Doubts grow on slots-tax compromise

Sun Staff

One legislative chamber sees the long-term solution to Maryland's budget crisis in the $670 million tax package it approved last week.

The other believes the answer should come through legalizing slot machines, combined with a handful of more modest tax increases.

While lawmakers and lobbyists believe common ground could be found between Democrat majorities in the state House of Delegates and the Senate, an increasing number fear there's little chance of a compromise between Gov. Robert L. Ehrlich Jr.'s threat to veto tax increases and House Speaker Michael E. Busch's opposition to expanded gambling without any taxes.

That means the most likely solution may be no solution at all - a balanced budget for fiscal year that begins in July, but no headway toward closing the $1 billion gap between revenues and spending projected for just one year later.

"There's a fairly decent chance of that," said Del. Kumar P. Barve, a Montgomery County Democrat and the House majority leader. "But having put a serious tax proposal forward, there's also a chance for a serious compromise to be struck."

Negotiations are expected to begin this week, when the House and Senate leaders appoint five members each to the conference committee.

The revenue question dwarfs virtually every other piece of legislation under consideration with two weeks to go before the scheduled April 12 adjournment.

Both the House and Senate have passed $23.6 billion spending plans for next year, with relatively few differences. A combination of one-time fund transfers and other budget tricks ensure that both plans are balanced, without any need for broader revenue increases.

But the state's budget has now been balanced for three years in a row with stop-gap measures, and there are far fewer of those options left.

That is why both chambers passed legislation separate from the fiscal 2005 budget to raise money for future years: The House approved one of the largest tax increases in state history last week; the Senate has passed a slots bill for the second straight year.

Neither likes the other's ideas, which leaves the negotiators a wide gap to bridge.

Wait until next year

"If this doesn't happen this year - and chances are it won't - it will put the pressure on next year, extraordinary pressure," said Del. Jean B. Cryor, a Montgomery County Republican and the ranking GOP member on the House Ways and Means Committee. "We have a balanced budget right now. There's not this fear or pressure from back home. Next year, it will be extraordinary."

Many leading lawmakers hope the speaker, governor and Senate President Thomas V. Mike Miller will find a way to hammer out a deal in the next two weeks. So far this session, the three have met once; Ehrlich and Busch have not had a meeting since their dinner last Sunday night.

"I sure would like to see Mike Busch, Mike Miller and the governor sit down together and work this out," said Del. Sheila E. Hixson, a Montgomery County Democrat and chairwoman of the House Ways and Means Committee. "But if they don't, we'll have to take this thing to conference committee. They will want slots. We'll offer taxes. And hopefully there will be a way to find something we can agree on."

That's the same type of compromise envisioned by Miller, who says he will support whatever package gets the backing of the executive and legislative branches.

"The end game has got to include slots and revenues," Miller said. "It means the speaker has to give, and the governor has to give."

So far, neither has shown much flexibility.

Ehrlich remains adamant that he will reject any version of a sales or income tax increase. Asked if any component of the House tax package approved last week was palatable, state budget secretary James C. "Chip" DiPaula Jr. said: "I'm unaware of any that are acceptable to the governor."

"We continue to look for a willingness to engage on the slots issue," DiPaula said. "The governor submitted a balanced budget, and he believes that is the best plan."

Busch won't definitively say whether he will allow a vote on slots or whether he will block it, as he did last year. Scores of pieces of legislation must be considered first, he said.

"You can only take one thing at a time," he said last week.

Miller refused to consider the option of legislative negotiators rejecting tax increases, taking a pass on slots and returning next year to tackle education and health funding needs.

"It would probably be the resort of cowards," Miller said. "That would be a disaster and the blame would fall directly on the Democrats because the Democrats control the House and the Senate."

Sen. Ulysses Currie, a Prince George's County Democrat and chairman of the Senate Budget and Taxation Committee, said, "Slots could be a part of a budget compromise if the House would look to what we've done."

Last month, the Senate passed a plan to permit 15,500 slot machines at three racetracks and three other locations - a proposal that analysts estimate would raise more than $800 million a year.

That plan has encountered great resistance in the House, where Democratic leaders have promised that a slots bill, if passed, will look far different from the Senate version.

While some slots opponents fear that leaving the budget in the hands of the small committee of House and Senate negotiators makes it easier to push expanded gambling through the Assembly, others believe that the differences between the House and Senate over how to legalize slots appear virtually insurmountable.

"Everybody talks about wanting slots and the money from slots, but it's a lot like everybody talking about liking ice cream," said W. Minor Carter, a lobbyist for a coalition of anti-slots groups. "But if you told your family that they would have to eat the same flavor of ice cream for the next 20 years, they would fight like cats and dogs over what that flavor would be.

"It's the same thing with slots. The slots proponents haven't been able to come up with a plan that everybody likes and wants to have for the next 20 years," Carter said.

'Whatever it takes'

Some Democrats want to see slots rejected outright because they believe Ehrlich does not have the stomach to make long-promised deep spending cuts next year. By next year, some speculate, Ehrlich may be forced to accept a tax increase.

But DiPaula, the budget secretary, said the governor is up to the challenge of balancing future budgets through reductions.

"We have a $23 billion budget. We can live within our means," DiPaula said. "The governor is prepared to do whatever it takes to balance the budget."

Such a scenario, however, would mean deep cuts in aid to local governments - perhaps including the elimination of money for teacher pensions.

"In the early '90s, the state allowed local jurisdictions to assume Social Security payments for teachers," DiPaula said. "I think the counties know they will have to pick up more responsibility."

Legislative leaders continue emphasizing the need for compromise and conciliation, even as neither Ehrlich nor Busch offers much room for movement.

"I just hope people don't feel they've put themselves in such a box that in the end we can't come out with the revenues we need," said Del. Norman H. Conway, an Eastern Shore Democrat and chairman of the House Appropriations Committee.

Without compromise, the buzzword around the Assembly's budget committees seems to be "train wreck."

"There's a light at the end of the tunnel, and it might not be the end," said Sen. David R. Brinkley, a Frederick County Republican. "It might be another train."

Sun staff writer Michael Dresser contributed to this article.

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