Worry rises over talk of cuts in state aid

Ehrlich suggests he may have to reconsider pledge if slots plan doesn't pass

December 18, 2002|By Andrew A. Green | Andrew A. Green,SUN STAFF

Waves of anxiety, but not shock, spread through Maryland local government yesterday in the wake of suggestions by Gov.-elect Robert L. Ehrlich Jr. that state aid to cities and counties would be on the chopping block if the General Assembly doesn't pass his slot machine proposal.

Ten years ago, the state solved many of its budget problems by making such cuts. So local budget officials weren't taken aback when Ehrlich hinted at a Maryland Board of Revenue Estimates meeting Monday that he might reconsider his pledge not to balance the state budget on the backs of local governments.

"I'm not surprised," said John R. Hammond, Anne Arundel County's budget chief. "I've got to believe the new guy coming to town is going to look at everything, but I would hope they would leave aid to local governments alone.

"We're the ones that the public is banging on for immediate services, and we're the ones who have had to raise taxes in order to meet some of the mandates that have been passed on to us from the federal and state governments."

Suggesting that cuts could be avoided if slots are approved at Maryland racetracks provided little comfort. Several local officials expressed deep skepticism yesterday that next year's state budget would benefit much, if at all, from gambling revenue should the General Assembly pass Ehrlich's proposal.

"From what I'm hearing ... at best they might get a quarter of a year's worth of revenue out of slots next year," said Howard County Budget Officer Raymond S. Wacks. "It seems like there's not going to be much impact from slots in fiscal 2004."

Ehrlich spokeswoman Shareese N. DeLeaver said the governor-elect doesn't want to cut aid to local governments, but she could not rule it out, either. "Cutting local aid doesn't fall in the Top 10 ways the governor-elect wants to balance the budget," she said.

At the earliest, a law authorizing slots would go into effect July 1, and depending on how the bill is structured, it could go to referendum.

Ehrlich has predicted that slots could be operational by spring 2004, and through sales of licenses and early revenues, the state could earn $400 million to $500 million for fiscal 2004, and up to $800 million in subsequent years.

The latest figures from the Maryland Board of Revenue Estimates project a $1.8 billion state budget shortfall over the next two years.

Montgomery County Executive Douglas M. Duncan said it looks as if the severity of Maryland's budget problems must have hit Ehrlich on Monday.

"He made a commitment to fully fund education. He made a pledge not to cut local aid," Duncan said.

Counties typically get about a quarter of their funds from the state. About 90 percent of that aid goes to education.

Harford County Executive James M. Harkins, a Republican who is a member of Ehrlich's transition team, said he has been studying the state's budget picture and that while the governor-elect's comments are harsh, they are also realistic.

He said he has talked to nearly every member of his county's legislative delegation about the importance of Ehrlich's slots initiative for preserving local aid.

"I've looked at the numbers. The numbers are real, and the bottom line is, the governor's initiative on slots is a major piece of what has to happen," Harkins said.

Ehrlich said Monday that county executives should consider lobbying their legislative delegations on behalf of the slots proposal if they want to avoid cuts. But not all of them are taking his advice. Duncan, who is a Democrat, said slots are the governor-elect's idea, so he should be the one to make sure they pass.

Senate President Thomas V. Mike Miller also said this week that the state will have to consider cuts in local government aid, which eats up one-third of state revenues.

"Our sales tax revenues are down, our capital gains taxes are down, our income tax revenues are down, but high property tax revenues have kept the counties flush," Miller said. "They're not overloaded with cash, but compared to the state coffers, they look very good."

Local budget officials don't echo Miller's assessment, but many are more optimistic than they were at this time last year about their finances. Most said they expect their revenues will meet expectations for fiscal 2003 and put them in decent shape for fiscal 2004.

In the most recent disbursement of income taxes, all Maryland counties except Dorchester, Howard, Montgomery and Talbot posted gains over the same period in the year before. At this time last year, 16 counties were facing declines in income tax revenues.

But major cuts from the state could wreak havoc on the bottom line, said Baltimore County spokeswoman Elise Armacost.

"We're well-managed and we're in good financial shape, but a big hit from the state is going to hurt us," she said. The other problem counties are facing is uncertainty. County budgets are generally finished in April or May, and local officials fear they won't know by then how much state revenue they will lose.

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