Loan is tied to funding dispute
Money for Northrop Grumman held up as Dems, governor fight
General Assembly leaders have no plans to schedule a vote on a $20 million loan the state promised Northrop Grumman, jeopardizing a plan to encourage the company to keep thousands of jobs in Maryland.
The money is part of a controversial $37.5 million package marketed by the Hogan administration as a way to ensure the aerospace giant keeps jobs here and remains competitive with other defense contractors. Northrop would not need to repay the $20 million loan as long as it keeps 10,000 employees in the state and meets other goals.
The legislature approved the loan as part of the state budget in April, but it’s now mired in a fiscal fight between Republican Gov. Larry Hogan and top Democrats.
As Hogan pondered whether to spend about $100 million that Democrats designated for their priorities, Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch canceled a meeting of the Legislative Policy Committee, which has final say over terms of the Northrop loan.
Hogan decided last month not to spend the money. There is no plan to reschedule the meeting, Busch said.
“Like anything else, you have to have the votes in committee,” said Busch, a Democrat from Anne Arundel County. “It was a tough vote for people to make, and now that the governor hasn’t released the money they thought went to essential services, they are reluctant to vote for this.”
The decision to link Northrop’s loan to Hogan’s budgetary choices irked Republican lawmakers — who said the committee needed to vote — as well as the Democrat who represents thousands of Northrop workers.
Hogan “didn’t release the $100 million because of the downturn in the economy,
and the last thing we need to do is add to that issue by jeopardizing thousands of jobs,” said Senate Minority Leader J.B. Jennings, a Republican who serves on the policy committee that oversees the loan. “They should meet and they should vote.” Veteran Democratic Sen. Ed DeGrange represents the Linthicum area where Northrop consolidated one of its divisions this year. He said the company held up its end of the bargain by purchasing the building it was leasing and investing tens of millions of dollars in the area.
“This was a commitment that the legislature made, and we made it for a good reason,” DeGrange said. “They [Northrop] have already fulfilled their commitment and followed through on the things that we asked them to do. … It sends a bad message to a business that is the largest employer that we have.”
Hogan’s budget secretary, David R. Brinkley, said last month that money the legislature set aside for specific programs would not be spent because state tax revenue was expected to fall $150 million short of projections. The money included $6.1 million to help rebuild aging schools and $19 million to help local governments with teacher pension costs.
Miller, who previously said the education spending was paramount, last month warned that the governor’s decision would jeopardize approval of the Northrop Grumman loan. Miller did not respond to requests for comment last week.
Northrop spokesman Tom Delaney also declined to comment, saying in a statement: “We can only defer to the state of Maryland on this matter.”
The spending disagreement concerns a small portion of Maryland’s $42 billion budget, but the fight has larger political ramifications as to whether the legislature and governor are willing to compromise.
Hogan spokesman Shareese Churchill criticized lawmakers for reconsidering the Northrop loan, which would come out of a program known as the “Sunny Day Fund.”
“If the legislature wants to box themselves in by creating a nonexistent link to Northrop Grumman’s Sunny Day loan, that’s their prerogative,” she said. “However, these kinds of political gimmicks are not in the best interest of our state or its citizens and businesses.”
House Minority Leader Nic Kipke, an Anne Arundel County Republican, likened Democratic leaders’ decision to “D.C.-style blockade politics.” He said it was important that Northrop and the jobs it provides remain in Maryland.
“Whether we like it or not, our state competes with surrounding states for large and small employers and we must do all that we can to remain competitive,” Kipke said.
More than a year ago, the Hogan administration met with Northrop officials to begin piecing together economic development incentives to defray the company’s cost of consolidating a division headquarters here, according to emails obtained by The Baltimore Sun through a Maryland Public Information Act request.
State officials came up with a two-part plan to sell to the legislature: grant a $20 million loan that could be forgiven and develop a $17.5 million aerospace tax credit that only benefited the giant Falls Church, Va.-based defense contractor.
The loan was approved with little discussion; the state has granted similar types of deals to big companies in the past. The tax credit was decried — even by some in the governor’s own party — as corporate welfare but lawmakers passed it anyway.
Sen. Richard S. Madaleno Jr., vice chairman of the Budget and Taxation Committee, was among the most outspoken opponents of the tax credit. He also sits on the policy committee.
The Montgomery County Democrat said that if the state can’t afford to pay for the programs the legislature wants, he’s skeptical it can afford to help Northrop.
“If the governor’s failed economic policies have put us in a position where we simply can’t afford the $25 million for our public schools, it does not seem wise to give $20 million to one of the most profitable corporations in America.”