O'Malley ties plan to fund tax break, voters' OK of slots

Expansion of Medicaid benefits, more for school construction, also linked

General Assembly -- Special Session

October 31, 2007|By James Drew | James Drew,Sun reporter

Gov. Martin O'Malley has tied voter approval of legalizing slot machine gambling to funding of his plans for a property tax cut for homeowners, expansion of the Medicaid program for childless adults, and a boost in spending for school construction.

If the General Assembly places a slots referendum on the November ballot next year and voters approve it, the state would get enough revenue to offset a proposed 3-cent property tax cut for homeowners from fiscal year 2010 through 2012 - and also hundreds of millions more for health care and higher education, Joseph C. Bryce, O'Malley's legislative director, told lawmakers yesterday.

But if voters reject the slots constitutional amendment, then the state won't be able to reduce its property tax rate, Bryce said at a joint session of three legislative committees reviewing O'Malley's budget plan.

He also said that Medicaid eligibility for childless adults would not be increased from the current threshold - 40 percent of the federal poverty level - to 116 percent, or about $12,000 a year for an individual, Bryce said.

Defeat of the slots referendum also would prevent the state from pouring an additional $300 million into school construction, Bryce said.

And the state would not be able to use 50 percent of the revenue generated from the proposed increase in the corporate income tax rate for holding down college tuition, completing capital projects at two-year and four-year colleges and funding work force investment, according to the governor's office.

That money would be needed to balance the general fund, Bryce said.

At a news conference outside Government House as joint legislative hearings wrapped up for the day, O'Malley said he linked the slots referendum and the other initiatives because "we have to make sure this all fits together."

"We don't want to fall into the same trap that got us here, which is doing the easy thing of voting for reductions in revenues at the same time you vote for increases in expenses," said O'Malley, who has cited the legislature's decisions to cut taxes and boost spending on K-12 education for the state's shortfall, which he calls a "structural deficit."

Senate President Thomas V. Mike Miller, a major supporter of legalizing slots, has said the bills that would enact O'Malley's sweeping plan require a "close reading."

"The way it's crafted, if you don't vote for the slots bill and it fails in referendum, you lose the property tax cut, you lose the money for health care, and you lose the money for school construction," Miller said.

By linking slots revenue to some of his most popular spending initiatives, O'Malley makes it more difficult for legislators to pick and choose from his revenue package, particularly the slots measure.

House Speaker Michael E. Busch, for example, strongly backs expanding health care coverage in the state but has been adamantly opposed to slots.

On Friday, Busch announced that he could support letting voters decide the slots question.

Busch said that until yesterday, he hadn't seen the 17-page presentation that Bryce used at yesterday's hearing.

One page lists the state's five-year plan with approval of the slots referendum. A second page with red numbers shows the impact if voters reject legalizing slot machines. Busch said it's the legislature's job to determine which revenues would be raised to offset a tax cut or pay for additional programs.

Yesterday, legislators peppered Bryce with questions about the governor's plan to eliminate a projected $1.7 billion shortfall in the state budget next year.

Senate Minority Leader David R. Brinkley, a Republican who represents Carroll and Frederick counties, asked Bryce about Comptroller Peter Franchot's recent statement that the state does not face an "immediate fiscal crisis" because the current budget is balanced.

Bryce noted that O'Malley's $280 million in spending reductions and other savings approved by the Board of Public Works in July will help balance future budgets, and failure to act during the special session would deprive the state of about $500 million in additional revenue.

"One option is to take action when you reach the end of the cliff," Bryce told Brinkley. "The other is to try to avoid getting there."

Brinkley said O'Malley's projections of state revenue from legalizing slot-machine gambling - $59 million in fiscal year 2010, $459 million in 2011, and $724 million in 2012 - show that the legislature does not have to take action during the special session.

Bryce replied that O'Malley felt he needed a plan that would balance the state budget beyond the fiscal year that begins July 1.james.drew@baltsun.com

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