Choosing state's doomsday budget scenario

January 11, 2004|By C. Fraser Smith

THREE OF the state's most experienced and highly regarded students of government finance offered their views on how to deal with Maryland's deficit during a sparsely attended forum last week at St. John's College in Annapolis. For the most part, they left politics out of their equations.

Call it fiscal tennis without a net, but it was a scintillating exchange nonetheless.

Two days later, on the campus of the General Assembly, the net was up -- way up.

James C. "Chip" DiPaula Jr., Gov. Robert L. Ehrlich Jr.'s estimable budget secretary, said increased education funding hinges on passing a slot machine gambling bill. There will be no other sufficiently large revenue source, he said -- no sales or income tax increase. It was not a new warning.

Immediately, House Speaker Michael E. Busch declared again that gambling is the wrong way to pay for a public service as fundamental as education. The people and their representatives should assume that responsibility -- not slough it off on gamblers. He suggested a penny increase in the sales tax. Nothing new there, either.

Thus did the speaker and the governor redraw lines that have divided them over the last year or so. Neither man doubts the resolve of the other by now. But change is not unimaginable as the 2004 legislative session begins Wednesday. What worries many in Annapolis these days is also not new: The opposing sides don't talk much with each other. What you have is a kind of rolling stalemate in which two of the government's power centers haven't found a way to negotiate.

Senate President Thomas V. Mike Miller Jr., a Democrat, has sided with the governor in this debate, judging apparently that Mr. Ehrlich is right politically: people don't want to pay more taxes. Mr. Miller also is on the side of those Democrats who believe slots, even when operating at full bore, won't produce enough money to pay down the deficit and maintain other state services. In that event, the Republican governor would be driving Maryland into the ditch. Democrats could ride in to save the day with a tax increase that would hardly be felt. It's a dreary scenario.

Is there a politically feasible alternative? Maybe not in this new day of partisan, campaign promise-driven politics. But maybe reason will prevail.

Mr. Busch signals he's ready to relent on slots -- but only if compromise includes the governor's agreement to sign a tax bill. His apparent thinking: If you simply grant the gambling venture, you lose leverage for a tax increase. Better to stand firm, deny the slots revenue and let government go into the ditch in time for people to see the results before they vote for governor in 2006. You can have your doomsday now or you can have it later.

So, you ask, what role might wise advice and the public interest play in such an atmosphere?

At St. John's College, a starting point was quickly identified by the experts: William S. Ratchford II, former fiscal adviser to the Assembly; Robert R. Neall, former county executive and former state senator; and Nancy K. Kopp, state treasurer, were joined by George W. Liebmann of the Calvert Institute for Policy Research and James T. Brady, a businessman, Ehrlich administration adviser and former secretary of economic development.

Their thought? Maryland's tax structure is outdated, unfair and inefficient at a time when maximum efficiency is needed. An update would produce more revenue. The mere mention of the "T-word," even if followed by the word study, sends tremors through the political strategist's soul. This conclusion is not new, either. But politics always get in the way.

Are you studying the system so you can reduce taxes? Well, of course not. But you might be trying to align the tax structure with the economy as we know it. Fiscal leaders have been saying for some time that a service economy demands taxes on services: from those provided by lawn services to those you're supposed to get from lawyers and car repair shops. Yes, each of these groups will squeal. Retail merchants don't want an increase in the sales tax. People with lots of money don't want even a temporary surcharge on the income tax.

Oh dear. What to do. Pass slots and pray? Raise the sales tax? Increase fees because the fee word doesn't begin with T? Watch it all heading for the ditch? None or all or some of the above?


Look carefully at the options, select one and then sell it like political leaders ought to do.

C. Fraser Smith is news director for WYPR-FM. His column appears Sundays.

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