Few states benefited from the COVID-19 and post-pandemic surge in federal spending more than Maryland.

Last year, federal agencies awarded nearly $115 billion in contracts, grants and assistance payments to the state — more than $18,500 per resident, according to data from USASpending.gov, a federal site that tracks government payments.

Federal obligations to the state rose 24% over the last five years, a Baltimore Banner analysis of inflation-adjusted spending data showed. The average state saw a 16% increase in federal spending over that same period.

Now, President Donald Trump and the Elon Musk-led Department of Government Efficiency are aiming to dramatically slash federal spending.

That’s likely to pose dire consequences for Maryland. Federal obligations were 22% of Maryland’s gross domestic product last year. And one in 10 Maryland workers is employed by the federal government.

One economist compared what Maryland is facing to the collapse of Michigan’s auto industry in the early 2000s.

“The economic outlook from Maryland is dismal right now,” said Anirban Basu, chairman and CEO of Sage Policy Group, a Baltimore-based consulting firm. “One could make the argument that no state in the country has a worse near-term economic outlook than does the state of Maryland.”

Federal money was propping up Maryland’s sluggish economy

Maryland, like every other state, saw a windfall of federal funding during and after the COVID-19 response. Between 2019 and 2024, inflation-adjusted grant funding to the state rose by 66%, while direct cash payments increased by 28% and contract dollars rose by 7%.

Economists say the influx of federal money concealed Maryland’s broader economic challenges, including sluggish growth in GDP, population and the private sector. Lawmakers in Annapolis are also staring down a $3 billion budget deficit.

With deep federal cuts looming, economists warn that those vulnerabilities will be exposed.

“If Maryland was an underperformer economically before, you have not seen anything yet,” Basu said.

Maryland saw the 10th-highest growth in federal payments nationwide over the last five years. Minnesota had the largest jump at 47%, while the District of Columbia followed at 46%.

The impacts of spending cuts will likely ripple across the state

Nearly every corner of Maryland relies on federal money to fuel its economy.

With over $30 billion in obligations last year, Montgomery County received three times as many federal dollars as the next-closest county.

Now the Trump administration is trying to downsize many of its flagship employers, including the National Institutes of Health, the Food and Drug Administration and the National Oceanic and Atmospheric Administration.

Compounding the challenges for the state’s most populous county: a lack of private-sector growth to cushion the blow of reduced government spending. Over the last decade, Montgomery County has added a net of only 1,000 private jobs, according to Richard Clinch, an economist and director of the University of Baltimore’s Jacob France Institute.

“Whatever pain Maryland experiences, [Montgomery County] will feel far, far more,” Clinch said.

St. Mary’s County, home to Naval Air Station Patuxent River, and Harford County, site of Aberdeen Proving Ground, each received billions in federal obligations last year from the Department of Defense. In Howard County, where the Environmental Protection Agency is a large funder, federal obligations were one-quarter of GDP.

“This isn’t just impacting Montgomery County,” Clinch said of the Trump administration’s cuts. “It’s impacting places that weren’t struggling before.”

Limits on grant funding are hitting a core Maryland industry hard

Maryland relies on federal grants to bolster its scientific research community, a pillar of its economy.

Maryland ranked second in the nation last year in NIH and National Science Foundation research grants per 1,000 residents, according to a report from the ratings agency Moody’s. Only Massachusetts received more.

The Trump administration’s steep cuts to funding for scientific and medical research will have an outsized impact on Maryland and its economy. In particular, the NIH’s decision to cap grant funding for administrative overhead costs could slash $200 million a year from the Johns Hopkins University in Baltimore and $75 million from state public universities.

Hopkins is challenging those cuts in court.

“When you look at what Maryland does well, take life sciences,” Clinch said. “Most of that is spin out of NIH, FDA, Hopkins and [University of Maryland, Baltimore.] Those are all getting gutted by the current administration.”

Hopkins, one of the state’s largest private employers, also recently implemented the biggest layoff in its history after hundreds of millions in foreign aid money was terminated.

For Maryland, Trump’s return to the White House is the latest reminder of how much it has tethered its economy to the whims of budget and policy shifts in Washington.

“No one could have foreseen Trump or some of his policymaking,” Basu said. “But what was foreseeable is that one day Maryland would have its day of reckoning. And that day of reckoning is here.”