According to a new report from the Maryland Chamber of Commerce, Maryland’s decline from 22nd to 31st in CNBC’s 2024 Top States for Business rankings highlights a growing concern for the state’s ability to attract and retain businesses.
Along with a 32nd place finish in U.S. News’ Business Environment rankings, these trends underscore the urgent need for improvements across several areas, with infrastructure shortcomings taking center stage.
Infrastructure Deficiencies Lead to Economic Decline
CNBC’s 2024 rankings emphasized infrastructure, including roads, bridges, ports, airports, utilities, and development sites. Maryland’s infrastructure ranking plummeted by 22 spots from 15th to 37th.
Local governments face increasing challenges maintaining deteriorating roads and bridges, which businesses rely on for daily operations. The Chamber stresses that without urgent investments in infrastructure, businesses cannot thrive, supply chains will falter, and economic progress will stall.
In Maryland, local governments have no authority to levy their own transportation revenues – counties and municipalities depend entirely on a share of state-levied revenues to support safety and maintenance work on local roads and bridges across the state.
For decades, the State supported a balanced approach to maintaining its transportation infrastructure. The bulk of transportation revenues — mainly motor fuel and vehicle titling taxes — have been split between the State (for its consolidated Transportation Trust Fund, serving multiple modes) and local governments (who own and maintain roughly five of every six road miles across the state).
The State faced a mid-year budget crisis during the “Great Recession” in 2009. In turn, the Board of Public Works adopted a 90% reduction of the local distributions of these Highway User Revenues and a roughly 40% reduction to Baltimore City’s allocation (the largest by far to any jurisdiction).
Since then, the state has fully or primarily restored many recession-driven cutbacks. However, Highway User Revenues still lag far behind historic levels, even after the State enacted a substantial transportation revenue increase.
The State’s fiscal 2025 budget remains far short of Maryland’s proper and historic funding levels, even on a simple dollar-to-dollar basis. Accounting for road maintenance and materials costs would expand this gap even further.
Restoring and expanding local transportation funding is critical to ensuring the state has the infrastructure to support long-term economic growth.
High Costs Stifle Business Expansion
The Maryland Chamber also notes that Maryland ranks 47th in cost of doing business, one of the highest in the nation. This high-cost environment and infrastructure deficiencies make it increasingly difficult for companies to operate and expand in the state, according to the Chamber.
The Maryland Chamber advocates for reforms to the state’s tax structure to reduce the burden on businesses and make Maryland more competitive with neighboring states like Virginia and Pennsylvania.
Stagnant Workforce Development Remains a Barrier
The Chamber points to Maryland’s stagnant workforce development, ranked 28th, as another factor holding back its competitiveness.
With only 33 available workers for every 100 open positions, businesses struggle to find the needed talent. The Maryland Chamber advocates for stronger workforce development programs that align with industry needs, including education initiatives and incentives to attract workers to Maryland.
Competing with Neighboring States
Maryland’s struggles are exacerbated by fierce competition from neighboring states.
The Maryland Chamber highlights that Virginia, ranked 1st overall in business competitiveness, boasts a stronger infrastructure and a more business-friendly environment. Pennsylvania, ranked 17th, also outperforms Maryland. According to the Chamber, Maryland must take bold steps to improve its business climate to remain competitive.
What’s Next?
According to the Maryland Chamber of Commerce, the state must immediately address its declining business competitiveness.
The Chamber prioritizes infrastructure improvements, including bolstering funding for local roads, bridges, and transit systems. Additionally, it advocates for tax policy reforms and stronger workforce development initiatives to attract investment and promote sustained growth.
The Chamber emphasizes that swift action is essential to creating a more business-friendly environment and ensuring a competitive, resilient economy for Maryland’s future.
Visit the Maryland Chamber of Commerce website for more information.