House Democrats planning on budget without slots income

Sets up confrontation with Ehrlich, Senate

February 21, 2003|By Tim Craig | Tim Craig,SUN STAFF

The leaders of the House of Delegates have narrowed their list of options for resolving the state's budget woes without relying on any money from Gov. Robert L. Ehrlich Jr.'s plan for slot machines at four Maryland racetracks.

House Democratic leaders said yesterday that they are moving ahead with their proposal because they do not intend to support slots, setting up a potential showdown with the governor and Senate leaders.

"We're starting to undertake a look at revenue increases as well as additional cuts to replace licensing fee revenues, which we believe will not materialize." said House Speaker Michael E. Busch, an Anne Arundel County Democrat and slots opponent. "We are trying to be fiscally prudent, fiscally fair, with an eye to the future."

To balance the budget without slots, House Democrats are considering a mixture of spending cuts, the closing of tax loopholes and a possible tripling of the state's alcohol tax. At one time, House leaders were considering increasing sales or income taxes to balance the budget, but Busch said yesterday that they are no longer considering those options.

Ehrlich's budget blueprint assumes the state will collect $350 million in upfront licensing fees next year from the owners of four racetracks, as well as another $45 million in revenue from the gambling. House leaders say they plan to replace that projected revenue in next year's budget by coming up with $250 million in additional tax dollars and $100 million in new cuts.

Busch's strategy could pit the House against the Senate - whose leaders have embraced slots - and the governor. Ehrlich has vowed to veto any tax increase and is skeptical of calls to close tax loopholes.

Yesterday, the governor reiterated that his slots proposal is the only feasible way to close the state's almost $1.3 billion projected budget shortfall while funding education and other state commitments. "The only Plan B I've seen calls for either massive tax increases or Draconian cuts, and both are unacceptable," Ehrlich said.

But even if slots are approved, the nonpartisan Department of Legislative Services is advising against relying on gambling revenue for next year's budget or the year after that.

Warren G. Deschenaux, the legislature's chief policy analyst, said yesterday that he told lawmakers there is a high level of uncertainty that the money would become available as quickly as the governor's legislation assumes. He advised lawmakers not to rely on the fees to balance the budget.

Busch said uncertainty about the governor's proposal is one reason he is moving ahead with his own plan. Elements under consideration include:

Preventing Maryland companies from setting up shell corporations in Delaware as a way of avoiding state income taxes. If adopted, the reform would save the state $75 million.

Changing the Heritage Tax Credit so businesses could not apply for it, saving $23 million.

Tripling the state's alcohol tax, which hasn't been changed since 1972.

House leaders said they believe those kind of tax changes could win Ehrlich's approval. "I don't know how he vetoes it," said House Majority Leader Kumar Barve.

Sun staff writers Michael Dresser and David Nitkin contributed to this article.

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