By: Nicholas Sohr

Anirban Basu, chairman and CEO of Sage Policy Group Inc., told a group of state senators Thursday they should pump more money into the Department of Business and Economic Development’s efforts to retain Maryland companies, and woo those located in other states.

Adding more money to the DBED budget will be a tall order. The department has suffered budget cuts in recent years and Gov. Martin O’Malley, in his proposal to be released Friday, will have to bridge a $1.6 billion deficit.

The governor has floated cuts to education and health care, but said the state will maintain its funding of county teacher pensions in the coming fiscal year. At a recent event, DBED Secretary Christian Johansson said the budget process will be “brutal.”

But that, Basu said, is precisely the reason to invest more now in attracting businesses and jobs to the state.

“Other states are going to slash their other business development budgets significantly,” he said. “They’re going to be weaker in business retention and attraction.”

Maryland lost the most recent mid-Atlantic game of high-stakes corporate courtship. Northrop Grumman Corp. chose Virginia for its headquarters (with 300 employees) over Maryland this summer, even after state and Montgomery County officials dangled $22.5 million in incentives. (At this point, I’d like to apologize to everybody I promised that I would never mention that company again.)

Basu said he would go after high-tech companies in California, specifically Silicon Valley, marketing Maryland as a state with a similar highly skilled workforce, access to top-notch research institutions, but one without the out-sized budgetary headaches and turmoil in the capital.

“That’s a way to make things better,” he said.

Basu was optimistic about the direction the economy is headed as it recovers from consumers — and institutions — outspending their means in the 2000′s.

“People tend to do foolish things when they have access to too much money all at one time,” Basu said. “It’s the MC Hammer, Michael Jackson, Mike Tyson problem.”

Basu predicts growth of more than 3 percent in the U.S. economy in 2011. He suggested a stroll through area shopping centers as an easy way to find evidence of returning confidence among consumers.

“The consumer is coming back, you can see it at Towson Town  Center, at Arundel Mills,” he said.

But problems persist in residential real estate, where houses are lingering longer on the market, and commercial real estate, where a series of loans are set to balloon in the next eight to 10 years, Basu said.

The Baltimore and Washington metro regions are faring better than most in the recovery, but the state remains vulnerable to cuts in federal spending as Washington looks for ways to lower its debt and deficit, which Basu described as the “sword of Damocles” hanging above the state.

“At some point, the federal government is going to stop spoon-feeding the states with money… And that will leave Maryland in a precarious position,” Basu said.