Merger of slots, tax rise weighed

Democrats' approach would create single bill to finance education aid

Ehrlich expected to negotiate

March 02, 2003|By Michael Dresser | Michael Dresser,SUN STAFF

Leading General Assembly Democrats are seriously considering merging Gov. Robert L. Ehrlich Jr.'s plan to allow slot machines at racetracks with measures to increase taxes, creating a single bill to finance Maryland's landmark education funding formula.

The idea would be to force the Republican governor to accept at least some form of higher taxes in order to win approval of slots, his No. 1 priority of the 90-day legislative session.

Even Democratic leaders who support expanded gambling are wary of handing Ehrlich a victory on slots before they can secure long-term funding of school aid proposed by the Thornton Commission and written into law by the Assembly last year.

"The House would be wise not to pass significant slot revenue without addressing the Thornton commitments we made," said Del. Howard P. Rawlings, chairman of the House Appropriations Committee. "It's very clear when you do the analysis that despite the governor's rhetoric, slot machines will not solve even 50 percent" of the Thornton funding gap.

Ehrlich, who campaigned as an unequivocal supporter of the education aid, spent much of last week delivering the message that if slots fail, so does the Thornton formula.

But some Democratic leaders say they fear that if they give Ehrlich a "clean" slots bill this year, they lose all leverage to persuade him to agree to tax increases to fulfill education funding commitments.

Sen. Patrick J. Hogan, vice chairman of the Senate Budget and Taxation Committee, said slot machines are expected to bring the state $600 million to $800 million a year - a figure that could drop after expected revisions to the administration bill.

When fully funded, the Thornton formula - adopted to help equalize spending between rich and poor jurisdictions - will cost about $1.5 billion a year.

Ehrlich has not detailed how he might cover future costs of the Thornton plan that go beyond the revenues from slots, putting off a solution until next year or later.

Addressing future gaps

Hogan and others say they want to address those future gaps this year, while the slots plan is still under consideration.

"There were a lot of people walking around who were thinking slots would solve everything. Now they're starting to realize that it doesn't," the Montgomery County Democrat said. "People just need to look beyond this year."

The House Democratic leadership is holding to House Speaker Michael E. Busch's position that expanded gambling is so complicated an issue that it needs a year of study before a well-informed decision can be made. Busch's position has been bolstered by the administration's delays in delivering revisions to its original slots bill, which was rejected by the horse racing interests it was intended to benefit.

As it stands, Ehrlich's bill calls for 10,500 slot machines at four Maryland racetracks. The administration anticipates $395 million in revenue to help balance next year's budget, but the Assembly's fiscal leaders have said that that is based on overly optimistic assumptions.

Busch, a slots opponent, says any decision to expand gambling should go to a referendum. He is also banking on the notion that the more people learn about the specifics of any slots deal, the less they'll like the idea.

Even Democratic supporters of slots are hardening their position in response to the administration's explicit linkage of slots and Thornton money - a position Ehrlich has taken despite promising last year to fund the education formula whether or not slots pass. An Ehrlich spokesman explained that the governor's vow to hold the line on taxes takes precedence over money for public schools.

"It's unfortunate the governor said to us, `If you don't pass my bill, I won't fund Thornton,' " said Sen. Ulysses Currie, chairman of the Budget and Taxation Committee. "The threats I don't think get us down the field."

Currie said an eventual slots-for-taxes bill could come in the form of an omnibus revenue bill - a device used during the 1992 fiscal crisis. He said he thinks the governor and leaders of the two chambers will eventually sit down and work out a compromise involving slots and taxes.

"Otherwise we'll be here till July," the Prince George's County Democrat said.

`Loophole closings'

Ehrlich said he is open to such an approach and is willing to consider "so-called loophole closings" as part of a broader deal - referring to proposals aimed at corporations that avoid paying some Maryland taxes.

"If it's income or sales tax, where you get the big dollars, the answer is no," the governor said.

Senate President Thomas V. Mike Miller, Ehrlich's key ally in the slots fight, said he doesn't want to increase sales or income taxes but thinks all options must remain on the table.

"Even with slots, there's going to be a huge hole in the budget this year and next," Miller said. "If revenues in addition to slots are not found this year, the governor's going to have to put them in play next year."

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