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1,000 workers hired under tax credit plan but questions raised

Lloyd Coates, worker with Middle River Aircraft Systems

Lloyd Coates, worker with Middle River Aircraft Systems

Lloyd Coates has made steel, guns, airplane wings, parts for landing gear and Styrofoam cups. But he spent most of the last two years out of work, handing out resumes and juggling bills to make ends meet.

Of the more than 50 jobs he applied for, the 60-year-old veteran assembly line worker was offered just two — unloading trucks at a supermarket, and a return to the shrinking manufacturing sector.

He took the latter, latching on with Middle River Aircraft Systems in a position that made him the 1,000th person hired using a state tax credit created last spring to push Maryland businesses to pluck workers from the unemployment rolls.

While the program appears highly unlikely to exhaust its $20 million allotment, state officials said it has been a success, making a dent in Maryland’s elevated unemployment and putting a little money back into the pockets of business owners.

“The cost of unemployment to the state, and key stakeholders, including the business community, is substantial,” said Christian Johansson, secretary of the Department of Business and Economic Development. “We need to do anything we can do to accelerate the employment of the unemployed.”

The program’s detractors, however, argue that the state would have been better served by spending the money elsewhere instead of sending small tax credits scattershot through the private sector.

“This probably didn’t change behavior, but rewarded those were likely to create jobs in any case,” said Anirban Basu, chairman and CEO of Sage Policy Group Inc., a Baltimore-based economic consulting firm.

A major initiative

The Job Creation and Recovery Tax Credit — big enough to cover 4,000 hires – was one of Gov. Martin O’Malley’s biggest economic and job creation efforts in spring as he and lawmakers scrambled to close a nearly $2 billion budget gap.

Through Monday, 600 employers had claimed $5.6 million to hire 1,123 workers. Coates’ hire, which came in July, was among dozens of claims made by Middle River Aircraft Systems last week for the $5,000 credits that the state began offering March 29.

This year, Maryland’s unemployment rate has remained elevated – at 7.4 percent in October – but payrolls have expanded by 40,600 new jobs since January.

The credit covers hires made by the end of the year.

“We set a very ambitious goal,” Johansson said. “We’re still seeking to do that. We want the program to be used as much as possible. But 1,000 people, that’s a measurable economic impact on unemployment in Maryland.”

O’Malley spokesman Rick Abbruzzese said the administration has discussed the possibility of rolling over unused funds into 2011 but does not have plans to seek legislative approval to renew the program.

“The money that’s left over would revert for the general fund,” he said. “There is a limited time left for small businesses and companies in Maryland to take advantage of the tax credit and we hope that they will.”

The credits have drawn interest from a range of industries. Many of the first claimants were construction firms gearing up for the building and paving season. Such outfits still account for at least a quarter of the credits claimed, but retailers, manufacturers, banks and even biotech firms have gotten in on the act, too.

Of the credits claimed through Monday, 82 went to companies based outside of Maryland — from 20 states as close as Virginia and as far away as Hawaii.

Large retail chains expanding in the state have used the credits. Wegman’s Food Markets Inc. of Rochester, N.Y., has claimed 15 and Indianapolis-based hhgregg, 11.

Employers are limited to $250,000 in credits. Coastal Sunbelt Produce, of Savage, is closest to the maximum with 34 hires and $170,000 claimed.

Hires must be Maryland residents who haves received or exhausted state unemployment benefits in the last 12 months to qualify. Companies have to keep the workers for at least year to keep the credit.

Hoping to stay

Coates hopes to stay at Middle River Aircraft Systems longer than that, he said Monday after wrapping up a 10 p.m. to 6 a.m. shift 11 hours earlier.

It took him two years to get his two job offers after spending decades at Bethlehem Steel, where he couldn’t get a job from the factory’s new owners, and  the former Solo Cup plant in Owings Mills, where he couldn’t get in touch with supervisors he  knows from his time there.

Coates works on reverse thrusters for jumbo jets at Middle River. From his time there and at a plant owned by aluminum fabricator Alcoa Inc. that fashioned wings, he has learned airplanes from the inside out. He dashes through the list of planes he worked on, piece by piece – V22 Ospreys for the military and CF34 turbofan engines for Boeing 747s.

“It was difficult, truly difficult,” he said of his time unemployed. His wife of 39 years, Deborah, is a medical secretary but they still had to cut back as he looked for work, Coates said.

He was looking for “anything that was something I could live off of.”

Asked if he ever thought he would never find another job, he said, “I was feeling that way. It was getting that way.”

Money well spent?

Johansson said one of the benefits of the tax credit is that it pushes companies to bring unemployed workers back into the work force rather than hiring away from other companies or turning to recent college graduates.

Outreach efforts by the Department of Business and Economic Development online and in radio ads this summer and by the Department of Labor, Licensing and Regulation through its career centers have spurred more interest recently. Just 238 credits had been claimed through early August, but nearly 900 more have been claimed since then.

“There’s no silver bullet program that’s going to fix the economy,” Johansson said. “The best the government can do is have a diverse set of tools to assist private sector business.”

But Basu, the economic consultant, said the hiring tax credit “probably did not make much difference.”

“It translates into about a dollar per Marylander. A program of that scale simply cannot be transformative,” he said. “Given the expense of hiring an individual, training, them, paying their salary and benefits, one is rightly skeptical as to whether or not this would have induced someone to hire if they weren’t going to otherwise.”

Business advocates offered similar critiques as the program was being debated and succeeded in getting the credit increased to $5,000 from the $3,000 proposed by O’Malley. Still, they said the program would speed hiring incrementally rather than spark it.

Basu said the dedicated funds would have been better used to lure employers to Maryland who were not already considering locating to the state as symbolic and actual boosts to employment.

Johansson, however, said speeding the return to work for once-unemployed Marylanders benefits the state and businesses alike, by reducing costs to unemployment insurance and other social programs, and putting more money in the pockets of consumers.

And for Coates, the job is as much a benefit as the paycheck that comes with it.

“I’m more secure, more dependable for my family,” he said. “It makes me feel good that I can do something again, that I’m responsible for myself.”