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Ehrlich proposes fiscal remedy for budget shortfall

THE BALTIMORE SUN

One day after tax estimates showed an alarming increase in Maryland's projected budget shortfall, Republican gubernatorial candidate Robert L. Ehrlich Jr. announced a partial fiscal plan he says would repair damage wrought by the "scorched-earth spending spree" of the sitting governor.

Ehrlich acknowledged his plan - which he called a "framework" yesterday - would not solve all the state's budgetary problems, nor would it fill the gaping $1.7 billion shortfall anticipated over the next two years.

But he calculated that it would generate $385 million in new money and save "hundreds of millions" in spending.

As the foundation of his budget policy, Ehrlich promised no increases to sales or income taxes, no layoffs of state employees and no cuts to local aid. Instead, he would raise money by installing slot machines at three racetracks. He proposes saving money through cuts to state agencies, early retirement incentives and not filling the jobs of employees who leave.

"Tough medicine is needed with regard to this fiscal situation," Ehrlich told reporters gathered at the Legg Mason plaza in downtown Baltimore.

Wednesday's discouraging revenue estimates gave fuel to the "fiscal irresponsibility" argument Ehrlich has leveled against his Democratic opponent, Lt. Gov. Kathleen Kennedy Townsend, and Gov. Parris N. Glendening for more than a year.

The worsening budget situation also presents a campaign challenge for Townsend, who would like to share credit for the administration's successes, but would rather not be associated with the budget shortfall.

During yesterday's news conference, Ehrlich criticized the spending priorities of the current administration, saying they've failed to put enough money into such areas as mental health clinics and health care for Maryland's poor.

"When the budget crunch happened, it was the poor people who took a disproportionate hit," he said. "I don't want to revisit that - always going after Medicaid first."

Townsend dismissed Ehrlich's proposal yesterday, calling it "flimflam" and proof "that he does not even understand the budget and does not understand what we've done already."

"He has the option of now saying, 'I have a seven-page proposal,' but it's not worth the paper it's written on," Townsend said after reviewing his plan. "It is not real. It is not serious. The numbers do not add up."

Other Democratic leaders joined Townsend's criticism and questioned Ehrlich's attacks on the Glendening administration's spending.

"Let's tell the voters the truth. We had a surplus because we didn't spend out of control," said Del. Maggie L. McIntosh, a Baltimore Democrat and the House majority leader. "We had a billion dollars in reserve funds a year ago, and that's why we, Maryland, are thus far weathering what is a national recession."

Del. Howard P. Rawlings, a Townsend supporter and chairman of the House Appropriations Committee, said Ehrlich's plan was untenable.

"He's lying," he said of the promises not to raise taxes or lay off workers. "The numbers don't allow him to do all those things, and to make any of the commitments that he's telling people he's going to do," such as fully fund public schools.

Ehrlich's plan relies on collecting $380 million in the first year from slot machines, which he says could be up and running at the Laurel, Pimlico and Rosecroft racetracks by March 2004. He says subsequent years could raise $500 million to $800 million.

Rawlings said meeting that deadline was unrealistic. A longtime proponent of slots, Rawlings said gambling legislation is likely to pass only as a constitutional amendment, which would be presented to voters on the 2004 ballot.

Legislative analysts have previously estimated that slot machines would generate far fewer dollars, perhaps a third of what Ehrlich expects.

"It's going to take more than two to three years for slot machines to come into the state and have any impact," Rawlings said.

But Sen. Robert R. Neall, an Anne Arundel County Democrat and state budget expert, said an Ehrlich victory could help secure passage of a slots bill through the General Assembly without the need for a veto-proof constitutional amendment.

Neall said he has talked to Ehrlich's campaign about Maryland's fiscal situation, but added those conversations do not equate to supporting the Baltimore County congressman's candidacy. (Neall was asked to endorse Townsend, but he said he refused because he does not believe in endorsements.)

Townsend opposes legalizing slot machines, and yesterday she criticized Ehrlich for relying so heavily on gambling revenue.

The lieutenant governor said she expects to release more details of her budget plans during the next several weeks, but reiterated yesterday that she does not intend to increase taxes to close the budget shortfall.

"My plan does not include raising taxes," Townsend said. "I also have said that it is irresponsible for any candidate to absolutely rule out all options."

Unlike Ehrlich, Townsend also refused to rule out making any cuts in aid to local governments, though she said much of that money goes to public schools and would be spared. "It's going to be an austere budget," she said.

The core of Ehrlich's savings strategy would be to ask state agencies to identify 1 percent cuts in their budgets his first six months in office, and 4 percent cuts for the fiscal year beginning July 1.

Ehrlich also estimates the state could save $66 million by replacing only half of state workers who leave their jobs. In addition he would start a voluntary early retirement program for state employees, for a possible savings of $18 million.

But Townsend said Ehrlich's plan appears to be more lenient than the hiring freeze that has been in place since October, permitting agencies to fill only "essential" positions.

"He has a proposal which is weaker than the proposal we instituted a year ago," Townsend said. "He would roll back a 98 percent freeze to a 50 percent freeze. He's going in the opposite direction."

Ehrlich charged that information technology is another sector in which the current administration has overspent, with "dismal" results. His proposal cites Department of Budget Management estimates that the state is poised to spend $1.87 billion in new IT projects during the next four fiscal years.

If he becomes governor, he said, his 2004 budget would include $350 million for new information technology projects.

Rawlings said cutting the IT budget would make government less efficient, and might even require hiring more workers. But Neall said a slowdown in that investment makes sense because Maryland has had a "very shabby performance record in bringing management information and data systems in on time and on budget."

Ehrlich did not refrain from taking a direct swing at Glendening by pledging to raise another $5 million by selling the state airplane sometimes used by the governor (which actually is leased); The Maryland Independence, the state's 114-foot yacht; and two of the state's luxury sky boxes at Orioles Park and Ravens Stadium.

And in a swipe at Townsend, Ehrlich said he would reduce the lieutenant governor's staff by nine people. The governor's staff he would reduce by five.

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