Lawmakers considering higher taxes

Increased levies proposed on gas, incomes, alcohol

`You can't just beg, borrow, steal'

Number of slot machines in budget concerns some

January 22, 2003|By David Nitkin | David Nitkin,SUN STAFF

General Assembly leaders said yesterday that they are weighing a menu of tax increases and deeper program cuts to transform a stop-gap budget fix proposed by Gov. Robert L. Ehrlich Jr. into a permanent solution.

Lawmakers learned that the budget Ehrlich drafted for next year relies on money from a higher number of slot machines than many are comfortable with, and leaves a projected shortfall of up to $700 million the next year.

After their first detailed look at the governor's proposal released last week, top legislators said yesterday that they will aim to balance the state's books for next year and the year after that.

"We intend to do it," said Del. Howard P. Rawlings of Baltimore, chairman of the House Appropriations Committee.

To accomplish that goal, Rawlings conceded that the state needs additional money. The House of Delegates, he said, will discuss an income tax surcharge on the state's wealthiest residents, higher taxes on gasoline and closing corporate tax loopholes.

Senate leaders, too, said they would consider new taxing options.

"You can't just beg, borrow and steal," said Sen. Patrick J. Hogan, a Montgomery County Democrat and vice chairman of the Senate Budget and Taxation Committee. "There will be a whole menu of choices."

But aides to Ehrlich reiterated yesterday that the governor would veto any increase in income or sales taxes, creating a sharp partisan divide between the executive and legislative branches as they grapple with the most troubling fiscal conditions in a decade.

"Simply turning to taxpayers and saying `Gimme more money' is not going to fly," said Ehrlich spokesman Paul E. Schurick. "Those are bedrock principles of his budget, and he will not violate them."

Stagnant state revenues and the growing cost of government have created a budget gap of about $1.2 billion for next year. Ehrlich has proposed filling the hole through expanded gambling, transfers from surplus accounts and program reductions.

Overall, his $22.8 billion budget would rise 1.8 percent from the previous year. The $10.8 billion general fund -- which pays for most state services -- would increase 4.3 percent. Ehrlich said he needs two years to bring spending and revenues into balance, a timetable that lawmakers say they want to accelerate.

Legislative leaders say they are looking for more money in part because Ehrlich's assumptions about slot machines are overly optimistic.

His budget calls for $600 million from slot machines in the budget year that begins July 1, 2004 -- a figure that would mean 13,500 machines at three racetracks. Rawlings and other legislative leaders say 10,000 machines is the most they would accept.

"We're not saying that slots is off the table, but it's not going to be on the table at the level that Ehrlich proposes," Rawlings said.

Rawlings' comments came yesterday after an annual briefing on the governor's budget for the budget-writing committees of the House and Senate. By law, legislators can only cut from the spending plan, and Warren Deschenaux, head of the General Assembly's Office of Policy Analysis, indicated there was room to do so.

"If you look at the quantity of reductions, it's probably a lot less than you might have thought," Deschenaux said. "We don't see retrenchment. We see moderation."

The state Spending Affordability Committee -- a panel of lawmakers and other experts that issues well-regarded budget guidelines -- recommended eliminating 1,700 more vacant positions than Ehrlich cut, Deschenaux said.

The governor does not oppose deeper reductions, Schurick said.

"There is tremendous room to shrink, and we welcome any and all proposals to do so," he said.

Still, most State House discussion yesterday centered on higher taxes, not program cuts.

Advocates for improved roads called on lawmakers to consider a gasoline tax increase, especially because Ehrlich has proposed transferring $300 million over two years from a transportation trust fund. The move has alarmed lawmakers from Montgomery County, where gridlock is a crisis, because it could delay future projects.

The state could pay higher interest when it borrows money for road projects, said Del. Peter Franchot, a Montgomery County Democrat and transportation subcommittee chairman, if it doesn't have a plan to replace the transferred money.

"This is really unprecedented," Franchot said. "It will rank right up there with slots."

Rawlings said he was considering a gas tax increase (a 5-cent raise would generate $125 million), plus expanding the sales tax to include gasoline.

Also yesterday, two lawmakers introduced a bill that would increase the tax on beer, wine and alcohol by a nickel a glass. The tax on distilled spirits has not gone up since 1955, and the levy on beer and wine was last increased in 1972, said Del. William A. Bronrott, a Montgomery County Democrat and one of the sponsors. The tax would yield $94 million for the state's coffers, estimates show.

In Annapolis

Today's highlights

10 a.m.Senate meets, Senate chamber.

10 a.m.House of Delegates meets, House chamber.

2 p.m.Senate Budget and Taxation Committee, briefing by the University System of Maryland on tuition increases and cost efficiencies, Joint Hearing Room, Legislative Services Building.

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