Budget debate to heat up soon

Ehrlich to reveal proposal for slot machines Thursday

Assembly wants permanent fix

House finishing plan for state tax increases

January 27, 2003|By David Nitkin | David Nitkin,SUN STAFF

The great debate over how to solve Maryland's budget mess begins in earnest this week, when the governor's gambling proposal and the General Assembly's tax-increase ideas receive their first public scrutiny.

Gov. Robert L. Ehrlich Jr. is scheduled to release his plan to install slots at racetracks Thursday. The eagerly anticipated bill will reveal how many machines the governor wants, who would buy and regulate them, how big a cut the state would receive and where the money would go.

Shortly after, leaders in the House of Delegates will finish refining a series of tax ideas, including the possibility of a 1 percentage-point increase in the 5 percent sales tax, a plan to raise temporarily the income tax of residents earning more than $100,000 yearly, a bill to slam shut corporate tax loopholes, and an increase in gasoline levies.

Once the bills land, the serious negotiating begins.

Ehrlich has taken these positions as he seeks to close an approximately $1.2 billion budget shortfall for next year: He won't earmark slots money for education. He doesn't want a referendum on the gambling issue. He will veto bills that increase sales and income taxes.

The General Assembly is marking its territory: The state's finances should be permanently fixed now, meaning a $700 million projected shortfall for the fiscal year that begins July 1 next year should also be addressed. Deeper cuts are needed than Ehrlich has proposed in his first budget. Slots would not provide enough money for education and other needs, so new revenues are necessary.

Those issues and others must be sorted out before the General Assembly adjourns April 7. If not, lawmakers will stay in Annapolis longer.

And many will be watching for who blinks first, for side deals crafted during secret meetings, for promises in exchange for votes.

"On the first week of April, I either see a train wreck coming, or a combination of cuts, slots and/or tax increases," said Senate President Thomas V. Mike Miller.

With his administration just 13 days old, Ehrlich is staking much of his political capital on slots at racetracks. There's no doubt that his first session would be viewed dimly if the General Assembly rejects his plan.

His election, he says, was a mandate for expanded gambling. Ehrlich argues that the horse industry needs help, and that the state is losing millions because Marylanders are taking their money to racetracks with slots in Delaware and West Virginia.

But as opposition grows and lawmakers express doubts, Ehrlich is playing down how vital gambling is to his agenda.

"There are many issues that are important to us," he said last week. "You've heard me emphasize many, many other issues."

Still, he concedes that if his gambling bill fails, his first legislative session "will be less successful."

Even as he tries to force the Assembly to approve slots or cut the budget by nearly $400 million (the amount of licensing fees and the first few months of slots operations contained in the budget), Ehrlich is leaving wiggle room.

He doesn't rule out a gas-tax increase, which some lawmakers say the governor has made necessary because of plans to shift $300 million from a transportation fund to general government operations. He says he will consider closing some loopholes, with the caveat that certain tax breaks are sensible public policy.

Many believe it's possible that Ehrlich could ultimately agree to tie slots money to schools, and could give black leaders many of the minority-business-participation concessions they are seeking.

Some top lawmakers, however, are advancing views that Ehrlich won't accept.

House Speaker Michael E. Busch shifted his rhetoric last week. The Anne Arundel County Democrat now says Ehrlich's budget proposal contains a "$400 million shortfall you have to deal with." Translation: We shouldn't count on money from slots, and we should replace it outright.

"If we're not going to address the overall structural problem of the budget, we ought to look at funding the [fiscal] '04 budget through some kind of combination of cuts and revenues, or a temporary solution, until we come up with a permanent proposal," Busch said, referring to the fiscal year that begins July 1.

Yesterday, Busch said the House Ways and Means Committee would hold a series of briefings on tax proposals -- probably before legislation is introduced -- to discuss replacing Ehrlich's slots plan with other money.

"Why aren't we seeing other proposals, and what's the urgency?" Busch said, referring to gambling.

Ehrlich may be ruling out most tax increases, but there is reason to believe some could be part of an overall budget solution.

For starters, it is the first year of the term for Ehrlich and lawmakers, so they won't have to face an election for nearly four years. That allows plenty of time for negative repercussions to subside.

"That's government and politics 101," said Miller.

Added Busch: "This is the best year to do this."

The General Assembly's Republicans sharply disagree.

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