Ehrlich warns he will veto tax legislation

Governor threatens to cancel Assembly effort to balance state budget

`We tried to negotiate'

Legislators tentatively agree on how to raise $300 million in revenue

April 04, 2003|By Michael Dresser and David Nitkin | Michael Dresser and David Nitkin,SUN STAFF

Stung by the House of Delegates' rejection of his slot machines bill, Gov. Robert L. Ehrlich Jr. threatened yesterday to veto the revenue bills legislative leaders are putting together to balance the state budget.

Declaring that he is "frustrated" but not angry over Wednesday's committee vote against the centerpiece of his legislative agenda, Ehrlich drew a stark line against tax increases now or in the future.

Ehrlich said that with his slots bill defeated, his administration would turn to "Plan B" -- drastic spending cuts. He said he would veto many of the tax proposals lawmakers are considering to balance the coming year's budget, including a tax on health maintenance organizations and closing so-called loopholes in corporate taxes.

Defying the governor's threats, House and Senate lawmakers negotiating on a $22.6 billion budget tentatively agreed yesterday to $300 million in new revenues, placing much of it in a tax bill that the governor could reject.

Asked if he was worried about an Ehrlich veto, Del. Howard P. Rawlings, chairman of the House Appropriations Committee, said: "I hope he does. Y'all will have more fun writing stuff. It will show how fiscally irresponsible he is."

Even though Ehrlich first proposed new revenue measures, he and his aides now say they agreed to them only if slots were also part of the state's fiscal future. Without slots, they're off the table, he said.

"We tried to negotiate. We tried to work in good faith," Ehrlich said. "At some point, you stop negotiating against yourself."

Debate continued yesterday on the effect of such a veto. It could trigger deeper spending cuts or force the General Assembly into a special session to override a veto and bring the budget into balance.

Because of the defeat of slots, Ehrlich said, the timeline for a landmark education funding formula recommended by the Thornton Commission would have to be extended.

In an impromptu interview outside the office of Senate President Thomas V. Mike Miller, the governor also hinted that he could call the Assembly back to Annapolis this year for a special session. Ehrlich did not say what would force such a move but hinted it could be prompted if state analysts predict worsening budget conditions this summer.

Ehrlich's remarks occurred during a day of finger-pointing and recriminations over the 16-5 rejection of his bill allowing 11,500 slot machines at four Maryland racetracks.

The administration had projected the measure would eventually bring in $700 million for education.

Miller, Ehrlich's chief legislative ally in the slots fight, criticized the administration's performance in drafting and selling the measure.

"It was mishandled from the very beginning in terms of how the administration presented the bill," Miller said, adding that it gave opponents reasons to vote against the legislation.

The Senate president described House Speaker Michael E. Busch, the architect of the vote against slots, as an obstructionist, and he expressed disdain for the delegates who voted against slots in the House Ways and Means Committee.

"I'm tired of dealing with timid and gutless people who won't do what's right for the people of Maryland," Miller said.

Busch laughed off Miller's statements. "I just know that Senator Miller is a good Catholic and will have the opportunity to go to confession," the speaker told reporters.

Miller said he would do nothing more to pass the slots measure -- pointedly calling it "the governor's bill" -- and was turning his attention to the budget.

"My role for now is to try to get the governor not to veto this revenue package," he said.

Last night, lawmakers agreed on the new revenues they support.

A taxation bill would include $45 million in corporate loophole closings, $48.9 million in the HMO tax and $44 million in a 10 percent corporate income tax surcharge. Ehrlich has said he opposes the first two.

Other money-generating ideas were included in a separate bill that also contains about $700 million in transfers needed to balance both this year's and next year's budgets.

Those include $59.4 million in corporate filing fees -- down from $85 million proposed by Ehrlich -- and some tax compliance measures.

Lawmakers decided to preserve but place a limit on a tax credit for historic properties widely used in Baltimore redevelopment.

Ehrlich budget secretary James C. "Chip" DiPaula would not say whether the governor would reject veto one or both bills. "I haven't talked to the governor yet," he said.

Lawmakers will also try another strategy: they are expected to include a list of unpalatable spending cuts in the budget that would be triggered by an Ehrlich veto.

Busch said House leaders could likely muster enough votes to override the action, but Miller said he was not as optimistic about the Senate, noting that several Baltimore County Democrats represent heavily pro-Ehrlich districts where slots are more popular than taxes.

The speaker said that if a veto forces deep cuts in popular programs, it will be Ehrlich's choice. "You veto the bill and then blame someone else? I don't think that sells," Busch said.

Ehrlich expressed little concern about the political repercussions of deep spending cuts. "I ran as a Republican in this state, so taking the heat is not an unusual thing," he said.

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