Impact of vote on slots

Spending cuts will occur regardless of outcome of Nov. referendum

August 31, 2008|By Gadi Dechter | Gadi Dechter,

As the November referendum on slots nears, Maryland voters can expect a barrage of warnings from proponents about what a "no" vote could mean: cuts to public education and health care, higher taxes and the demise of the state's horse racing legacy.

In recent years, though, voters in other states have rejected gambling initiatives sold as cure-alls for fiscal ailments, and the consequences have not been catastrophic, according to officials in Ohio, Nebraska, Rhode Island and elsewhere.

Moreover, analysts and budget experts in Maryland caution that approving 15,000 slot machines here will not preclude the need for major spending cuts in coming months because of faltering economic conditions in the state and nation. Just last week, the state comptroller's office said revenue fell $74 million short of expectations in the 2007-2008 fiscal year, which ended in June.

So how would a failure of the slots referendum affect you? The answer depends on who you ask and who you are.

"If you are solidly middle class and you don't have a kid in school and you're not sending a kid to college and you're not in a high-crime area, maybe it's not going to make that much difference to you," said Warren G. Deschenaux, the General Assembly's chief fiscal analyst. "But you may notice that you are paying higher taxes locally because state government is being less generous."

A constitutional amendment to allow slots parlors in five locations around the state is an integral part of a fiscal overhaul designed by Gov. Martin O'Malley and Democratic leaders to repair a structural budget deficit that has dogged Maryland for years.

Since O'Malley took office in 2007, lawmakers have cut the state budget by about $1 billion and passed about $1.3 billion in tax increases. If the slots plan is approved by voters, the introduction of $600 million in anticipated yearly slots revenue could plug much of the remaining budget hole and enable the state to expand popular programs such as health care.

Slots opponents - who say the plan would prey on the poor and trigger social ills - hope voters will reject casinos and force state government to balance its books without establishing a new industry to tax.

Among likely voters polled by The Baltimore Sun in January, a strong majority said they would vote for slots, a finding consistent with internal polls conducted by slots proponents in May. Still, similar ballot initiatives have failed in other states in recent years.

In 2006, Ohio voters rejected a legislature-sponsored referendum to install 31,500 slots at seven horse racing tracks and two other locations. That proposal earmarked about 30 percent of the hundreds of millions in projected annual revenues for state college system scholarships.

"I don't think anything happened directly from the rejection of that particular proposal," said Jean Botomogno, an economist with Ohio's Legislative Service Commission, who emphasized that that was his personal opinion.

Nebraska voters have repeatedly rejected gambling referendums, most recently in 2006. As in Maryland, gambling proponents have argued that casinos in nearby states siphon off tax dollars that could bolster the state treasury and create jobs.

"You'd be hard-pressed to show any impact" such as tax increases or budget cuts, said Ernie P. Goss, an economics professor at Omaha's Creighton University.

Unlike measures in those states, the Maryland slots proposal is backed by the state's top elected officials. And some spending initiatives championed by O'Malley, including a dedicated revenue source for higher education, are conditioned on voters' authorizing the slots measure.

"We are already spending the money that we are hoping to raise, if you will," Deschenaux said. "Slots were part of a program to restore structural balance to the budget."

The possibility, however remote, of voters rejecting slots has elected officials, lobbyists and analysts starting to chart the painful course out of Maryland's budget woes without a gambling-generated windfall.

The biggest cuts would likely be to school-related funding, because more than half of the tax revenues generated by slots is targeted for education.

If the referendum fails, state lawmakers are likely to revive debate on a measure they rejected last year: shifting responsibility for teacher retirement costs - now more than $600 million a year and projected to escalate - to local governments.

Because local governments are already suffering from the slow real estate market, which has reduced tax revenue from property sales, a cut in state support for local schools could trigger higher taxes at the county level, said David Bliden, executive director of the Maryland Association of Counties.

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