Increase in state gas tax forecast

Ehrlich's budget proposal to draw from transit fund, two top Democrats say

January 17, 2003|By David Nitkin | David Nitkin,SUN STAFF

The state budget proposal Gov. Robert L. Ehrlich Jr. plans to release today sets the stage for a gasoline tax increase, the General Assembly's top two leaders said yesterday.

Senate President Thomas V. Mike Miller, a Prince George's County Democrat, said Ehrlich's plan to close a $1.2 billion shortfall will borrow a significant sum from a transportation fund to use for daily government operations - a move Miller opposes because state road and transit construction would be pinched.

"It's going to happen, and it's a mistake," Miller said. "The governor's transfer of money from the transportation trust fund will necessitate a gasoline tax increase."

House Speaker Michael E. Busch concurred, calling Miller's assessment "fairly accurate."

"It's kind of like being in self-denial," Busch said. "If you are going to build the ICC (Inter-County Connector) and build roads, you need a revenue source."

Miller and others briefed on the Ehrlich budget said the plan balances state spending and revenues through three major components of roughly equal weight: pay-to-play fees from slot machine operators; cuts to some state agencies; and the use of surplus money from a variety of accounts, including significant transfers from the $2 billion transportation trust fund.

The new administration has carefully withheld specific figures and has not distributed documents to key legislators.

Ehrlich has scheduled a final briefing for lawmakers this morning and will publicly disclose his first spending plan hours later.

"I won't tell you anything today, but we'll tell you everything Friday," said Ehrlich communications director Paul E. Schurick.

By law, the state cannot run a deficit, so the General Assembly must approve a balanced budget during its annual session.

Ehrlich has made broad promises about protecting programs and interests in the budget. He has said he won't raise taxes, cut public safety or education, or reduce the aid sent to counties.

But lawmakers who have heard outlines of the governor's plan said Ehrlich doesn't fully keep those commitments.

"He's not holding the counties harmless as he said he would," Miller said.

In an interview, Ehrlich said that overall, counties would receive more money next year and education commitments would be met.

"It's a pretty darn good job, given the promises we've made and the fact that the budget situation is worse than we thought it was," the governor said.

But in areas other than education, Ehrlich conceded, counties might not get all the funding they expected based on formulas contained in state law. He would not specify those areas.

David Bliden, executive director of the Maryland Association of Counties, said counties need the formula-driven money for public health and assistance to poorer jurisdictions, among other needs.

If Ehrlich does not abide by the formulas, "it's huge, because it's based on growth and demand," Bliden said.

Busch, the House speaker, said he was hesitant to criticize Ehrlich's budget because "there aren't any easy answers."

But he said Ehrlich's reliance on transfers from surplus funds, plus an up-front payment from slots operators anticipated to be budgeted at $400 million, bears similarities to Gov. Parris N. Glendening's last, widely criticized budget.

"It's a one-time fix," Busch said.

Ehrlich and his budget aides say they need an additional year to fully address the wide gap between spending and revenues, bringing the state's finances into structural balance.

"We got the baseline numbers two weeks ago," Ehrlich said, and they were worse than he anticipated during the campaign. "We haven't complained about it. We haven't whined about it."

Busch said Ehrlich wants to transfer money from the transportation fund to balance both this year's budget - which still has a $350 million hole to be plugged - and next year's.

"They're using the transportation trust fund somewhat like a bank," Busch said. "They're borrowing the money to balance the budget."

The transfer could delay some projects, fear officials such as Montgomery County Executive Douglas M. Duncan. But if political pressure mounts for road construction, particularly in the Washington suburbs, a movement could arise to raise the tax on gasoline. Duncan has proposed such an increase.

A 1-cent increase in the tax generates about $20 million, legislative analysts say.

Ehrlich has said that a gas tax increase would not be part of his budget plan, but he would not oppose such a move if lawmakers pass it.

Ehrlich's budget plan will include about $400 million from slots licensing fees, those familiar with it say. But the governor is not expected to release his full slots plan today, so details will likely not be available on what share of money the state would collect from the machines.

Passage of legislation to legalize slots is far from a sure thing this year, potentially forcing Ehrlich to come up with other alternatives to cover the $400 million.

Agency cuts are expected to hit higher education particularly hard. Busch said the state's higher education budget would be reduced - and money transferred from a reserve account - for a total of roughly $100 million.

Some areas of the budget will increase. Ehrlich has said he would spend more on drug treatment, and Del. Howard P. Rawlings of Baltimore, chairman of the House Appropriations Committee, said prison construction funds would get a boost.

Sun staff writer Sarah Koenig contributed to this article.

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