Loan is tied to fund­ing dis­pute

Money for Northrop Grum­man held up as Dems, gover­nor fight

Baltimore Sun - - FRONT PAGE - By Erin Cox

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.”

Larry Ho­gan

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