washington, D.C., job cuts could have a disproportionate impact on local economies, particularly in counties such as Charles, Montgomery, Prince George’s, and St. Mary’s. The report also notes that Maryland’s share of personal income from federal employment is significantly above the national median, making any reductions in these jobs a potential economic blow.
While Democratic leaders emphasize the immediate challenges of federal downsizing, some Republicans argue that the issue reflects long-standing economic policies. Senate Minority Leader Stephen S. Hershey Jr. (R-Upper Shore) noted that Maryland has been overly dependent on the federal government for decades. “Economists have been warning us for more than two decades that Maryland’s economy was too reliant on the federal government,” Hershey said, advocating for policies that encourage private-sector growth.
Compounding these economic concerns, Maryland is also contending with a projected $3 billion budget deficit for fiscal 2026. Lawmakers are exploring potential solutions, including a proposed 2.5% sales tax on certain business-to-business services, which has met resistance from the business community. As policymakers work to navigate these economic challenges, the debate continues over how best to balance the state’s fiscal stability with its reliance on federal employment and funding.
