Maryland already seeing ‘big impact’ from federal DOGE cuts

The Department of Government Efficiency has already had a “big impact” on Maryland’s economy, its comptroller said this week. And that is felt not just by its thousands of federal workers, but also contractors and those who rely on federal grants.

Comptroller Brooke Lierman said the six months of DOGE cuts across the federal government have had almost the same effect of two years of cuts under sequestration a decade ago. More than 5,300 state residents have lost their jobs with the federal government, with contractors in the state also hit hard.

Lierman said it’s the perfect time for Maryland to diversify its economy away from reliance on the federal government, although the relationship will endure in some form.

“We have had a happy marriage with the federal government for many years, but we are breaking up,” Lierman said during the Maryland Defense Forum this week in Baltimore. “Or at least it's really on the rocks. We are getting strong counseling.”

The state comptroller’s office released a report this week that found that Maryland is home to the third most civilian federal government jobs, behind Washington, D.C., and Virginia, with those jobs representing 10% of all wages in the state. The biggest federal civilian employers in Maryland are the Department of Defense and the Department of Health and Human Services, which employed almost 90,000 people in FY 2023.

The research also found that the average federal wage in Maryland is $126,468, higher than the private sector average wage of just over $73,000. And those hardest hit by DOGE cuts are in the Washington, D.C. suburbs, especially Montgomery and Prince George’s Counties.

Lierman said there has always been a “symbiotic relationship” between Maryland and the federal government, with the public sector relying heavily on the state for its highly educated population and world-class research facilities, including the University of Maryland and Johns Hopkins University. And that has saved the state from major economic troubles in the past, especially during recessions, when the “stabilizing force of the federal government” has protected it from major job losses.

The economic value for the state has been tremendous, too. Lierman estimated that the federal government brings around $150 billion into Maryland, including $27 billion in wages, $9 billion in retirement payouts, $46 billion in contracts, $31 billion in grants and $38 billion in direct payments to individuals through assistance programs and the like. The effect of federal spending on the state  is huge but has never been quantified before.

“This is one of those things where we all know it and we see it in our corner of the universe, in our corner of the economy, but we've never had it all together,” Lierman said.

But DOGE’s effects are being felt, including in the research arena. Scientists at the National Institutes of Health, which has its main campus in Bethesda, have reported being unable to buy lab supplies and other essentials, first due to the freeze on federal credit card spending, then because those in charge of procurement have been laid off.

Dr. Haley Chatelaine, vice president of the NIH Fellows United union that represents 5,000 NIH fellows, said this has made it “prohibitive” for scientists to continue their work to, for example, find cures for infectious diseases. And while the federal government has promised to hire back primary investigators who were mistakenly fired, Chatelaine said that does not appear to have happened.

It all adds up to a feeling that working for the federal government as a research scientist is not as attractive a role as it used to be. 

“I know for me, the federal government isn’t what it used to be,” Chatelaine said.

Federal contractors, also a key part of Maryland’s economy, have felt the DOGE effects too. Agencies have awarded billions of dollars of contracts in Maryland, Lierman’s office found, a number that accounts for 40% of federal spending in the state.

But DOGE is now reviewing every contract, said Jerrod Moton, CEO of the Goldman Edwards security consulting firm, and zeroing out many for professional services and diversity, equity and inclusion. Contractors now must pivot, Moton said, and focus on what DOGE wants to see: innovation, cost reductions and modernization. Whether a contract survives DOGE could come down to its name, he added, which “sounds silly, but it’s very serious.”

Lierman said the comptroller’s office will release more research later this summer about the direct effects of DOGE cuts on the state economy.