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Gov. Hogan supports 'lockbox' to keep Maryland casino money in education, vows $4.4 billion in extra funding

Gov. Larry Hogan described plans Wednesday to increase state spending on public education by $4.4 billion over the next decade by ensuring that all the revenue Maryland gets from casinos is spent to improve the schools.

His proposal echoes calls from the Democratic leaders of the General Assembly to create a “lockbox” for casino revenues, and to use the money to increase education funding beyond the levels required by a state formula.

But the Republican governor’s plan ran into skepticism from advocates for education who argued that the state needs to increase money for schools by far more than the governor is proposing. Others questioned the strength of the so-called “lock,” and the fiscal viability of the plan.

“It means that somebody’s going to have to find some more revenue or cut the budget a whole lot,” said Warren Deschenaux, the recently retired chief of the Department of Legislative Services.

Hogan said the proposal would take the roughly $450 million a year the state receives in casino revenue each year and use none of it to fund the basic K-12 education formula that governs the distribution of education funds.

Of that money, he said, $100 million in casino revenues each year, or $1 billion over the next decade, would go to school construction.

“I believe every child in Maryland deserves access to a world-class education no matter which neighborhood they grow up in,” he said.

The governor presented his proposal as the fulfillment of promises made to voters in 2007, when the General Assembly first approved casinos, and in 2012, when it authorized their expansion. The referendums approved by voters in 2008 and 2012, before Hogan was governor, dedicated roughly 32 percent of casino revenue to an Education Trust Fund and helped finance a more generous formula. But it didn’t ensure the casino windfall wan’t used for other purposes.

“This legislation will fix a flawed bill that was enacted in 2007” by a Democratic General Assembly and Gov. Martin O’Malley, Hogan said. “Our administration did not make that promise, but it’s imperative we all come together to keep that promise.”

Hogan’s plan follows similar proposals by legislative leaders.

Del. Maggie McIntosh, who chairs the House Appropriations Committee, and Sen. Joan Carter Conway, who chairs the Senate committee overseeing education, said in December that they would introduce legislation to put a constitutional amendment before voters to phase in a requirement that casino money provide money to schools beyond the state’s basic education funding formula.

That formula determines most of the money Maryland provides to local school districts — $6.5 billion in next year’s budget.

Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch last month endorsed the proposal sponsored by the two Baltimore Democrats.

Hogan said he would introduce an alternative bill. The key difference is that it would be a statute and would not require voter approval. The governor said he didn’t want to wait for an amendment.

“The people of Maryland and our children should not have to wait for another election or another referendum in order to fix this important issue,” he said.

The downside of the statutory approach is that any future legislature and governor could, in effect, pick the lock with a simple majority vote, while the constitutional amendment would require a three-fifths majority.

Hogan expressed confidence that no future governor or legislature would dare.

McIntosh said she found it ironic that Hogan, a vocal opponent of requiring the governor to spend prescribed amounts of money, was proposing what could be seen as huge mandate. In most recent years, governors, including Hogan, have proposed bills that excuse them from meeting mandates in order to balance the budget.

A constitutional amendment ratified by the voters would carry more weight, McIntosh said.

“Once the voters really have spoken, it cements decisions in a way a bill doesn’t,” she said.

The governor’s legislation would mean that the state would have to fund the entire education formula out of non-casino revenues. Hogan insisted it can be done without new revenue by phasing it in over four years, the same period envisioned in the bill backed by legislative leaders.

“We’re not going to need to raise taxes to maintain this commitment,” Hogan said. If there were an emergency, he said, other spending would have to be cut.

Busch said he was not consulted about the governor’s plans or told about the news conference.

“The fact of the matter is this is a direction we took a month ago,” the Anne Arundel County Democrat said.

Legislative leaders were planning to announce legislation Thursday arising from the interim recommendations of the Kirwan Commission. That panel, chaired by former University of Maryland System Chancellor William E. “Brit” Kirwan, was formed in 2016 to study Maryland’s current educational formula and recommend changes.

The commission released a consultant’s report in December saying Maryland needs to spend $2.6 billion more on public schools each year — $1.9 million from the state, the rest from local government.

Hogan’s announcement calls into question how he will react to the final recommendations of the commission, expected after the legislative session ends April 9. His proposal, if it yielded the money he predicts, would still far short of the amounts the Kirwan panel is expected to call for.

“This does not get us anywhere close to meeting that standard,” said Benjamin Orr, executive director of the Maryland Center on Economic Policy.

Though Hogan was flanked at Wednesday’s news conference by a member of the Kirwan Commission, Budget Secretary David R. Brinkley, he derided the panel’s decision to take more time before rendering its final recommendations.

“I don’t know what the Kirwan Commission has done,” Hogan said. “You don’t hear about the Kirwan Commission any more. I think we need to send a search party to find out where they went.”

Bebe Verdery, education director of the Maryland ACLU, said $440 million a year in additional funding “is not going to be sufficient to fund what children in Maryland need.”

Some budget-watchers doubt it would be easy to fill in the gaps left by locking away the casino money.

“What isn’t clear to me is how we would make up the difference out of the general fund to hold harmless people who depend on the state for health services particularly,” Orr said. He said funding the formula without casino funds “would be very difficult to achieve if the economy declines or reverses course.”

Deschenaux, who now teaches in the School of Public Policy at the University of Maryland, Baltimore County, questions whether the phase-in periods in both plans would be enough to make them work.

“Where is the money coming from, phasing or not?” he said. “Phasing doesn’t create money.”

Hogan was joined at his news conference by Comptroller Peter Franchot, a Democrat who insisted the governor’s plan is practical in one of the wealthiest states in the union.

“We have revenues on top of revenues,” he said. With prudent fiscal management, he said, “all of this is affordable, especially when it’s phased in.”

Baltimore Sun reporter Liz Bowie contributed to this article.

mdresser@baltsun.com

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